Complete Gasoline Coverage

By Amy Eagleburger
June 19, 2008 12:49 PM

For business journalists, rising gasoline prices is now a daily story. But how often do the stories express more than just consumer ire?

To really educate readers on the issues surrounding changing gasoline prices, reporters need to go beyond typical surface stories and connect the increases with the real-life implications for consumers. Once you start digging, you’ll see more depth to the issue than at first glance.

Educate your community about how the price of oil trickles down to become the price of gasoline. While about 60 percent of the final gasoline prices come directly from the price of crude oil, there is still another 40 percent that is determined by refining costs, transportation, marketing and other local factors. And more fundamental changes in your community’s travel habits might also be overlooked.

To strengthen your coverage of changing gasoline prices, here are some tips:

1 – Go beyond the usual suspects
As gasoline costs increase, more people are using public transportation, purchasing hybrid cars and dumping pricey SUVs. But one overlooked trend is the growing popularity of scooters.

In a recent story, Christopher Kirkpatrick, a reporter for The Charlotte Observer, detailed one man’s decision to ditch his hybrid for a Vespa motorized scooter.  The scooter gets about 72 miles per gallon, compared to the 45 miles per gallon the man’s hybrid averaged.

But there was an even bigger story. Kirkpatrick found that this man wasn’t the only one buying a scooter – sales at Vespa of Charlotte had increased fourfold.

“These things illuminate who we are and social trends and are the more interesting reads,” Kirkpatrick said. “You have to put yourself in people’s shoes and think, ‘if I had four kids what would I be doing? If I had to drive to work 30 miles each way what would I be doing?’”

2 – Dissect local pricing
Ever wonder why gas prices can have a range of nearly 30 cents in some cities?

Elizabeth Douglass, an energy reporter for the Los Angeles Times, had the same question. She found her answer in zone pricing, which is a practice used by oil companies to set prices based upon the competition surrounding the station’s location.

For example, if a gas station is located next a discount gas retailer, the companies would charge the gas station less so they would be more competitive.  But across town, the same brand of gas station would be selling gasoline at a higher price because there was not a cheaper alternative close to the station.

While the practice is technically legal, it’s a form of price fixing but more than that, it helps to illuminate why there are regional variations in local pricing.

Douglass’ findings were compiled in a three-part series that she co-wrote for the Los Angeles Times, which detailed refinery politics, zone pricing and other factors that add to consumers’ bottom line.

Concern over high prices has led the states of Maryland and New York to consider banning zone pricing. Regardless of the state, regional differences in gas prices are a reality. Explaining one of its more questionable causes is well worth the effort.

3 – Talk to local gas station owners
Most corporate gas stations won’t be willing to talk about pricing policies. Your best bet is locally owned stations.

The Journal Star (Peoria, Ill.) recently ran a week-long series about the cause and effect of increasing gas prices. Reporter Michael Smothers was brushed off by the big name gas stations but found a willing source in local owners.

“The corporations are hiding behind their curtain,” Smothers said.  “People on the local level not only have more difficulty in hiding but they have less incentive to because they’re local people.”

In most cases, he said, the locals who have the highest gas prices want a chance to explain their reasons for charging so much.  Locals with low prices want to complain that they’re be penalized by low profit margins for trying to pass on the lowest cost to the consumer.

Another great source for Smothers was the jobbers who would buy gasoline in bulk and then drive around to sell it to the gas stations. 

4 – Don’t accept the conventional wisdom on oil politics
When it comes to who is to blame for higher oil and gas prices the simple fact is that it’s complicated. So before you write your next story, step back and look at some of the more overlooked facts.

While China’s increasing demand for oil is a factor, the low average gas mileage of American cars and the increase in the average morning commute are of equal importance.

Saudi Arabia has the largest single voice among oil producing countries but in terms of pure volume, Canada and Mexico account for nearly twice as much delivered to the American market.  Maybe there is a story in the Mexican or Canadian oil production market.

There is also a lot to be said for how refineries play into the final cost of gasoline. 

Maintenance, which usually occurs in the spring, can result in consistently higher summer gas prices.  Some regions, like the Phoenix-metro area, switch to cleaner burning gasoline with additives during the summer.

Addressing the issue of why the Dutch pay nearly $7 per gallon (a 158 percent tax rate to discourage consumption) and why Chinese car owners only have to pony up $2 per gallon (fuel subsidies) might also be a good idea.

5 – Pay attention to propane and natural gas costs as winter approaches
With the focus on gasoline prices, the increase in other fuel prices has been largely ignored, Kirkpatrick said.  While summer still has two good months left, the states with colder winters will see people affected possibly more than last year’s price increases.

“Look at the procedures that power companies and gas companies have in dealing with people who don't pay their bills,” Kirkpatrick said.  “There’s just a treasure trove of data at the state level about how utilities behave towards their customers in terms of shut off.”

He also added that journalists shouldn’t be afraid to contact trade associations and organizations that do industry research.  By and large they have excellent data that can quantify corporate behavior.

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism