updated 4/30/2006 1:38:08 PM ET 2006-04-30T17:38:08

MR. TIM RUSSERT: Our issues this Sunday: This is a special edition. Why are gasoline prices going up and up and up? And what must America do to ensure we have the energy supply we need? With us, for the full hour, the secretary of energy, Samuel Bodman; the president and CEO of the American Petroleum Institute, Red Cavaney; the host of CNBC’s “Mad Money,” Jim Cramer; the assistant Democratic leader, Senator Dick Durbin of Illinois; and the author of “The Prize: The Epic Quest for Oil, Money and Power, NBC energy analyst Daniel Yergin.

And in our MEET THE PRESS MINUTE: 29 years ago, the head of the Standard Oil Company was here talking about huge oil profits.

(Videotape, April 24, 1977):

MR. JOHN SWEARINGEN (Chairman of the Board Standard Oil of Indiana): Oh, yes. They have gone up and I think if you’ll read the papers this morning, you’ll find that the profits of other companies have gone up, too.

(End videotape)

MR. RUSSERT: Welcome, all. A lot to talk about this morning.

And let’s start, we’ve been talking to folks all across the country about their concerns, and this is what we found out in our NBC/Wall Street Journal poll. Which concerns—causes you most concern? $3 per gallon gasoline, 45 percent of Americans say that is their number one concern; more than a nuclear Iran, 33; illegal immigration, 26; civil disorder in Iraq, 23. Gas is on people’s minds. Who do you blame? Who’s responsible for the high gas prices?  Oil companies, say 37 percent of Americans; 22 percent say oil-producing nations; 15 say George Bush; consumers blame themselves, 8 percent; federal regulations, 6 percent; U.S. Congress, 4 percent; automobile manufacturers, 2 percent.

Secretary of energy, why has gasoline gone up at the pump 60 cents in a month?

MR. SAMUEL BODMAN: First, oil prices have gone up, Tim. And that’s been a, a situation that we’ve been dealing with over the last, basically, year and a half. The suppliers have lost control of the market and, therefore, demand is, is—exceeds supply, and it’s a real issue?

MR. RUSSERT: Why? Why? How have they lost control of the market? Why, why has oil gone up?

MR. BODMAN: The oil has gone up because the suppliers are unable to make the kind of demand to make the flows equal to the demand. So we’ve got demand coming from China, from India, from the United States. All of this is good because the economies are strong. And so we’re getting people out of poverty, we’re getting people that are, that are working and doing—and living better.  But the demand is also causing the kind of price spike that we’ve had. That’s one thing. The second piece is that we have a number of factors. We’re shifting from winter to summer, gasoline grades, we’re shifting from MTBE to ethanol, which has got some dislocations that have caused some, some—I have to believe, have caused some price spikes. We’re moving to ultra low-sulphur diesel fuels. All of that is adding to the situation that we now have. I expect the latter to settle down over the next month or two, but, clearly, we’re going to have a number of years, two or three years, before suppliers are going to be in a position to meet the demands of those who are consuming this product.

MR. RUSSERT: But a lot of these demands have been ongoing. Are the oil companies exploiting this situation?

MR. BODMAN: The president has, has instructed the Justice Department to undertake an investigation of that. We see no evidence of it, but this is one of those situations where, I guess I would call it trust, but verify and that’s what the Justice Department is engaged in.

MR. RUSSERT: Senator Durbin, in your mind, why has gasoline gone up 60 cents per gallon in one month?

SEN. DICK DURBIN (D-IL): I think there are two things, and one that you alluded to in your second question, profit taking by the oil companies. Last year, $110 billion in profit by the oil companies. ExxonMobil leading the pack. That translates into $1,000 for every household in America paid for profits by these oil companies. Four hundred-million-dollar retirement gift for Lee Raymond, the CEO of ExxonMobil. That is part of the problem. And I think it has to be focused on. Secondly, though, we’ve had a failure in our nation’s energy policy. Since President Bush was elected to office, the price of gasoline has virtually doubled. After he signed the Energy Bill last year, home heating cost in the Northeast and Midwest went up dramatically. We saw this coming with MTBE. We knew that there would be a transition over as the MTBE producers were not protected from liability by Tom DeLay’s amendment.  All of these things were predictable, and yet we didn’t prepare ourselves for them. We don’t have a sound energy policy and we definitely need one.

MR. RUSSERT: But you voted for more ethanol to be blended into gasoline.

Aren’t you partly responsible for what we’re seeing?

SEN. DURBIN: I’d vote for it again because that’s home grown and that means that domestically we can start to provide for ourselves as Brazil has done so successfully, I’m sure we’ll mention on this program. But let’s be very honest about this. When we put up the Maria Cantwell Amendment on the floor in the Energy Bill and said America should reduce its dependence on foreign oil by 40 percent over the next 20 years, it was opposed by this administration. Opposed because they said that would force higher CAFE standards, higher fuel economy for cars and trucks. That has to be part of the solution in America. And now the president recently has said he wants to revisit that issue. But that has to be part of any sound energy policy.

MR. RUSSERT: Jim Cramer, you were on the “Imus in the Morning” radio program this week, last week, and said this, and let me share it with our viewers:

“They ought to investigate the Energy Department because they switched over to ethanol without any plan whatsoever to be able to mix ethanol into gasoline.  I mean really. I would have the Justice Department call the Energy Department to say, ‘We’re investigating you.’” What is that about?

MR. JIM CRAMER: I have to tell you, I was shocked. Everyone knew at the distribution, remember, you have to go refining to distribution center, that is very difficult to mix ethanol with, with ordinary gasoline. Ethanol is not ready—we’re not ready to have ethanol in this country. And yet we acted as if, “Hey, listen, it’ll be no problem whatsoever.” I think that 50 to 60 cents of the increase is because we had a bottleneck that should’ve been, should’ve been perceived and should’ve been dealt with well ahead. I think the Energy Department should’ve known that. I think the Energy Department should have warned us that this was going to happen.

MR. RUSSERT: Mr. Secretary, did you drop the ball?

MR. BODMAN: No. We didn’t drop the ball. Listen, first of all, ethanol is easily blended with gasoline. Ethanol—we used four...

MR. CRAMER: That’s not true.

MR. BODMAN: We used four billion gallons of ethanol last year in, in our country. It’s expanding in its availability by 40 percent this year. So we have a supply of ethanol that I believe will be commensurate with the demands.  What we have is a difficulty in, in the transportation, the movement of ethanol throughout our country. Most of it is made in Senator Durbin’s home, home state and surrounding areas in the Midwest, and the issue therefore is we need to get ethanol to areas where we need reformulated gasoline which is what ethanol is used for and that is the East Coast, that is the major metropolitan areas in Texas as well as the West Coast. And we’ve got to have ways of transporting the material there.

MR. RUSSERT: But you knew you were going to have those transportation needs.

Why didn’t we prepare for them? Why didn’t we plan for them?

MR. BODMAN: I think we have planned for them. This is not something that the Energy Department does. This is a, this is a program that the—those who are in the business of manufacturing ethanol and supplying it, we are reliant upon the private sector to do that. And in my judgment, they’ve done pretty well.

MR. RUSSERT: Daniel Yergin, you’ve written about this issue extensively.  “The Prize: The Epic Quest for Oil, Money and Power.” Why are we witnessing what we are seeing at gas pumps all across the country, 60 cents in one month, and outrage by consumers?

DR. DANIEL YERGIN: Right. Tim, partly what we’ve—it’s the reasons we’ve heard. But the thing people forget is we’re not an island here. We import 60 percent of our oil and in addition to the growth in China and India, we are seeing a slow-motion energy shock spreading across the world, a sort of disruption. All you have to do is look at the front page and look at Iraq, Nigeria, Venezuela and a supply that has not yet come back from the hurricanes and we’re missing over two million barrels a day in a very tight market. And now, on top of everything else is a ratcheting up of tension over Iran, which is having a big influence in this oil market.

MR. RUSSERT: Mr. Cavaney, do you believe the Iraq war has affected oil prices?

MR. RED CAVANEY: I think it has. One of the things our companies do is we make sure that we don’t put our employees in harm’s way. So, as a result of some of the disturbances that are going on there, the technical expertise that can be brought to bear to assist the Iraqis in trying to increase the production from their fields and from their refineries just isn’t happening to the extent it should. I’m quite confident, though—they are very resourceful people—that, as, as soon as you can stabilize the civil situation in Iraq, they’re going to be able to significantly ramp up their production, but it’ll take years and a lot of investment.

MR. RUSSERT: Mr. Secretary, Paul Wolfowitz, the assistant secretary of defense, had said the Iraqi reconstruction would be paid for by oil money, and here we have just heard the head of the American Petroleum Institute saying one of the reasons for the high prices here in this country is because of the war in Iraq.

MR. BODMAN: I think Mr. Cavaney’s right. We’ve had—obviously, the security situation in Iraq has been more difficult than that which had been anticipated in the beginning, and, clearly, it needs to be dealt with. I’m comfortable that we will see, as the Iraqi security forces gradually take control of the situation, that we will see improvements there. But there’s no doubt that Mr. Cavaney’s right.

MR. RUSSERT: It is interesting reading what politicians are saying on this subject. Here are two conservative Republicans, the speaker of the House, Dennis Hastert, and the majority leader of the U.S. Senate, Bill Frist, in a letter to President Bush. “Dear Mr. President, we respectfully request that you direct the Attorney General and the Chairman of the Federal Trade Commission to investigate any potential collusion, price-fixing or gouging in the sale or distribution of gasoline.”

Mr. Cavaney, what do you think of that letter?

MR. CAVANEY: Well, first of all, let me explain that that’s one of the typical ways that a politician can react to concerns about this. But over the last several decades, our industry has been investigated over 30 times by federal and state agencies, and every single one of those investigations came out with the same conclusion: We did not participate in anti-competitive behavior, we did not have any collusion, and we were exonerated. I expect any subsequent look and investigation is going to determine the same thing.

MR. RUSSERT: But let’s look at some of the things that, that Senator Durbin talked about, specifically with Exxon. And here, I’ll put it on the screen for our viewers and for everyone else to see. “ExxonMobil Corp., the world’s largest oil company, reported Thursday the fifth highest quarterly profit for any public company in history, posting gains from higher oil prices that were likely to stroke the furor over outsized oil company earnings. ... In January, Exxon posted the highest quarterly profits of any public company in history: $10.71 billion for the fourth quarter of 2005 and $36.13 billion for the full year.” That’s a lot of profit.

MR. CAVANEY: Well, it is, but not for the size of the company. Something has happened, that Dan alluded to. A couple of decades ago, the global oil market changed significantly where the principal competition out there now is national oil companies owned by foreign governments. That required U.S.  investor-owned oil and gas companies to significantly scale up in order to compete with them directly. Those companies have. If you take the percent of profit that they made on top of their sales, what you’ll find is we typically come in pretty close to the all-industry average. Last year, we earned 8.5 cents per dollar, the all-industry average for all of the economy was 7.7 cents, so it’s right about in the band.

MR. RUSSERT: I think what troubled a lot of people is that, two years ago, a bill was passed to give incentives, tax breaks to the oil companies, to invest. And this is what the Connecticut Post reported, “ExxonMobil Corporation invested only $10 million last year on direct research on alternative energy while reaping a record $36 billion in profits. Meanwhile, it handed its retiring chief executive officer a nearly half-billion-dollar parachute. ... The New York Times reported that recently retired Exxon Mobil CEO Lee Raymond received a $400 million compensation package in his final year.” Making that much money, getting taxpayer-funded subsidies, in effect, tax breaks, why wouldn’t Exxon invest more in alternative fuel exploration?

MR. CAVANEY: Well, I can’t speak to a specific company, but I can tell you what the industry’s record did. Over the last five years, U.S. oil and gas companies have invested $98 billion in new technologies, including alternatives and renewables, and that represents 73 percent of the total U.S.  investment, which includes all the federal government’s money and every other business sector. We are investing in the future. We are tied to the consumer, and our job is to provide them the fuels they need regardless of whatever that fuel is.

MR. RUSSERT: But there seems to be an attitude. This was in the Boston Herald, from one of the largest oil refineries in the country, Valero, and it says here: “Valero [Energy] CEO Bill Klesse boasted this week that ‘tighter supplies’ of gasoline had helped produce ‘outstanding (profit) margins.’ And, he said, ‘the outlook for the rest of the year is even better.’”

MR. CAVANEY: Again, I can’t comment for an individual company. But what I can say, the industry itself doesn’t feel that these kind of levels are sustainable, and they’re good, because what happens is you have demand destruction. People who rely on these fuels to run their businesses, to heat their homes and all, they, they are going to end up sending jobs elsewhere.  So we think what we need to do is, as a nation, we should look at a policy framework to make sure that our broad policies are consistent with the world that we operate in today, which is very, very different than 20, 30 years ago, when the last time we really looked at the whole broad policy and made some major changes.

MR. RUSSERT: Mr. Secretary, if, if demand is up but supply is down, why are the profits so high?

MR. BODMAN: For that reason.

MR. RUSSERT: No, think about that.

MR. BODMAN: You know?

MR. RUSSERT: Play it out.

MR. BODMAN: Demand is up.

MR. RUSSERT: Correct.

MR. BODMAN: Right?

MR. RUSSERT: Right.

MR. BODMAN: So you’ve got more demand, you’re going to force price up.

You’ve got, you’ve got limited supply, and you’re going to have...

MR. RUSSERT: But that’s a decision by the oil companies.

MR. BODMAN: No, it is not. That is a decision—those are—oil is traded every minute of every day, and it’s traded basically 24-by-seven. And it’s, it is determined in marketplaces in New York and London and Tokyo, all over the world. That’s the, the—the oil companies do not determine the price of oil; the producers determine the price of oil.

MR. RUSSERT: They determine, they determine, help determine the price at the pump. And if the, if their profits are going up, they have made a decision to add on the cost at the pump at such a level to guarantee higher profits.

MR. BODMAN: That’s—look, the, the president has made, has made a, a—has given instruction to the Justice Department to investigate exactly that. And so that’s what is ongoing. That’s the question you asked Mr. Cavaney, and we are—we will see whether, in fact, that is the case.

MR. RUSSERT: Jim Cramer, you are renowned capitalist. What do you think of all this?

MR. CRAMER: Valero was able to buy its largest competitor; the government looked the other way. Valero is running its refineries, though, 105 percent of the time. They’re ‘round the clock. We have 100--we have 140 refineries in this country; we had 350 refineries 20 years ago. We have a huge refinery problem, and you can’t build them. And it’s not a federal government issue.  It’s a local government issue because no one wants a refinery next to them.

MR. RUSSERT: So what we have is lack of refining capability...

MR. CRAMER: Right.

MR. RUSSERT: ...an increased worldwide demand, ethanol being added and blended in...

MR. CRAMER: Without preparation.

MR. RUSSERT: ...and do you believe the oil companies have been adding on a little bit extra profit?

MR. CRAMER: I, I think if they could drill they would drill. If they could refine more, they would. These are companies that are run for the shareholders, but they’re run to be able to produce as much oil as we can possibly use. They want to do that. Lee Raymond, he, he generated $67 billion in profits for his shareholders. I think that that’s a reasonable return, $144,000 a day. Katie Couric makes $85,000 a day. What value has she created vs. 67 billion by Lee Raymond?

MR. RUSSERT: Well, to the “Today” show and to the millions of viewers?

DR. YERGIN: Greenlighted to our morning...

MR. RUSSERT: You leave Katie alone. At least till the end of May.

MR. CRAMER: She plays for another team now, so...

MR. RUSSERT: Senator Durbin?

SEN. DURBIN: Am I the only one of your guests here that think that profit taking is a problem? I mean, I understand the basic laws of supply and demand. I understand that if the input costs have gone up, it’s going to reduce your, your profitability. But here we have the most enormous profits in the history of the United States of America in business. The equivalent of $1,000 per household in America for profits. All of the market factors you described may suggest that the product is going to be more expensive to sell, but they don’t forgive what I think is an outrageous profit taking by this industry.

And let me also say to Mr. Cavaney, to suggest that these are average, average profits—they’re the largest profits in the history of American business. And to suggest that Mr. Lee Raymond’s retirement gift is an average gift of $400 million for his service to the company? That’s $3 for every household in America that they paid for Mr. Raymond’s going-away gift.

MR. RUSSERT: Do you have any evidence of collusion or gouging?

SEN. DURBIN: Here’s the problem we run into. Look, let me go back to an earlier point. For the past several decades, as we’ve just heard here from Mr. Cramer, there’s been a consolidation of this industry. There are now five majors. They have swallowed up all of the competition, and they’re the five big players. The Department of Justice antitrust division has watched as thousands of these mergers have taken place, with hardly a whimper. And now we have a situation where they are in control. Competition has lessened in terms of our own domestic oil industry, our own domestic energy. And I think that is a fact, too.

Is there collusion? Not until we have an aggressive investigation. And I might also add that when we suggested—the Democrats suggested in Congress making price gouging a federal crime, it was opposed by the Republicans. We think that this has to be taken very seriously if consumers are going to be protected.

MR. RUSSERT: Mr. Yergin:

DR. YERGIN: I think I’m in the “yes, but” role here. We’re back in this island of what we have to look at is what’s happening in the rest of the world. The American oil companies only produce—they produce less than 10 percent of the total world oil. That most of it is produced by state-owned companies. So what happens in terms of future supplies has a lot to do with what President Chavez of Venezuela decides to do in terms of investment.

And when we look at refining, refining went down because we had a lot of these tea kettle refineries that were created for—under a system of price controls.  But I was looking at the numbers yesterday. The refining capacity, which is what really counts, not the number of refineries, is up about 15 percent in the last 12 years. So it’s as though we’ve built eight or nine new refineries but they’re not at greenfield, they’re on existing sites because that’s the only place you can do it.

MR. RUSSERT: Another Republican suggestion, this one from Arlen Specter, the chairman of the Judiciary Committee, and I’ll read it for everyone here on the screen. “Republican Senator Arlen Specter said the U.S. Congress should consider taxing the ‘Windfall profits’ reaped by oil companies as a result of surging crude oil prices.

Specter, and other lawmakers are responding to what they say is rising voter anger over gasoline prices.”

Mr. Secretary, should the government have a windfall profits tax on the oil companies and target that money for exploration of alternative fuels?

MR. BODMAN: First of all, this administration is doing everything that it can do to deal with both short and long-term issues related to the energy situation. That’s point one. Point two: There are certain things we know that don’t work and windfall profits tax is one of them. That was tried 30 years ago, it did not work. It resulted in reduced production. We have—you know, we have prima facie evidence of that. And to me, that proposal does not hold water.

MR. RUSSERT: What do you think?

MR. CRAMER: It doesn’t create any more oil, it just doesn’t. Nor does the $100 rebate create more oil, nor does a hydrogen program we’ve spent to create more oil. We’re a carbon-based economy, Tim. We got to create more oil.

MR. CAVANEY: The last time was tried that windfall profits tax we lost $1.6 billion barrels which was then had to be imported and almost one-third of the total work force of the industry left.

DR. YERGIN: I’d like to see the focus on investment. When you look at what’s required, something like $17 trillion of investment around the world for energy in the next 25 years, that’s where I think the money needs to go.

MR. RUSSERT: Senator Durbin:

SEN. DURBIN: I guess I’m the only one at the table to disagree. Let’s get down to the basics here. The Bush administration has asked for tax breaks, $2 billion in the last Energy Bill, and protecting existing subsidies for oil companies, which are at this point in time experiencing the largest profit in their history. They are engorged with profit and when Senator Wyden goes to the floor and says, “Isn’t it time that we reduced the subsidy to the oil companies who are drilling on federal lands,” it’s opposed by the Republicans and the administration. I mean, the bottom line is this: If you do not tax these corporations at this level they will continue to run up the profits to sky heavens.

I don’t know where it ends. And they’re saying as much, this year maybe better than last. And it means that consumers will continue to be victimized unless they feel that ultimately they’re going to have to pay some of this money back. I’d like to see it come back. Rebates directly to consumers who’ve paid the price for this, but also investment. Investment in promoting energy independence and promoting new sustainable, renewable technologies.  Businesses creating new jobs and good-paying opportunities for America with new technologies. And, Tim, we’ve done it before. Between 1975 and 1985 we got serious. We dramatically increased CAFE standards, we reduced our dependence on foreign oil by 30 percent over that 10-year period of time and our economy expanded at the same time. That’s when California took off and became a national leader in terms of their cars and their, their conservation of energy. We need the same kind of leadership in America. We need a new direction. The direction we’ve been going in for an energy policy is disastrous.

MR. RUSSERT: I’ll give you a chance to respond.

MR. BODMAN: The senator’s too smart to believe what he just said, if I may say. The—this, this president has led in terms of getting an Energy Bill passed, which was a year ago, has made a proposal and has now demanded an investigation. We’re working on—have asked the Congress for the, the permission from Congress for the Transportation Department to undertake a look at the CAFE standard. We asked for that in 2002. There was no...

MR. RUSSERT: That’s miles per gallon. Miles per gallon. Sorry.

MR. BODMAN: No—yes. Miles per gallon. What are called CAFE standards.  We’re also working on increasing supply, or at least have asked to. The president has suspended the, the reintroduction of oil into the strategic reserve and has asked for ANWR.

MR. RUSSERT: Yeah, but stop, let me ask you about that.

MR. BODMAN: Yes.

MR. RUSSERT: Because after Katrina we drove down on that strategic petroleum reserve fund.

MR. BODMAN: Right.

MR. RUSSERT: And we’ve been repaying it. Putting it back in there.

MR. BODMAN: Right.

MR. RUSSERT: Putting it all back in there in case there’s a crisis. I remember back in 2000 when it was Al Gore vs. George Bush running for president of the United States.

MR. BODMAN: Right.

MR. RUSSERT: And Al Gore recommended that Bill Clinton draw out of the strategic petroleum reserve.

MR. BODMAN: Right.

MR. RUSSERT: And this is what candidate Bush had to say about it back then.

Let’s watch.

(Videotape, September 21, 2000):

PRES. GEORGE W. BUSH: Today, my opponent, in response to public outcry, proposed that our nation tap into the strategic petroleum reserve. That’s bad public policy. The strategic reserve is an insurance policy meant for a sudden disruption of our energy supply or for war. Strategic reserves should not be used as an attempt to drive down oil prices right before an election.  It should not be used for short-term political gain at the cost of long-term national security.

(End videotape)

MR. RUSSERT: Isn’t that exactly what the president is now doing?

MR. BODMAN: Tim, this, this president has been very consistent in his, in his application and management of the strategic reserve. We have not used the reserve for interruptions in supply. We have been asked by the Democrats when oil was $60 a barrel to remove oil from the reserve and put it into the marketplace in order to drive prices down. We declined to do that. Now we have oil at $75 a barrel. You know that the, the movement of prices is a function of the, the supply and demand as we’ve already talked about and it is not something that is, I think, going to be meaningfully affected by whatever happens to the strategic reserve. He has taken the position at this point in time to suspend the, the repurchase until the fall after we get through the driving season. So I, you know, it’s a, it’s a modest effort, it is a symbolic effort, but it is something that I think may help.

MR. RUSSERT: In all honesty, it’s a political effort before the midterm elections.

MR. BODMAN: I think it’s not. I wouldn’t call it a political effort. I would say that it’s an effort to, to affect the, the supply of gas, of oil in the, in the system and to, and to make a contribution to the reduction of price.

MR. RUSSERT: But his standard was a crisis or a war. We don’t confront any of those at this moment in terms of the oil supply. This was a reserve in times of real crisis. And we’ve stopped putting oil into it in order to affect the market price during the driving season. You just said that.

MR. BODMAN: Tim, Tim, the, the—we’re here today. I would say that there’s evidence, there’s, there’s apparently some evidence that we have a crisis.  There is a lot of concern about this. And so the president is looking at everything, every tool at his disposal to put to work on it. And so, you know, I’m not embarrassed by that and I think it’s the right thing to do.

MR. RUSSERT: You think that the president’s action is consistent with his campaign pledge in 2000?

MR. BODMAN: I think that that was 10 years ago or nine years ago, whenever it was, and it was some, it was—times are different and the situation has changed. Fundamentally, this reserve, the strategic reserve, has not been used for the purposes other than trying to deal with disruption. And so we have been very conservative in the use of it and I think that stands this country in very good stead.

MR. RUSSERT: But you said we are in a crisis.

MR. BODMAN: I believe that there is—there are those who would call it that.

MR. RUSSERT: Would you call...

MR. BODMAN: The fact, the fact that we are here today.

MR. RUSSERT: Do, do you call it a crisis?

MR. BODMAN: I would call it that, yes. I think that there is great concern.  You, you started out, you started out with the suggestion that it’s the number one issue on the minds of the American public. It’s something this president takes very seriously. It’s something the entire administration takes very seriously. And, you know, we’re doing everything we know how to do to deal with it that works. Not the things that we know for a fact do not work.

MR. RUSSERT: Senator Durbin, the Democrats, Al Gore urged Bill Clinton to tap that reserve. Democrats have, and the secretary’s right, urged the president to tap into it. Now that he is withholding some oil and trying to hold prices down, Democrats are criticizing him for doing just that.

SEN. DURBIN: The reserve’s almost full. The amount that’s going to be withheld is going to have no measurable impact on price in the market. I think those of us who’ve looked at the reserve in the past have also looked at the, the impact of these oil prices. I’m from the state of Illinois. We’re proud to have Chicago’s hometown airline, United. They just went through bankruptcy. And if you ask the CEO, Mr. Tilton, what was the major driving factor, he said it was the price of fuel. Price of fuel drove them to lay off thousands of people, to force others to take massive wage cuts, to cut back on the retirement benefits of thousands of people as well. It’s impacting agriculture, it’s impacting taxi cab drivers. You name it. Average families feel it. And now what we’re saying is, “Mr. President, last August you signed your Energy Bill. Your Energy Bill didn’t serve America well.” We need a new direction.”

We can’t do more of the same. We have to step out and look at this problem anew. And to hear, as some said earlier, we are a carbon-based economy, it’s true. But let’s be honest, there’s an environmental impact here as well. As I mentioned to you earlier, Al Gore was—made a presentation yesterday about the impact of global warming as we burn all this fuel. We should be moving toward more conservation, more fuel economy, more efficiency, ways to fuel our economy that won’t destroy this Earth in future generations.

MR. RUSSERT: We’re going to take a quick break and come back and talk about consumers. We have to look in the mirror and find out what are we doing, and where do we go in the future to become energy independent in the United States of America. We’ll be right back.

(Announcements)

MR. RUSSERT: More of our special edition of MEET THE PRESS, gasoline prices, after this station break.

(Announcements)

MR. RUSSERT: And we’re back. Daniel Yergin, let me quote again from you.  “Every president who has problems with energy learns that there is not a lot you can do in the short term. The system is overstressed ... and the truth is most of the solutions are medium-term or long-term. What counts in the short-term is demand, he said, noting that prices retreated when consumption dropped amid the price surge that followed last year’s hurricanes. For immediate effects, Yergin said, it’s really not what the administration does - what really matters is what consumers do.”

DR. YERGIN: Well, first thing, of course, it’s very painful for an awful lot of people, but they respond, they change how they drive, who they drive with, they switch to mass transit, and lo and behold, you start to see the demand coming down, and that takes some of the pressure off price. And we’re in a situation as we look to the summer is if we don’t have anymore disruptions, if we don’t have problems with Iran get out of hand, we could actually see gasoline prices lower. But there’s a lot of risk in the market, so you asked a very good question about “What happens if the prices go higher?”

MR. RUSSERT: Tom Friedman suggests and hopes that oil will go to $100 a barrel, because he thinks only then...

DR. YERGIN: He’s not running for office is he?

MR. RUSSERT: But he thinks only then will American consumers and political leadership and, and industry leadership get the message and say, “You know what? We have to do something different. We have to get off oil and change our behavior and change our habits.”

DR. YERGIN: Well, it seems to me that we’re already seeing that change. I think there’s an embrace of conservation efficiency across the board in a way that there hasn’t been for a number of years. And certainly the movement towards renewables, alternative, diversifying the gasoline pool, I think we are at a turning point as it is now.

MR. RUSSERT: Let me go back to the State of the Union Address, this is President Bush, January 31, 2006. Let’s watch.

(Videotape, January 31, 2006):

PRES. BUSH: Keeping America competitive requires affordable energy, and here we have a serious problem, America is addicted to oil.

(End videotape)

MR. RUSSERT: Mr. Cavaney, you agree with that?

MR. CAVANEY: We’re addicted to oil, if you want to use that term, because hydrocarbons, which is oil, coal, natural gas, have a lot of energy content, the most energy content per volume, about 30 percent more than, let’s say, alcohol, which is what ethanol is. But the industry is working very hard, we worked together with the agricultural interests to come to—with a historic pact in the year 2001 to go to Congress to put together a program that would gradually incorporate alternative fuels, like biodiesel and ethanol, and we’re well along the path to the 2005, 2006, 2007, each year it’s going to be a bit more, and by 2012 we’ll have at least 7.5 billion gallons of ethanol alone included in our national gasoline pool.

MR. RUSSERT: Mr. Cramer, if these gasoline prices keep going up, what’s it going to do to our economy? The airline costs, the pizza deliverer, the cab driver, everybody—the consumer is going to be affected in a very negative way.

MR. CRAMER: Should be. But the consumer’s shockingly resilient. Yesterday, Wal-Mart, 100 million shoppers in America go there every single week, 6.8 percent increase in comparable store sales over last year. Remarkable. The highest that Wal-Mart has had in many years. It shows me that the consumer, and that’s the month of April, consumer is not being impacted as much as you would think.

MR. RUSSERT: Let me show you something from The New York Times about Brazil.  And this is quite striking and I think a lot of the country will be surprised by this, and I’ll put it on the screen. “With Big Boosts From Sugar Cane, Brazil Is Satisfying Its Fuel Needs. [Brazil] expects to become energy self-sufficient this year, meeting its growing demand for fuel by increasing production from petroleum and ethanol. Already the use of ethanol, derived in Brazil from sugar cane, is so widespread that some gas stations have two sets of pumps, marked A for alcohol, G for gas. ... Today, less than three years after the technology was introduced, more than 70 percent of the automobiles sold in Brazil ... have flex fuel engines [that run on both ethanol and gasoline] which have entered the marketplace generally without price increases.” Here’s Brazil, South America, automobiles, flex fuel at the same costs people can buy gasoline-fueled automobiles, and they’re using sugar cane grown in Brazil...

MR. BODMAN: Right.

MR. RUSSERT: ...to fuel the cars. How can Brazil do it and not us?

MR. BODMAN: Brazil is a good model. I—the—all I can—that’s all—you know, that’s all I can say, Tim, Brazil is a good model. And that’s exactly what we’re trying to do. That’s why their—the increase in use of corn for, for generation of ethanol, that’s why the president has increased by 50 percent the amount of research that is being done out in our Colorado laboratory, so that we can create ethanol using cellulose, using more...

MR. RUSSERT: How much is he spending—how much are we spending?

MR. BODMAN: We’re spending $150 million.

MR. RUSSERT: That’s it?

MR. BODMAN: We will be spending—but that’s what we need—that’s what we need.

MR. RUSSERT: There’s a company in Idaho that wants to use wheat chaff for cellulosic ethanol...

MR. BODMAN: Right.

MR. RUSSERT: ...and they’re being told they can’t get any federal money.

MR. BODMAN: I don’t know about the name of it, but the—I can’t—you know, I can’t deal with that. I can’t...

MR. RUSSERT: Is that enough money to spend on something that should be, in, in many people’s minds, the equivalent of a Manhattan Project? Let’s get off oil? Is $150 million enough to do that?

MR. BODMAN: I think that the, the—there is a tendency in this town, Tim, to equate volume of money with progress. This is a 50 percent increase in what we’re doing. We’ve done very good work in the laboratory and we’re expecting to be able to look at other feed stocks. This is the idea of producing ethanol using something other than food, a food material, either sugar cane or corn, something that’s cheaper, and wood chips or, or switch grass or other kinds of materials like that. And we think that we’re going to be in, in a good position. The, the, the whole question about pace and speed—this is a research project. This is something that takes time. It is not something that is going to be a function of how much money is spent.

MR. RUSSERT: But if Brazil has done it and done...

MR. BODMAN: Yes.

MR. RUSSERT: ...it relatively quickly...

MR. BODMAN: Yes.

MR. RUSSERT: ...why can’t we do it quickly?

MR. BODMAN: Brazil manufactures ethanol using sugar cane. Our sugar is much more expensive than sugar cane in Brazil and now you’re getting into agricultural policy related to the Ag bill, and it’s a different matter.

MR. RUSSERT: So how long before you think that we will be off of oil and onto ethanol?

MR. BODMAN: Well, we will be in a position over the next three or four years, I believe—and again this is a function of research. It takes time to, to, to figure this out, but where we will have designed the enzymes and we will be in a position that we can then start the conversion. You first have to determine what the enzymes are before you can then start to expand and build these plants all over America. And it’s going to be something that would not just be in the Midwest, but would be in the East Coast and the West Coast where these grasses are, are available.

MR. RUSSERT: Daniel Yergin, can this country do what Brazil did and convert itself from...

DR. YERGIN: Well, it took Brazil 30 years to do it. It took three years to convert the cars, but 30 years to do it and Brazil’s gasoline consumption is about 3 percent of ours. We have to remember the scale. I think that we will see more ethanol in, in our fuel thing. The key thing, the holy grail, the breakthrough is can you take this waste product and turn it in to fuel? And I look around and not only government spending, but see a lot of private venture capital money trying to unlock the key to that mystery.

MR. RUSSERT: Mr. Cramer, do you believe that the United States can convert from oil to ethanol and other byproducts?

MR. CRAMER: Well, I would tell you that why don’t we start by waving the 50 cent tax we put on the Brazilian ethanol to protect our own people? Why don’t we do that now instead of giving 100 bucks back. Make all these noises. Why don’t we just stop the tax?

MR. RUSSERT: So import Brazilian ethanol?

MR. CRAMER: Well, it’s only because the government refuses to waive the import...

MR. RUSSERT: Senator, can you go along with that? It’s going to hurt your farmers?

SEN. DURBIN: I’ll tell you why we won’t do it, the same reason Brazil didn’t do it. They had to build their indigenous domestic industry and so they didn’t allow ethanol to come in from other countries. We are now building our indigenous ethanol industry. All over Illinois, all over the United States.

MR. CRAMER: But in the interim why not just waive it?

SEN. DURBIN: In the mean...

MR. CRAMER: Why not make it cheaper for America?

SEN. DURBIN: At this point in time, I tell you there is a boom now and opportunities for these ethanol production facilities. I want to see that happen. You know why? Because in downstate, small town America, that I represent as well, these are the best job opportunities they can find. These are business opportunities in communities that have otherwise almost given up.  They have a chance now. And if you’re going to allow us to become, allow this import of fuel from Brazil we may find ourselves as dependent on foreign ethanol as we are today on foreign oil.

MR. RUSSERT: Senator, in order to continue this drive you’re concerned about global warming, you’re concerned about oil and carbon gases and things, would you be willing to expand nuclear power in the U.S.?

SEN. DURBIN: I have trouble with that because I—we still have not resolved what we’re going to do with the waste from these nuclear power plants. I just went to Braidwood Nuclear Facility outside of Chicago. Still serious problems with environmental issues that threaten the village of Godley, Illinois, directly in the, in the shadow of this plant.

MR. RUSSERT: So you would take oil and coal over nuclear?

SEN. DURBIN: Well, at this point, I think that we have to see other alternatives. There are sustainable and renewable sources as well. You know, I drive a hybrid car at home. My wife and I, we bought a Ford Escape hybrid.  I think it’s a move in the right direction. We need to promote more hybrid vehicles, more electrical-powered vehicles. We need to move away from this carbon consumption that could endanger this planet we live on. I think it’s sustainable and renewable fuels. Also looking for more efficient ways to use the vehicles we have today.

MR. RUSSERT: Do you think you will one day head up the American Ethanol Institute?

MR. CAVANEY: Well, we look forward to using more biofuels, more ethanol, but we have to also square with some of the facts. There’s a huge amount of use of oil and natural gas in order to make ethanol. So ethanol doesn’t come to you free from nothing. So we have to use about 80 percent to as much of 95 percent of the energy just to get a gallon of ethanol. It has a proper place, but the big breakthrough is going to come when cellulitic ethanol comes. And the difference between the two: you need one set of enzymes—if your raw material is just sugar cane you need one set if it’s just ethanol. But if you’re going to use everything: yard debris, wood chips and all of these, you need a very complex mixture. But that is where the real breakthrough opportunity may well be, Tim.

MR. RUSSERT: And the oil companies are willing to convert to that kind of fuel?

MR. CAVANEY: We, we have already started to incorporate—four billion gallons are already being used right today as we speak, and we’re going to continue to be able to use more. We’re in the process of serving the consumer, and what we’ve always done is try and find the lowest affordable price. And if ethanol can be competitive, we’re going to use more of it.  This past year, ethanol was more expensive than gasoline almost every single month.

MR. RUSSERT: Daniel Yergin, based on all your study and research, what do you believe has to be done in the next decade in the United States of America regarding energy, and what do you think will be done?

DR. YERGIN: I think we need a broad range. It’s technology, it’s research and development, a very broad range, very intensive to do it. I think we see a lot more momentum now to, to have it happen. And despite the differences we hear here, around this table, there’s actually a lot of consensus on what the elements are. So I think that the...

MR. RUSSERT: What are the elements?

DR. YERGIN: Well, the elements are A: a lot more efficiency, and that means automobiles, transportation. And how do you get there? It’s either regulation or tax or price, but some way it’s going to happen. And then I think it’s a kind of continuing to diversify what goes into the gas tanks, what we use for energy, and I think as you look around the world, and you see the problems around the world, and the, the risks above the ground, you see a sense of urgency about that.

MR. RUSSERT: Do you believe we become, can become energy independent in a decade?

DR. YERGIN: No, I don’t think so. I think that we’ve gone from importing a third of our oil in the 1970s to importing 60 percent, but we’re going to be importing more natural gas. So I don’t think energy independence—I mean, it’s a, it’s a, it’s a motivator, but I don’t think it really describes our situation. The question is how do we manage the fact that we’re part of this global market in energy?

MR. BODMAN: But the first step, if I may say, is to take the pressure off that market. And that’s what ethanol will do, even in more modest quantities.  It will start to take the pressure off oil markets. That’s where the issue is.

MR. RUSSERT: But if you look at the world in which we live, and where the United States gets its oil, we’ve already talked about it, the Iraq war, limiting production from Iraq; the situation with Iran; in Venezuela, Mr.  Chavez not particularly fond of the United States.

MR. BODMAN: Right.

MR. RUSSERT: Saudi Arabia could topple tonight and we wouldn’t be surprised.  We could wake up tomorrow, and oil could be 100, $150 a barrel with the right set of circumstances, all working against our national interest. And what would that do to our economy and way of life?

MR. BODMAN: It would be, it would be a real problem. It would be a very time to—it would be a very bad time to be the secretary of energy, I can tell you, I can tell you that. As, you know, as Dan has...

MR. RUSSERT: Do you worry about this?

MR. BODMAN: Of course we worry about it. Of course we worry about it, all the time. That’s what I, that’s what I do, that’s my job is to worry about it. And, you know, as, as, as Dan said, I think that, that the issues are trying to focus on the renewable problems, trying to focus on issues that, that we can deal with in a reasonable period of time. But this is not—this has been a problem that has taken three decades to be created, and it’s going to take a number of years—this is a huge industry, the scale...

MR. RUSSERT: Realistically, Mr. Secretary...

MR. BODMAN: Yes.

MR. RUSSERT: ...how long before we could be energy independent?

MR. BODMAN: I think that the president’s instruction to us is by 2025, in 19 years, that we would have five million gallons a day of renewable energy, of ethanol in the marketplace to give—to, to square that with you, that’s about, that’s about 25 percent of what we use today, probably 20 percent of what we will use at that time.

MR. RUSSERT: Doable?

SEN. DURBIN: It’s doable, I think. To reach a point of 40 percent reduction over 20 years, which was the Democratic position on the Energy Bill is doable.  It means making a commitment to doing some things we’re not doing, promoting energy independence and energy technology development that is environmentally responsible.

But it also means two other elements we shouldn’t overlook: punishing profiteering. All the market forces not withstanding, if the oil companies still insist on these outrageous profits, the consumers will lose and the American economy will lose.

MR. RUSSERT: To be continued. Thank you all.

We’ll be right back with our MEET THE PRESS MINUTE from three decades ago, talking about high oil prices with an oil company executive. Right here on MEET THE PRESS.

(Announcements)

MR. RUSSERT: And we are back. Nearly three decades ago, MEET THE PRESS was focusing on, you guessed it, the energy crisis, big oil and profit margins.

(Videotape, April 24, 1977):

MR. ROBERT NOVAK (Chicago Sun Times): You have led into what I think is the, is the great philosophical point confronting the oil industry and that is you have painted perfectly the importance of increasing production as a matter of national security and national interests. Since we’re talking about sacrifice and everybody is being called upon to sacrifice, is it possible for the oil industry to sacrifice some of its huge profits and dig a little more oil even though there may not be the incentives that perhaps you want from the government?

MR. SWEARINGEN: in the first place, I don’t agree with your figures about huge profits. I think you are parroting here the kind of things that you hear from the left wing element of this country.

MR. NOVAK: But they’ve gone up since OPEC, haven’t they?

MR. SWEARINGEN: Oh, yes, they have gone up and I think if you’ll read the papers this morning you will find that the profits of other companies have gone up, too, and this is largely as a result of the depreciation of our money here in this country and not as a result of any major price increase.

MR. ROBERT BAZELL (NBC News): Mr. Swearingen, you said a little while ago that only the left wing elements could say that the oil companies were making huge profits. And I think that many people would find that remark rather incredible. One only has to look at Wall Street figures to see the kinds of profits you’re making. Isn’t it true that most of your big profits are in production and that a lot of—that in refining and retailing sort of brings that down, but that you do make extraordinary profits in production?

MR. SWEARINGEN: No. I disagree with your numbers or your analysis of the numbers. I’ll have to repeat, again, that the absolute aggregate numbers are reported on a worldwide basis and must be related to the capital employed in the business which you have chosen to ignore. The second thing is the profit in the production end of the business is larger on a basis of the capital invested than the profits in the refining and marketing part of the business.  This is due largely to the intensely competitive nature of gasoline marketing which any automobile driver can see as he drives down the street.

(End videotape)

MR. RUSSERT: And our viewers should know we did invite the representatives of the major oil companies, Shell, Chevron, BP, ExxonMobil, Sunoco and ConocoPhillips to be with us today. They declined. We hope they will join us in the future.

How about that populist reporter, Bob Novak? We’ll be right back.

(Announcements)

MR. RUSSERT: A reminder of two great resources on msnbc.com. Sign, sign up for our weekly MEET THE PRESS newsletter. Each letter—each Friday you can find out who’ll be meeting the press on Sunday delivered free via e-mail right here on your computer. Subscribe, our Web site: mtp.msnbc.com. Also, NBC’s ground-breaking political blog, First Read, has expanded its coverage and is now updated with breaking news and analysis throughout the day. Check it out, firstread.msnbc.com.

That’s all for today. We’ll be back next week. If it’s Sunday, it’s MEET THE PRESS.

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