Monday, April 10, 2006

Oil Price Reporting: Follow-Up

This is a quick follow-up to a recent post where I promised to investigate—as objectively as reasonably possible—the accuracy and potential bias in the reporting of oil price by the main stream media. Well, here’s the first two weeks of data with some analysis. Overall, I cannot point to any evidence of bias, either to under-report or over-report price movements either up or down. What I can point out is a general inconsistency by CNN and MSNBC in dealing with the Pit market and Access market prices. Essentially, the “Pit” is the live trading floor that only trades during the mid-day hours. The “Access Market” is the electronic trading board that trades crude futures during all other hours (overnight). The Pit session may close with the oil price up $1, and then it may immediately drop $0.20 in the opening hour of Access trading. How should the MSM report this, as a rise of $1, a rise of $0.80, or a drop of $0.20. Consistency would at least facilitate an analysis of potential bias, but the most evident piece of data (albeit very premature and preliminary) to come out of my two weeks of study is that these discrepancies are not reported consistently. Here’s the data:

An analysis of the discrepancies:

March 27th: Prices rose $1.91 in the Pit, then slipped just slightly as soon as the Access market opened. CNN ran the headline “Oil Slips Slightly.”

April 3rd: Prices dropped $0.52 during Pit session, but rose slightly after Access opened. Both MSNBC and CNN ran headlines that oil was up, however CNN mentioned in the article fine print that the after-hours rise was less than the drop in the Pit earlier that day.

April 4th: I was out of town on business and unable to check reporting on time.

April 5th: Both CNN and MSNBC reported the $0.87 rise in Pit trading, even though oil had already dropped slightly in Access.

A few notes: FOX consistently did not report on daily price moves, even on their energy page, so I dropped them from sampling. The market has been steadily trending during the sample period—I don’t know what effect this has had on the reporting, but I hypothesize that any bias would be more evident in a trading, not trending, period. Also, as any statisticians will point out, this is a grossly undersized sample, and the specific procedures are not firm enough to make this a rigorous scientific study, so take from it what you will. Bottom line: oil prices are reported inconsistently by the MSM, which has clouded this effort to prove or disprove any bias. That said, it is interesting to note that there have been several rather lengthy discussions at about alleged bias in reporting to hide the rise in oil prices during exactly this sample period…

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