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A Tulsa TV station's mix-up caused a major mishap in the crude oil market

If anyone needed proof that it doesn't take much to make gas prices jump, here it is: Reuters reports that world oil prices leaped again today because a Tulsa, Okla., TV station published an erroneous report on its Web site.

The report claimed that a lightning strike had touched off a fire at a Tulsa-area refinery. The managers of the refinery, apparently noting that they were not on fire, promptly extinguished the false report, and the TV station removed it from their site. Not quickly enough, however, to prevent oil traders around the globe from pressing the panic button and sending crude prices spiraling up another 40 cents a barrel.

I find this story disturbing on several levels:

  1. If international markets can move on the basis of a Tulsa TV station's Web site, we are in a heap of trouble. For one thing, Web sites are almost always an afterthought at TV stations. I've worked at several, so I base this on firsthand knowledge. TV stations are in the business of broadcasting TV shows. If they have anybody who can actually write news, they're working on the 11 o'clock broadcast, not the Web page. This is generally the province of an underpaid coed or an intern. Secondly, Tulsa ranks as the No. 62 broadcast market in the United States. From a media standpoint, that's pretty much the bottom rung -- at least among towns that boast a freeway and a few multistoried buildings. If this is where oil buyers get their news, no wonder I'm paying $3.29 a gallon for unleaded.
  2. I don't think the problem is limited to the energy industry. The analysts that cover tech stocks are just as vulnerable to a bad piece of news reporting. Financial analysts are expected to be at least quasi-clairvoyant, and since that's pretty much impossible, they work hard to find out things (and when that fails, to guess things) before anybody else. Scouring the Web sites of Podunk TV stations and other spurious news outlets is one way to pick up a market-moving tidbit before it hits the major media, giving an analyst (and subsequently his or her client investors) a leg up on the competition. It's also a good place to pick up the scent of a red herring, potentially throwing markets into turmoil by indiscriminately overvaluing or trashing an unsuspecting stock.
  3. I'm happy that the fine folks at the Wynnewood Refinery in Garvin County, Okla., are safe tonight, despite what their neighbors at KOTV may have reported. I'm not so pleased that a little snafu like this can cause a global ripple effect that further drives up prices at the pump. Filling up my SUV is already a hideous experience. So please, whether you work at a TV station in Tulsa or publish a parish newsletter in Anchorage, let's all try to be at the top of our game people. The Internet is an indiscriminate medium, treating every Web page on Earth as if it were of equal importance and credibility. In this environment, one slip of the keyboard can spell disaster.

Interesting to note, a very similiar incident occured just two weeks ago when a fake email was published on Engadget, subsequently sinking the Apple stock price.

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RE: Missed the point
By InsaneGain on 5/31/2007 1:29:18 PM , Rating: 1
From what I hear it's the massive multi-billion $ hedge funds that greatly magnify price fluctuations and create the incredible volatility in commodity markets such as gasoline. Billions franticly flow in or out of a given commodity based on the smallest bit of information or even rumours and the price fluctuates accordingly. I work at a company that uses copper for cables, and I therefore follow copper prices. After decades of relative stability, copper prices fluctuate up to 5% daily which makes it extremely risky to enter into any kind of contract with a customer, and of course the speculators love it. How is it logical that something as fundamental as copper fluctuate 5% in one day or 54% in 3 months? The supply is relatively stable and predictable and so is global demand. I believe that the increased volatility is hurting business and consumers, and speculation should be banned in commodities and only producers and end users should be able to buy and sell commodity future contracts.

RE: Missed the point
By masher2 on 5/31/2007 2:08:43 PM , Rating: 3
Before you lobby against futures speculation, consider the situation before we evolved a futures market. One piece of bad news could and would raise the price of a commodity by 500% or more, literally overnight. In comparison, the 'volatility' of today is a pale shade.

If you ban speculation, then you reduce liquidity...and that prevents the market from working properly. Remember this. Anytime a speculator guesses wrongly and improperly winds up raising the price of a commodity, he pays for it by losing his shirt. If he's guessed right, then he's done the end consumer a favor, by signalling demand and future price changes early, thereby allowing an easier, more gradual adaption to new conditions.

RE: Missed the point
By Ringold on 5/31/2007 6:14:50 PM , Rating: 2
Additionally.. prices arent set, if I understand it correctly, until the commodity market for any given month moves on to the next month. If gas stations raise prices today based on futures contract price changes today it's not due to any direct cost being passed on yet, though it could reflect an attempt on their part to somehow manage their price such that they don't run out ahead of their next shipment or the likes.

And beyond the whole discussion, once it was known, or becomes known, that the story was false then it ceases to be incorporated in to the price of oil. Everything from global security concerns, weather forecasts and political developments impacts the price of oil and it's seems strange to me to think we can even speculate later in the same day of trading why a price move actually occured. Was it that, or did another terrorist strike occur in Nigeria? Who knows? The 'market' knows, but we sure don't.

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