‘Ask AP’ Writer Fails to Note Quick Retail Response to Oil-Price Drop
"Ask AP" is "a weekly Q&A column where Associated Press journalists respond to readers' questions about the news."
Not surprisingly, given the deteriorating quality of their reporting, the journalists questioned sometimes give less than perfect responses.
One such example came last Friday from Adam Schreck, AP's Energy Writer, at the end of a week when oil prices had already plummeted over 10% from their peak.
Reader Joseph Patterson from St. Louis asked Schreck this question:
I understand, to some degree, the raising of gasoline prices when the price of a barrel of oil increases. What I can't understand is why we never see a significant drop in prices at the pump when the price of oil drops. Oh, there may be a penny less here or there, but nothing like the increases you see when oil prices go up. Why is that?
Schreck had the opportunity to correct Patterson's false premise that "we never see a significant drop in prices at the pump." But instead, he told Patterson that:
The cost of oil does indeed affect what we pay at the pump, but the process of getting it from the well to your gas tank takes time. Prices take a while to catch up.
..... As much as gasoline prices have climbed, the refiners and retailers would like to have raised them even more to cover their costs - but falling U.S. demand has made that impossible. And so, with an eye on their bottom line, they're not likely to lower their prices all that quickly - even with oil prices declining sharply.
Sorry to burst your price bubble, Mr. Schreck, but prices did respond to the decline in the barrel price, and quickly. On Tuesday, I wrote that:
Cincy (Greater Cincinnati) gas prices are down about 4% from a week ago, and (not pictured) more like 5% from 8-9 days ago:
All 15 low-end listings at the site (CincyGasPrices.com) are $3.78 or lower.
Visiting that site again at 10 p.m., I've found that prices have plummeted even further in the past 60 or so hours (the chart is dynamic and may not have the same readings when viewed):
All 15 low-end listings at CincyGasPrices.com are currently at $3.69 or lower.
In fact, if you look at the site's overall price chart beginning on Sunday, July 13, you'll see that the price drop correlates pretty nicely, after about a 24-48 hour delay, with the drop in the barrel price of crude, which closed at $145.08 on Friday, July 11:
Considering the fixed costs of retail operations and fuel delivery, the 6% or so price drop is a pretty darned quick reaction to a 13-14% drop in crude prices.
What Shreck and questioner Patterson don't understand is that as much as retailers and refiners would like to keep their prices sticky in a falling-crude environment, competition greatly limits their ability to do so.
Patterson's ignorance is unfortunately understandable, because journalists like Schreck have been misreporting from ignorance such as that just demonstrated in his "Ask AP" answer for all too many years.
Cross-posted at BizzyBlog.com.