CNN Reporter Tries to Explain Oil and Gas Prices
Gas prices have gone down again, bringing more journalistic wondering of when they‚Äôll rise again ‚Äď but this time, with a twist.
CNN‚Äôs Kiran Chetry reported on the September 24 ‚ÄúAmerican Morning‚ÄĚ that gas prices dropped ‚Äúin the last couple of weeks to a national average of $2.79 a gallon,‚ÄĚ but Ali Velshi later warned that ‚Äúyou‚Äôre going to expect your gas prices to go up.‚ÄĚ
‚ÄúHow long can it last?‚ÄĚ John Roberts asked Velshi in the ‚ÄúMinding Your Business‚ÄĚ segment.
Velshi responded, ‚ÄúThere are all sorts of people saying that there are all sorts of theories about how gasoline can continue to go down while oil can go up. Absolutely not true.‚ÄĚ
It wasn't clear whether Velshi was referring to this particular instance or declaring it ‚Äúabsolutely not true‚ÄĚ that oil and gas prices could move in opposite directions. In any case, there are indeed ‚Äúall sorts of people‚ÄĚ ‚Äď including oil experts ‚Äď explaining the fact that oil and gasoline are different markets.
‚ÄúThe public and energy neophytes have difficulty understanding the connection, or disconnection between crude and gasoline/diesel because the former is quoted in dollars per barrel, while the latter two are converted into cents/gal,‚ÄĚ wrote oil expert Tom Kloza on his Web site September 12. Kloza, one of the founders of the Oil Price Information Service, is a highly sought-after source for media reports.
Kloza pointed out that earlier this year ‚Äúgasoline prices rallied independent of crude,‚ÄĚ and said ‚ÄúThere are different forecasts for the different segments.‚ÄĚ He said crude oil futures ‚Äúare tied to investment flow, cyclical tides, and fear that weather or events can deliver an immediate price shock,‚ÄĚ but that ‚Äú[o]nce the latest storm threat passes, we may see pump prices drop with Autumn leave s.‚ÄĚ
Steve Alexander, writing in the Minneapolis Star Tribune, explained it plainly: ‚ÄúA graph plotting oil and gas prices is full of contradictions: Sometimes the two prices move up and down together. Sometimes gas goes up when oil goes down. Sometimes gas goes down when oil goes up.‚ÄĚ
‚ÄúCrude oil accounts for only half the cost of gasoline,‚ÄĚ Alexander wrote, and prices can be affected by ‚Äúthe cost of refining the oil, transporting the gasoline to gas stations, marketing expenses and, of course, a profit.‚ÄĚ
Gasoline demand ‚Äď and prices ‚Äď are also seasonal.
Lynn Westfall, chief economist and senior vice president of external affairs at Tesoro Corp, a San Antonio-based refiner, told the Express News that because demand is falling, ‚Äúrefiners have been forced to hold off ramping up gasoline prices quickly.‚ÄĚ
"Our ability to pass along price increases is somewhat restricted,‚ÄĚ and if it were summer, "we could probably pass on the increase penny for penny," Westfall said.
The Business and Media Institute has noted previously that when gas prices rise, the media will surely be all over the increase. A year ago, BMI found that in 35 business days of falling gas prices, evening news shows emphasized ‚Äúhigh‚ÄĚ or ‚Äúrising‚ÄĚ gas prices more often than falling prices.