Media Watch - Gas prices keep rising and consumers keep buying

Gasoline prices in the US of late have been reminiscent of the 1970s.

Gasoline prices in the US of late have been reminiscent of the 1970s.

Gasoline prices in the US of late have been reminiscent of the

1970s.



Now, as then, demand is outstripping current supply. The shortages and

extended service station lines of that decade, however, have yet to

develop, and it seems so far through the eyes of the media that the

American consumer has yet to be fazed by the higher prices.



CARMA found media reports most often cited OPEC’s oil production

cutbacks over the past several years as the key reason for rising prices

at the gas pump, sentiments mirrored by George Hager of USA Today. ’The

key reason for higher prices continues to be oil-producing countries

trying to recoup revenue lost when crude oil sold below dollars 11 a

barrel as recently as 14 months ago’ (March 2).



A recurring theme in media coverage was that increases in OPEC oil

production will not decrease prices for several months, a point

emphasized by S&P Equity Group’s Jordan Horshak. ’Even though (OPEC) is

putting more oil out there, it’s not enough to meet the demands’ (CNN,

March 2).



The current lack of consumer concern may change in the coming months as

a number of stories cited analysts predicting further gasoline price

hikes in the near future. John Kilduff of the brokerage firm Fimat USA

said he anticipated ’in the New York area, consumers will be paying

dollars 2 a gallon by Memorial Day’ (Newsday, March 2).



Some, however, pressed the point that gas prices remain low when the

price is adjusted for inflation and its tax component is taken into

account.



’The pre-tax price of gasoline at the pump barely changed between 1990

and 2000, actually declining from 88 cents per gallon to 86 cents as of

last November. But over the same period state and federal gasoline taxes

jumped from 27 cents per gallon to 43 cents,’ noted one editorial

(Indianapolis Star, March 1).



Other coverage has focused on the public’s continued demand for autos,

sport utility vehicles and trucks and how the increase may impact these

vehicles. So far, media coverage has not honed in on this group. ’The

traffic lights are green on Main Street, USA,’ noted Robert Rewey, Ford

Motor Co.’s group vice president for global consumer services (Los

Angeles Times, March 2). The company reported its best February ever,

with sales up 6.5% to 353,357 units.



Several outlets noted that fuel-intensive truck and SUV sales were up in

February. ’Gas prices had no effect on sales of Jeep and Dodge trucks

and SUVs, and shouldn’t if they decline in the next few months,’ said

Jamie Jameson, DaimlerChrysler’s vice president for sales and marketing

(Chicago Tribune, March 2).



’Consumer attitudes will bear watching over the next few months to gauge

the impact of rising interest rates and relatively high gas prices,’

said Lynn Franco, director of the research center at the Conference

Board, which produces the Consumer Confidence Index (New York Times,

March 1).



Despite the apparent lack of concern appearing in the press, Franco’s

comments bear out that the issue should be closely watched.





- Evaluation and analysis by CARMA International. Media Watch can be

found at www.carma.com.



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