Gasoline "Demand:" Find the Flaw
By David Henderson
If the Department of Energy is to be believed, weekly gasoline demand has fallen 7% on average from a year ago, to its lowest level since 2001.
But few market observers believe it.
The Energy Information Administration’s weekly report on U.S. gasoline demand has for years been the most-watched measure of gasoline usage. Analysts and economists use it to make projections, and traders use it as a gauge of when to buy or sell.
But many analysts say the recent data are flawed. They say the data suggest American drivers this year, based on the average of weekly figures, have cut back at the pump by 622,900 barrels a day from a year ago, the equivalent of Argentina’s entire daily consumption. The U.S. economy is gaining steam, they argue–nonfarm payrolls rose 1.6% in February–and while high gas prices probably are eroding demand, it wouldn’t be by that much.
This is from a news story, “Questions Arise on Gasoline Data,” by Carolyn Cui, in this morning’s Wall Street Journal.
The news story is not about demand at all, but about something else. And by making it look as if it’s about demand, the reporter confuses an issue. It’s an issue that someone who really paid attention in an introductory microeconomics class would see clearly.
So here’s a test of your basic understanding of microeconomics:
(a) The first two times in the above quote that Ms. Cui uses the word “demand,” she really should use another word. What is that word?
(b) The third (and last) time she uses the word “demand,” she really should use a two-word term. What is that term?
If you want to illuminate things for your fellow readers, then, as co-blogger Bryan would say, “show your work.” I.e., explain.