Sunday, March 27, 2005
Economic illiteracy in the business press.
From innumeracy in the public schools to economic illiteracy in the press. Of course, we are inundated with a perpetual flood tide of it -- but one might think the business press might be a little less bad. Go wish.
Birthday boy Tim Worstall gives us a fine example in this current and widely reported story...
Crude oil prices climbed more than $1 per barrel on Thursday, following the news of a fatal blast at a Texas refinery.... which Google news at this moment says is the substance of more than 307 different news reports (like this).
A deadly explosion at a BP refinery in Texas City, Texas, led to supply concerns. The third-largest petroleum refinery in the US produced 30% of BP’s supply of petroleum products in North America... Crude oil futures for May delivery rose $1.03 a barrel on Thursday to settle at $54.84 per barrel...
What's the problem with it? Well, it's true that there was a refinery explosion and also that the price of crude oil rose soon afterward
But, as Tim points out, if a refinery that consumes a major amount of crude oil in the course of producing finished products is unexpectedly knocked off line for a significant period if time, then the amount of crude available to other refineries will increase, which will cause the price of crude to fall, other things being equal. And any price increases will be seen among finished products, which is where any resulting shortages will occurs.
Correlation is not causation -- and sometimes the idea that it is simply defies common sense. But that doesn't keep the business press from reporting it as so. (Is it any wonder the political press does what it does?)