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]