Maybe the Most Ridiculous Headline in History: ‘Gas Price Decline May Spur Inflation’

I didn’t believe it when I saw it, nor did I believe a NewsBusters member when he/she referred to it in our comments section. But, there it was in USA Today: “Gas Price Decline May Spur Inflation.”

Can’t be, right? After all, even if you’re not an economist, you are intelligent enough to realize that inflation is typically caused by higher energy prices. Such was certainly the case in the ’70s, and has been the case in the past twelve to twenty-four months as oil and gasoline prices have skyrocketed. Isn’t that what the media have been claiming since Hurricane Katrina hit last year – higher oil and gas prices are going to lead to inflation?

Yet, this USA Today article had the gall to suggest that declining gas prices were a bad thing because they would spark inflation. If you don’t believe me, read it for yourself:

The recent sharp decline in gasoline prices may help consumers. But it also may stoke inflationary fires, perhaps forcing the Federal Reserve to raise interest rates again later this year, some economists, such as those at Merrill Lynch and the Bank of Tokyo-Mitsubishi, say.

The article amazingly continued: “If consumers spend the cash in their wallets left over from filling their gas tanks, the economy may speed up and businesses will have greater power to raise prices. That could lead to higher inflation — not lower, as some may expect — and renewed action from the Fed.”

Hmmm. Haven’t the media been warning us for almost two years that rising gasoline prices would cause the Federal Reserve to raise interest rates thereby leading to a recession? Now that such prices are declining, the press is telling us that lower gas prices are bad because consumers will have more money to spend?

Honestly, folks, this could be the most ridiculous economic analysis I’ve seen since I graduated high school. The net effect is the media have created a perfect lose-lose situation for the economy: if gas prices go up, it’s bad; if gas prices go down, it’s bad.

How disgraceful.

Furthermore, this article offered absolutely no contrary opinion. A good economic piece, when dealing with such a subjective and controversial viewpoint, should present the position of an analyst or economist that doesn't agree. In this case, USA Today exclusively quoted people that feel the same way irrespective of how out of the mainstream their views were. In fact, there are many economists and analysts that are looking at this energy price decline as a reason why the Federal Reserve might lower interest rates due to waning inflationary pressures. This is why interest rates on treasury notes and bonds have declined so much of late.

Finally, this article chose to ignore recent inflation data -- including that released on Tuesday --  suggesting that declining energy prices are indeed reducing retail and wholesale costs.

Once again, how disgraceful.

Oil & Gas Prices USA Today
Noel Sheppard's picture