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Why Are We Over a Barrel?
Networks blame big, bad oil but skip threats, taxes and increased demand.

By Dan Gainor
The Boone Pickens Free Market Fellow
April 19, 2006

Send this page to a friend! (click here)     I paid too much for gasoline last week. My fill-up of premium gas cost me $3.04 per gallon or $42.40 just to replenish the near-empty tank. Premium? Heck, we might as well change the name to outlandish.

     Like most Americans, I fumed more than my exhaust pipe. I was looking for someone to blame. I didnt have to look any further than my TV. Why investigate the issue and find out the many major reasons why gas prices are so high when I can blame the oil companies just like TV news does?

     Thats the attitude the media have been driving home for more than a year now. They bemoan the record profits of oil companies and dont bother to tell you that they have no idea what that really means.

     In the real world, that record means merely that the oil companies are big, and big companies inherently make big profits if they are well-run. The actual percentage profit, a number used by investors, not blowhards, illustrates the point. ExxonMobil had more profit than any other company, but it also is gi-normous as a friend of mine used to say. Still, its profit margin was 10.6 percent, placing it at No. 116 on Fortunes list of top 500 companies.

     By contrast, Microsoft made almost three times as much 30.8 percent. It wasnt long ago that the Redmond giant was one of the most hated companies on Earth. Now, Bill Gates and his wife get chosen Time magazine Persons of the Year for their charity efforts in a story titled The Good Samaritans. And Microsoft rakes in the profit like a successful company should.

     Even Microsoft did poorly compared to some other tech firms. The Internet giant Yahoo made 36.1 percent profit. The wireless Internet company Qualcomm made 37.8 percent profit.

     Yet the media criticize oil companies. We get sarcastic comments by Charles Gibson of Good Morning America on April 11 when he made it clear that he blames the oil industry for our problems. According to Gibson, current events led everybody to be very cynical about what the oil companies are doing. Actually, Im cynical about what hes doing by asking loaded questions like this:

     It is really, truly a supply-and-demand issue, as so many people wonder, or is it that the oil companies gouge us?

     I wish that were the end, but its barely the beginning. When ExxonMobils CEO Lee Raymond retired with hefty compensation, many in the media took swipes at the company. On April 17, NBC Nightly News anchor Brian Williams described Raymonds huge salary with this un-subtle comment: The New York Times did the math, that works out to $144,573 a day, and even better, $100.40 per minute. That includes time spent sleeping and we can only assume that worries about money didn't keep Lee Raymond up at night.

     Presumably, someone at NBC could have replicated the math, but their lazy reporting didnt allow for even that much originality.

     Williams might have mentioned that Raymond headed up a super-successful merger, while big mergers can fail just as mightily. Or he might have asked some of the millions of shareholders how they felt. I bet theyve been pleased with Raymonds results.

     Three days earlier, Good Morning America had the audacity to refer to the stunning details of Raymonds salary. Anchor Robin Roberts explained they were Details that left us saying, You must be kidding, during the April 14 broadcast. I didnt see similar comments from any network about Katie Courics new salary details. Maybe TV newsies dont like people making more than they do.

     Or maybe the story is just too darn complicated for TV. Though a few oil stories did touch on some of the real causes of our gas prices, too many didnt. They left out the fear factor from Mideast instability BusinessWeek says that adds $15 a barrel, though other estimates are up to $30. Then theres Hugo Chavez in Venezuela threatening to turn off our oil, and terrorism in oil-producing Nigeria. Journalists ignored the taxes that can add more than 60 cents per gallon in New York, nearly 50 cents in five other states and 40 cents in about 17 more.

     Of course, we still have some refineries offline after Katrina and a shortage of ethanol that the government mandates oil companies use as an additive.

     And that doesnt begin to address increased demand in the United States because of warm weather driving season, not to mention and increased demand worldwide.

     Yeah, I think Ill just blame the oil companies. Its simpler.

Dan Gainor is a career journalist and The Boone Pickens Free Market Fellow. He is also director of the Media Research Centers Business & Media Institute www.businessandmedia.org.