The Manipulative “Mainstream” Media

I’d like you to go check out this story, at ABC News (warning: the video at that link starts automatically). You’ll have to scroll to the end of the print story to see the video.

Go ahead, you’ll need to see it to see what I’m talking about here. Done? Good.

The blatantly manipulative focus of this really ticked me off.

First, I’d like to explain three things about how gas stations set prices.*

  1. Stations do not set prices based on what they paid for what is currently in the tanks, but what they expect to pay to replace what is currently in the tanks.
  2. Most convenience stations make little to no profit on gas. The gas is there to draw customers in so they will buy drinks, snacks, and other items, which is their main source of profit. Gas prices are set at a level that will offset their costs, and maybe (hopefully) make a very minimal profit. Service stations use a similar model with their profits coming from repairs, and the gas being used mainly as advertising.
  3. Prices are usually changed when the station’s tanks are filled. It may also be changed when there is a sharp change in the supplier’s price that changes the anticipated cost of replacing what is currently in the tanks. (i.e., “We expected it would cost us $3.45/gal when we refill the tanks next week, and the supplier is already charging $3.50/gal. We need to raise the price to $3.50/gal now or we won’t be able to afford to fill the tanks next week.”)

Those are just some of the factors that go into how gas stations set the price for gas. Of course, chains like Kroger or Sheetz, that have their own corporate distributors, have other factors to take into account. Now, let’s take a look at that video.

First, I want you to notice something right at the beginning. Look at that sign behind the field reporter. See how the numbers are blinking? That means someone inside is putting a new price into the system, right at the start of the report. Yet the news people then act surprised that the price has changed during the report! My guess? They found a station that was receiving a delivery to use as a background for the report, and waited for the sign to start blinking before starting, so that it would change during the report.

Notice the bit where they say the price “shot up 16 cents in just 3 hours”? Yes, that’s a pretty big change to happen in one day, but it’s not like it went up by 1 cent every 11 minutes – it really went up 16 cents in one jump. That’s how gas prices change, all in one jump. At a guess, I would say that particular station probably didn’t raise prices when they should have, and had to make a bigger increase to offset a loss on the previous load of gas (remember my earlier points).

“Price gouging” at Lake Buena Vista, FL? They conveniently “forgot” to mention that that’s where the Walt Disney World Resort is located. Everything is more expensive around Disney. Plus, due to the large tourism factor, I would expect higher prices there due to higher demand. How much more than the rest of the country do they normally run?

Notice that they’re doing this story from Los Angeles? Even though they do show the average national price, they chose to make the bulk of the story in the part of the country with the very highest prices, without actually mentioning that fact.

Gas theft is nothing new, and while they make a big deal out of it, they don’t make any assertion that it’s actually increasing due to the rising prices.

Then there’s the whole “profit” sequence. Sure, for every $50 spent at the pump, the oil companies might be getting $30.75. But notice what they don’t say? How much of that is profit, and how much is offsetting costs? The $6.00 in taxes they mention? I bet that’s only the taxes assessed at the pump, not what the oil companies and refineries are assessed for taxes before it gets to the pumps. How much of that ~$31 are the oil companies spending on storage and infrastructure? How much on delivery? How much on regulatory compliance and government mandated paperwork? But no, ABC presents that as if it’s all profit.

And then we get to the true setup. “ZOMG, it’s too unbelievable to believe! The price behind me went up ten cents just while we were doing this report!!1!11!!!eleventyone!!!11!!”

Of course it did. YOU SET IT UP THAT WAY! The only part that might have been a surprise was how much, but you knew it was going to change when you started, and “up” was a pretty safe bet.

False outrage and manipulation of the facts by the media, in order to create bias and further an agenda. Quelle surprise!

Look, I’m not arguing that gas prices are getting higher and higher, or even that they’re getting ridiculously high, but this kind of reporting is just plain dishonest. That’s what pisses me off the most.

END OF LINE

* I am not directly familiar with this process, having never been personally involved in operating a gas station. I am basing this off what I have been told by friends who either worked at or were involved in the management of gas stations. If I am wrong about something, please feel free to correct me in comments, and I will correct the post as necessary.

[Source: ABC News story, retrieved 2/23/12]

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5 Comments

  1. I am intimately familiar with how gas is priced at the pumps. On a broad level, you are correct. And no, the station is not making any money off of the fuel. Gas prices are highly competitive and really just an engine to get you in the store. Gas prices generally update once or twice a day unless there is a major shift. I won’t (because I really shouldn’t) get into more specifics there.
    There are many, many things that go into pricing that gallon of gas. Not one of them is the greed of your local convenience store. In fact, they are likely pricing it as low as they possibly can without taking a loss. And yeah, thieves have gotten very creative since prices have been rising. I just wish I could tell you about some of those schemes, but I wouldn’t want to give anyone ideas.

    Reply
    • Thanks for the confirmations! I was only going for a pretty broad outline, anyway. I figured there were a bajillion more things that go into it, but that was enought to highlight the “it’s not greed” point.

      Some of what I wrote (like the “It may also be changed when there is a sharp change in the supplier’s price that changes the anticipated cost of replacing what is currently in the tanks” part) were extrapolations of what I know guided by (un)common sense. Twice a day does seem more reasonable, especially for a larger chain that can have a regional office do the number-crunching. I was looking at the fact that the prices around here usually stay pretty stable for at least a few days, but I would guess that that’s intentional – customers like stability, and it can be frustrating as a consumer to see a price in the morning and have it be different when you can stop to fill up after work.

      “I won’t (because I really shouldn’t) get into more specifics there. […] I just wish I could tell you about some of those schemes, but I wouldn’t want to give anyone ideas.”

      Perfectly understandable on both counts. I’ve been in those situations myself, right here. Again, thanks!

      Reply
  2. Notice that two Corvettes pulled in just before the prices jumped? Damn haters.

    Reply
  3. Divemedic

     /  February 24, 2012

    I was talking to a guy that works for a large fuel distributor in Tampa. He said that one reason why fuel prices increase in the summer is that they have to switch formulas when the weather is warm in order to meet government emissions mandates, and the additives required for the summer formula are more expensive.
    The Lake Buena Vista price is not a real price. There is ONE gas station near the airport that charges high prices in order to catch tourists returning rental cars. All of the locals know to stay clear of that station. I’m sure there are a few others like that as well. The average cost for gas in Orlando is right around $3.60 per gallon right now. That station has been accused of gouging since at least 2008. Here is a story from 2010:
    http://articles.orlandosentinel.com/2010-05-20/news/os-ed-gasoline-price-gouging-052010-20100519_1_gouging-gas-stations-mr-dyer

    Reply
  4. I have typically observed that the first persons to start screaming about “price gouging” have no idea how “supply and demand’ works, much less logistics, market pressures, or anything even remotely economically complex.

    On the flip side, these are the average prices for Orlando gasoline: http://www.orlandogasprices.com/retail_price_chart.aspx If you tell the chart to run out to the past five years, you will see that the prices now are roughly equal to the prices right before the 2008 elections, when the media was absolutely castigating President Bush for “allowing” / “forcing” / etc. gas prices to be that high. Now, when we are back into the same ballfield… *crickets*

    I am certainly not going to claim that the American President has any direct control over the price of gasoline at the pumps, but a little consistency from our media would be nice. Absurdly optimistic, but nice.

    Reply

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