Perhaps you've noticed that oil prices continually "dip," "drop," or "plunge," but the price of oil really doesn't seem to be going dow over time. Funny. Sure, sometimes the news reports that prices "jump" on some unexpected news--say one of the rare attacks in Nigeria that actually gets reported. More often than not--in my opinion--the price rises don't get reported. So, I am announcing my plan to begin to track this interesting little phenomenon. In an attempt to make this an objective suvey, here is my proposed methodology:
I will check daily after the close of the NYMEX at a set list of internet news sites, and I will record whether each site runs a lead story (defined as "above the fold" on my browser) that mentions in the headline that oil prices either rose or fell (not "how much," but just "yes" or "no"). Then I will record the actual NYMEX price change for that day. I will post my results regularly in the form of some kind of snappy graph. Here are the sites (all US for now) that I will check daily, feel free to follow along:
My hypothesis: the news agencies are selectively ignoring the effect of overnight trading on the oil markets. Yesterday's NYMEX pit close is not the price at which today's NYMEX pit opens--instead, the markets trade electronically all night, and the close of the electronic market 1/2 hour before the pit opens is the new opening price. I think that when there are significant gains in electronic trading, but a minor fall in prices during the pit session, the news agencies report that oil prices decline. For that reason I will calculate day on day change in pit session closing price, rather than just the change during the pit session, as this reflects more accurately what the price of oil is doing. For example, today (March 22, which I am not counting in my experiment), the day-on-day pit close was up because of price gains in overnight trading, but the price fell slightly during the pit session. MSN and CNN both reported that the price dropped (Fox had no mention), but neither had any metion about the overnight gains. We'll see what happens...