CNN Reporter Tries to Explain Oil and Gas Prices

     Gas prices have gone down again, bringing more journalistic wondering of when they’ll rise again – but this time, with a twist.


     CNN’s Kiran Chetry reported on the September 24 “American Morning” that gas prices dropped “in the last couple of weeks to a national average of $2.79 a gallon,” but Ali Velshi later warned that “you’re going to expect your gas prices to go up.”


     “How long can it last?” John Roberts asked Velshi in the “Minding Your Business” segment.


     Velshi responded, “There 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.” 


     It wasn't clear whether Velshi was referring to this particular instance or declaring it “absolutely not true” that oil and gas prices could move in opposite directions. In any case, there are indeed “all sorts of people” – including oil experts – explaining the fact that oil and gasoline are different markets.


     “The 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,” 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 “gasoline prices rallied independent of crude,” and said “There are different forecasts for the different segments.” He said crude oil futures “are tied to investment flow, cyclical tides, and fear that weather or events can deliver an immediate price shock,” but that “[o]nce the latest storm threat passes, we may see pump prices drop with Autumn leave s.”

     Steve Alexander, writing in the Minneapolis Star Tribune, explained it plainly: “A 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.”

     “Crude oil accounts for only half the cost of gasoline,” Alexander wrote, and prices can be affected by “the cost of refining the oil, transporting the gasoline to gas stations, marketing expenses and, of course, a profit.”

     Gasoline demand – and prices – are also seasonal.

     Vicki Vaughan of the San Antonio Express News noted that Americans are using “300,000 fewer barrels a day of gasoline” now that the summer is over.

     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, “refiners have been forced to hold off ramping up gasoline prices quickly.”

     "Our ability to pass along price increases is somewhat restricted,” 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 “high” or “rising” gas prices more often than falling prices.