Yesterday at the Associated Press, aka the Administration’s Press, the headline at reporter Jim Kuhnhenn’s story on President Obama’s latest excuse to add more bureaucrats to the government payroll (“Obama wants to target oil market manipulation”) presupposed the existence of oil market manipulation when none has been proven. In 850 words, he didn’t find any space for critics of the move, who include the Daily Ticker’s Henry Blodget, CEO of Business Insider, using descriptions like “embarrassing,” “give me a break,” “smoke and mirrors,” and “a crock.” Finding contrary opinion is something Kuhnhenn would almost definitely have done with an economy-related move of a Republican or conservative president.
Before getting to Blodget, let’s look at what the government itself had to say to everyday Americans about what influences gas prices just two months ago at the USA.gov blog (bolds are mine):
Why the Price of Gas is Rising
On Facebook, Laura asked, “what is causing the rise in fuel prices in the USA and who benefits from this increase?”
Fuel prices in the United States are rising because of the increasing cost of crude oil. Crude oil is the natural form of oil as it is found in the ground, before it has been refined into gasoline. As of January 2012, the price of crude oil made up 76% of the cost of regular gasoline. In January, the national average retail price of gas was $3.38 per gallon. This means $2.57 per gallon paid for crude oil. Find out what makes up the rest of the price.
There are a few reasons why the price of crude oil is rising. There’s more demand from countries that haven’t used very much oil in the past, such as China. Also, instability in the Middle East means recent output from countries like Libya and Iran has been unpredictable or low. The Middle East produces a lot of the world’s oil and less oil means higher prices.
Currently, the United States’ demand for oil is down and production of oil is up. These factors would normally make prices go down. However, demand for oil in emerging markets like China is so high that it overcomes these market forces.
The countries and corporations that sell crude oil benefit when the price is high. In 2010, about 49% of the oil used by the U.S. was imported from foreign countries.
What? No mention of speculators? Nope, and there’s mention of the alleged role of speculators found in search at the government’s Economic and Statistics Administration on “speculator,” “speculators,” or “speculation.” Imagine that.
Here is some of what Blodget had to say in a Yahoo Finance video yesterday, as reported by the site’s Bernice Napach:
The Daily Ticker’s Henry Blodget says the proposal is “embarrassing” because speculators have little to do with the rising price of oil and gasoline. Prices are moving higher, Henry says, because “three billion new capitalists” in India and China are consuming oil and gasoline. It’s the balance between supply and demand that determines whether oil prices rise or fall, not speculators, Henry argues.
Ms. Napach left out many of the video’s juicy parts. Here are just a few:
- “It does not required a Ph.D. in Economics to see that the main driver of gas prices and oil prices is supply and demand.”
- “Speculators couldn’t care less whether prices go up or down. They bet both ways. So this idea that all speculators do is drive gas prices up is a crock. … This is smoke and mirrors.”
- “People do not want to confront the fact that we do not have as much oil as we need to have $20 (a barrel) oil.”
Blodget also made a telling point in relation to housing, which is that raising the “margin requirements” (i.e., the required down payments) on homebuyers has driven the home prices down. While it’s clear that many mortgage loans during 1990s and 2000s were too lenient in this regard (thanks largely to Fannie Mae Freddie Mac, and HUD allowing them and in Fan and Fred’s case buying the potential problems, I’m told that the pendulum has swung way too far in the other direction, and that it’s very difficult for even well-qualified buyers to get financing because Dodd-Frank and other regulations are giving banks virtually zero discretion or ability to reasonably accommodate special circumstances.
Back to AP’s Kuhnhenn: He and his headline writer owed his readers at least a little skepticism, and they gave them none. The closest Kuhnhenn got (one would think after a lot of trying to get a stronger statement out of someone and failing) was the following ridiculous non-statement: “Analysts say it is possible that such speculation has somewhat inflated the price of oil.”
Cross-posted at NewsBusters.org.