JABbering Stooge

Thursday, June 09, 2005

MSRNC and Reuters: Shilling for big oil

MSRNC...I mean, MSNBC posted a Reuters story on its web site entitled, "Gasoline: One of the best bargains around."

The story cites, and accepts at face value, a study by oil industry research firm John S. Harold, Inc., which concludes that "the price of gasoline is cheaper by volume than many other household products, and the cost has not risen as quickly over the years."

Of particular relevance is this quote:

"On a per-barrel basis, gasoline is America's bargain liquid: 10 percent cheaper than bottled water, a third the cost of milk, a fifth the cost of beer, and less than 2 percent the cost of a bottle of Jack Daniels," the study said.


Great. But what's important here isn't unit price, it's usage cost that matters (because even a small price adds up as usage increases).

Let's assume for a moment that the gasoline usage cited in the study is accurate:

Gas: 10 gallons/wk.

Now let's assume, using an educated guess based on the volume of product that goes through the grocery store I work for, the average usage of various commodities:

Milk: 2 gallons/wk.
Beer: 2 12-packs of 12-oz cans/wk. = 12 x 24 = 288 fluid oz./wk. = 2.25 gallons/wk. (according to onlineconversion.com's volume conversions)
Bottled water: 1 24-pack of 20-oz bottles/wk. = 480 fluid oz./wk. = 3.75 gallons/wk.

Totaled up together, usage of the sample non-gas commodities is 8 gallons/wk. - 80% of the gas usage cited. Over the long haul, that 20% difference can add up fast. But as a percantage of overall usage in this sample, gas is by far the worst offender.

Gas: 10 gallons / 18 gallons = 55.56%
Milk: 2 gallons / 18 gallons = 11.11%
Beer: 2.25 gallons / 18 gallons = 12.5%
Bottled water: 3.75 gallons / 18 gallons = 20.83%

So, let's suppose that gas is $2.16 per gallon, milk is $3.49 per gallon, a 12-pack of 12-oz. beer is $10.99,and that 24-pack of 20-oz. bottled water is $5.69.
Then the following happens:

Gas costs 10 x $2.16 = $21.60
Milk costs 2 x $3.49 = $6.98
Beer costs 2 x $10.99 = $21.98
Bottled water costs 1 x $5.69 = $5.69

Notice that the only commodity in this sample set that costs more than gas, based on usage, is beer.

Total expenses for the week: $56.25.

Gas represents $21.60 / $56.25 = 38.4% of the week's expenses.
Milk represents $6.98 / $56.25 = 12.41% of the week's expenses.
Beer represents $21.98 / $56.25 = 39.08% of the week's expenses.
Bottled water represents $5.69 / $56.25 = 10.11% of the week's expenses.

So on a usage basis, gas is the second most expensive commodity in this sample set, and only because beer was set at an arbitrarily high value (though one that reasonably approximates the price of beer - the prices of the other commodities are also assumed to be reasonable approximations of their respective prices).

In other words, for an oil industry research frim to use a "price per barrel" comparison with non-gasoline commodities to argue that gas is actually a bargain is one more example of lying through statistics, because the average household isn't going to be using barrels of oil in one week, much less even one barrel of any other commodity.

Or as fellow Bartcop poster "retroper" put it: "Yes, Gas in the US is the cheapest of any industrialized nation but don't tell me what a great bargain it is by comparing it to Windex and Summer's Eve."

If MSNBC and Reuters want to maintain any semblance of credibility, they would do this sort of analysis (albeit in a much more rigorous fashion) on any claims made by any special interest group.

"Liberal" media bias, indeed.

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