A price spike 28 times larger than the proportion of global oil production lost? The loss of 0.4% of oil output leading to a 13% price increase?
It's what NBC's Ann Curry imagined on this morning's Today show. 'Soaring Gas Prices' is one of the Today show's longest-running hits. This morning's episode brought us Ann Curry trying to induce CNBC financial reporter Ron Insana to paint the gloomiest possible picture in the wake of the news that BP has shut down an Alaskan oilfield. BP shut the Prudhoe Bay field indefinitely due to the discovery of severe corrosion and a very small spill from a Prudhoe Bay oil transit line. The 400,000 represents 8% of US domestic oil output and about 2.6% of US supply, including imports.
Curry: "First - new fears of a spike in gas prices now that BP is shutting down their oil field. Ron Insana is here to explain what it means. Major developments?"
Insana: "Absolutely. If you think about the size of this shut down and what it means to the world oil market. 400,000 barrels a day are coming off line. 2.6% of US oil consumption. While we worry about disruptions from the Middle East because of what is going on between israel and lebanon, this is a disruption at a time when prices are already high."
Curry: "Overseas markets $77. Higher?"
So far, so fair. Clearly the loss of 400,000 barrels a day is not good news. But it was then that Curry started pushing the envelope.
Curry: "How much? $10 [per barrel]?"
And understated Insana: "In a single day that would be a lot."
I'll say! As mentioned, the 400,000 barrels represents only 2.6% of US supply. But remember - the crude oil market is international. The lost 400,000 represents only 0.47% of total global daily crude oil production of about 84 million barrels. Yet Curry was envisioning a 13.3% price increase! Now, it's true that negative events can disproportionately impact prices. But by a factor of 28 times?
So for the MSM, the loss of 400,000 barrels/day is a huge event that could cause a $10/barrel price increase. But the same MSM dismisses the addition of more than double that by drilling in ANWR as insignificant! Big hat tip to poster Syriacus at Free Republic.
Ann wasn't done: "What about the economy? What happens to oil affects the economy?"
Insana: "If it's above the $78 a barrel level, gas prices will go up. Retail sales could be hurt and the consumer will get pinched more. It could slow down an already weaker consumer whom we have seen stop spending at walmart and restaurants because they are feeling the pain at the pump."
Curry saved her fondest wish for last: "A game changer in the economy?"
Ron played along: "Yes. Because it puts more pressure on the inflation picture. It may keep the Federal Reserve raising rates longer. That's an open question. If it slows the economy too much, it may take the fed out of the game and rates may come down."
Curry wasn't finished beating the higher-prices horse: "One way the economy is [slowed] is the price of gas. What do you think will happen to the price of gas?"
Well, Ann, what do you think would happen to price of gas if your prediction of a $10/barrel increase in the price of crude came true?
Curry closed by telling Insana to "come back when you have good news." Somehow you sensed she didn't mean it.
8/10 Update: After an initial spike, crude oil prices have settled back to about where they were when the BP story broke.
8/14 Update: Crude is now about $2/barrel below where it was when Curry speculated about a $10 increase. Should we hold our breath for a Today show retraction?
8/18 Update: Crude has now fallen below $70/barrel! Wonder when might Today run a segment on the "Plummeting Price of Oil?"
Mark Finkelstein lives in the liberal haven of Ithaca, NY, where he hosts the award-winning public-access TV show 'Right Angle.' Contact Mark at firstname.lastname@example.org