Media Spread Suspicion of Gas 'Gouging'
Itâs dĂ©jĂ vu all over again. Rising gas prices and oil companiesâ ârecord profitsâ fuel an almost yearly call for investigations into âprice gouging.â The media then complain of alleged wrongdoing and fail to ask intelligent questions about the issue.
âKinda suspicious, huh?â said CBSâs Julie Chen when âEarly Showâ co-host Harry Smith mentioned that âhigher than everâ gas prices are prompting politicians to call for another investigation.
âIt makes you wonder at least a little bit,â replied Smith on the May 23 show.
The House of Representatives passed a bill that same day that would outlaw âprice gougingâ â without really defining it â and is now being considered by the Senate Committee on Commerce, Science and Transportation.
Never mind that there have been more than 30 investigations into price gouging over several decades, and no conspiracy by oil companies has ever been found, according to the American Petroleum Institute (API). Or that 28 states and one territory already have their own price gouging laws on the books as of 2004.
But the price of gasoline almost always makes the media suspicious, even when itâs going down. CNNâs Jack Cafferty proposed a conspiracy theory in August of 2006 that oil companies were artificially lowering the price of gas to re-elect Republicans.
âYou know, if you were a real cynic, you could also wonder if the oil companies might not be pulling the price of gas down to help the Republicans get re-elected in the midterm elections a couple of months away,â suggested Cafferty on the Aug. 30, 2006, âSituation Room.â
Of course, we know how that turned out.
But Theyâre Making Money!
Even when government investigations came up empty, finding no evidence of oil company price gouging, journalists continued to be âsuspiciousâ of the oil and gas industry, complaining about profits and tarnishing their reputation.
CBS, which is consistently the most negative network for economic reporting according to Business & Media Institute research, has a history of promoting price gouging rhetoric.
In a May 23 interview of Florida governor Charlie Crist, who along with 21 other governors is asking Congress to investigate high gas prices, âEarly Showâ co-host Hannah Storm threw him softball questions and didnât include any opposing arguments.
Storm asked how high gas prices were hurting Florida; if Crist thinks âoil companies are gouging consumers;â what concerned him in the 2005 investigation; and if the lack of new refineries is a problem.
At one point in the interview, Crist said, â[Y]ou have to reach the conclusion that, you know, theyâre gouging people.â There was not a word of disagreement from Storm.
Moments later, Storm remarked, âlast time prices shot up like this, Governor Crist, the oil companies said, âLook, we canât help this. We canât control prices.â And then they turn in these record profits. I mean, how does that make you feel âŠâ
âLetâs hope you get this investigation that you and the other governors are pushing for,â Storm gushed to close the interview.
The ârecordâ profits Storm referred to are a common media argument. Oil companies make record profits in dollars because in they are enormous businesses, but the percentage of profit is lower than many other industries.
And other media companies have even higher margins. David Carlson, former president of the Society of Professional Journalists, wrote that âeven in todayâs difficult climate, many newspapers turn an annual profit greater than 25 percent.â That wasnât even the top. âOne national chain reportedly demands 30 percent profit from each of its newspapers,â he continued.
Guilty Until Proven Evil
âIt seems the profits for these companies keep going up and the American consumer doesnât have anyone intervening on his or her behalf,â Kucinich said as the reporters indulged his conspiracy theories.
The media also left out the liberal leanings of so-called âindustry watchdogs.â
NBC âTodayâ reporter Michael Okwu cited âindustry watchdogâ Judy Dugan on May 3 and blamed oil companies for âgouging consumers by indirectly controlling the supply.â But just like the January 16 USA Today, Okwu left out Duganâs anti-industry slant, conspiratorial opinions, and 2006 support for California voters to approve a âprofit-based levy on companies that extract oil in California.â
Even when official investigations found no wrongdoing, that didnât affect reporting much.
âCBS Evening Newsâ correspondent Sandra Hughes reported price fixing allegations by the California attorney general back on June 5, 2006. Just two short weeks earlier, CBS âEvening Newsâ ignored an announcement on May 22, 2006, by the federal government that there was no concerted effort by the oil industry to manipulate gas prices.
Hughesâ June 5 report also excluded the government conclusion that there had been no systemic price gouging following Hurricane Katrina, only localized incidents.
The same government report confused CNN contributor and now Fortune magazine managing editor Andy Serwer, who said it âboggles the mind.â âAmerican Morningâ host Miles OâBrien said it wasnât âgood news for the little guy.â So it would have been good news if the oil industry had been committing a crime by conspiring to jack up pump prices?
What Theyâre Not Telling You
The media consistently leave out economists, industry experts, oil companies and the facts about price gouging.
CBS interviewed Gov. Crist, who alleged price gouging was causing higher gas prices, but the âEarly Showâ didnât include any other reasons for the high gas prices like regulation, taxes, or increasing demand for gasoline.
The networks didnât criticize the House bill that would criminalize the sale of gasoline at âunconscionably excessiveâ prices.
But a May 25 USA Today editorial did criticize the bill, saying it âwould criminalize free enterpriseâ and could cause shortages.
The same editorial cited the Energy Department when it said âthe U.S. refining and marketing industry has been characterized by unusually low product margins, low profitability, selective retrenchment, and substantial restructuring throughout the decade of the 1990s.â
Taylor and Van Doren pointed out in their May 25 column that the House bill failed to define its own terms:
âWhat constitutes taking âunfair advantageâ? Congress doesnât say. Apparently, taking âfair advantageâ of motorists is O.K. And what is an âunconscionably excessiveâ price? Again, silence. Presumably, âconscionably excessiveâ pricing is O.K., as is âunconscionably highâ prices if we posit that there is a difference between a âhighâ price and an âexcessiveâ price,â they wrote.
Of course one of the reasons gas prices rise is too simple for the media to bother reporting. Demand is growing and supply has had its disruptions, which resulted in increasing prices.
NBC âTodayâ show reporter Okwu and CBS âEarly Showâ co-host Hannah Storm both mentioned the problem of limited refining capacity, which in turn limits the supply of gasoline.
Some experts, like Hudson Institute senior fellow Diana Furchtgott-Roth, say refineries arenât being built because of government obstacles and community unwillingness to have a refinery in the back yard.
âCongress has discouraged the construction of new refining capacity through proposed legislation that punishes refiners when prices rise, that gives extensive and expensive permit requirements for construction of new refineries and expansion at existing sites, and that allows for tort risk,â wrote Furchtgott-Roth in a May 11 op-ed.
Catoâs Jerry Taylor disagreed. He told the Business & Media Institute that oil companies chose not to build new refineries because it was less expensive to expand existing refinery capacity, which they did. Refineries are now at the highest capacity ever.
Another reason oil companies are unlikely to build new refineries is because of the huge government push for alternative fuels. The New York Times pointed this out in a May 20 column.
âIf thatâs the plan, will oil companies want to invest in more refineries? âYouâve got to ask whether the demand will be thereâ,â the Times quoted John Felmy, chief economist of API.