Media Moves

Business press wrong about weather and oil prices

February 8, 2007’s Marek Fuchs points out that Reuters and the Associated Press are getting it wrong when tying changes in the weather to prices for crude oil in the commodities market.

Marek FuchsFuchs wrote, “Let’s start with a headline from this morning, careful not to ensnare our pant leg on too much nonsense. Reuters, in its infinite lack of market-moving wisdom, yells, “Oil above $59 as cold bites, OPEC cuts supply.” Not to be outdone in overdoing it, Associated Press did the same.

“In the Reuters lead, we are told that oil prices climbed back above $59 a barrel as ‘a blast of cold weather boosts heating oil demand.’ Got that? We’ve had a warm winter, but a few days of freezing our measuring sticks off — at least in the Northeast, where a lot of journalists need to be sent off to their newsrooms by their mothers with their mittens — and oil is zooming. Onward, skyward and — well, you get the picture.

“But by only the fourth sentence, the theory that hit so hard in the attention-grabbing headline and lead, which many investors don’t read past, is already looking like a scared little rabbit. ‘The rally,’ opines Reuters, ‘has coincided with a drop in temperatures in top heating oil market in the U.S. Northeast.’ (Emphasis mine.)

“Uh, which is it? A direct correlation between the ‘cold biting’ and crude soaring? Or a total freakin’ coincidence? We can’t be neutral on this. The causes are contradictory. It’s either/or, neither/nor. And you wonder where good investors’ chronic mistrust of the business media comes from.

“The answer, of course, is neither.”

Read more here.

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