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Gas prices aren’t at a record high (yet) but health care costs are

ASK THIS | August 16, 2005

[Updated with editors' notes on Sept. 1] Increases at the pump make news because they are dramatic but only medical care prices are advancing far beyond the level of inflation, and they are doing so month after month. [Editor's note: This is no longer true; gas prices are now at record levels.]

Q. Why isn’t the press doing a better job of examining medical care costs? Is it because the subject is too complicated?


Q. Are vested interests serving themselves by promoting front-page play for gas price increases?


By Philip Meyer



The prices of housing, food and beverages, transportation, and medical care all hit records this summer. They did it without generating many page-one headlines.


But record gasoline prices make the front page all the time.


“Gas prices driven to record level,” said a banner headline on page one of the San Antonio Express-News on August 13. “Nationwide Gas Prices Set Another Record,” said the headline on an Associated Press story that appeared on both the New York Times and USA TODAY web sites August 15.


But of all these “record” prices, only the record highs for medical care are real. All the rest are phony records, artifacts of inflation. The dollar you earn today is worth less than half the dollar you earned in 1981 when gasoline prices hit their real peak.


The gasoline price record was set in 1981 when the Reagan administration removed price controls on the oil industry. If you are old enough to remember paying $1.42 for regular gasoline then, you might have forgotten how much harder dollars were to earn. That 1981 price is equal to $3.05 in July 2005 dollars. The record in nominal dollars is still 50 cents below the record in real dollars. [Editor's note: This was correct when written but after the New Orleans flood, gas prices went up to record highs.]


So why do newspapers do this? Here are three theories. Take your pick.


Theory 1: A hoary journalism tradition is to grab your attention by exaggerating the news in the headline or first sentence and then compensating with a fast backpedal that finally delivers the truth.


The San Antonio newspaper did that with its headlines. Underneath the banner proclaiming record prices was the truth in very small type: “… But in relative terms, it’s still cheaper than in 1981.”


The Times version of the Associated Press story buried its backpedal eight paragraphs down, although it was foreshadowed in the second graph with the words, “The figures were not adjusted for inflation.” (In its version of the AP story, the USA TODAY web site put the complete U-turn in the second paragraph.)


But if sensationalism were the only reason for doing this, why don’t editors give the same treatment to food, housing, and medical care costs? With medical care, a little sensationalism could be justified, because those costs are advancing far ahead of the rate of inflation, and it’s happening month by month.


Theory 2: Exaggerating fears of gas prices serves the interests of the oil industry. Keeping consumers upset over high gasoline prices can discourage any future government effort to lower demand with a “green” tax on gasoline. Lower demand would equal lower profits. That might motivate the suppliers of price data to emphasize the scarier nominal dollar comparison.


Gasoline price data come from three independent sources: the U.S. Department of Energy, the Lundberg Survey of Camarillo, Calif., which lists major oil companies, independent refiners, distributors, and service station dealers among its customers and the Oil Price Information Service, also supported by industry. News releases based on data from all three have resulted in the phony “record” headlines.


Theory 3: Some of the sensationalized stories are based on press releases from the American Automobile Association, which represents ordinary motorists like you and me. Consumer associations benefit by convincing us that they are looking after our problems. Exaggerating the problems can boost their perceived importance.


The July 19 AAA press release based the comparison on nominal dollars. There was no mention of inflation, no looking back to the true record year of 1981.


AAA gets its numbers from Oil Price Information Service. It is the daily visibility of gasoline prices that makes them so newsworthy, says Tom Kloza, chief oil analyst for the service. “We all get addicted to the volatility that comes with the uneven swings,” he said. “… when this calms down to the way it was in the 90s or the 80s or even 2002, I’m going to be bored stiff.”


Justin McNaull, spokesman for AAA, agrees. We all buy gas every week, pay at the pump, and see the price changes. “It’s something to gripe about at the water cooler.”


Journalism scholars have been saying for decades that media might not tell us what to think, but they do tell us what to think about. It’s not always very thoughtful guidance.


Newspapers tell us to think about gasoline prices more than they tell us to think about health care costs because the story is easy to get, and it’s not very complicated. But in the information age, we desperately need media that do not shy away from the complicated stories and that can look at government and association press releases with a skeptical eye.


One of these days, maybe before summer is over, the national average gasoline price is going to top $3.05 (in August 2005 dollars) and set a record in real terms. After the press has cried wolf so often, will anyone care? [Editor's note: The average price of gas on Sept. 1 went well above $3.05, and from the look of things, many people do care. A lot.]

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