Video: Pain at the pump: Could gas reach $6?

  1. Transcript of: Pain at the pump: Could gas reach $6?

    WILLIE GEIST, co-host: If you're driving to grandma's house for Easter , it's going to cost you. The national average for a gallon of regular unleaded gas now stands at $3.85. That's 99 cents higher than what we were paying at this time just last year. NBC 's Mike Taibbi is in Chicago , where folks are feeling that pain at the pump. Mike , good morning.

    MIKE TAIBBI reporting: Willie , good morning to you. Yeah, rainy Chicago today . Here drivers are already paying $4 plus, in most cases plus a lot. At this Mobile station it's 4.599 for a gallon of regular, unless you're willing to also buy a car wash . Fat chance on a day like today . President Obama says Americans are so concerned he's now asked the Justice Department to look into all the reasons why the price at the pump is climbing so fast. To say the price of a gallon of gas is rising hardly tells the story. It's been a day-by-day climb for the past month with no relief in sight.

    Unidentified Man #1: Oh, when I pulled up to the gas station , I said -- I thought I'd probably have to get a second mortgage on my house to pay for it, it was so high.

    Unidentified Man #2: I don't like it, but I don't feel like I have any control over it.

    TAIBBI: In fact, six states and the District of Columbia are now averaging more than $4 for a gallon of regular.

    President BARACK OBAMA: Every time you go to work, a big chunk of your paycheck is being eaten up.

    TAIBBI: That's why President Obama , in Reno , Nevada , Thursday, to talk about the national budget , took time out to talk about the impact of gas prices on household budgets and about efforts to minimize the pain at the pump.

    Pres. OBAMA: Attorney general's putting together a team whose job it is to root out any cases of fraud or manipulation in the oil markets that might affect gas prices , and that includes the role of traders and speculators. We're going to make sure that nobody's taking advantage of American consumers.

    TAIBBI: But industry analysts see little relief on the horizon.

    Mr. ROBERT SINCLAIR (AAA New York): It's hard to predict where gasoline prices will go exactly. It seems that all the stars are aligned right now for gasoline prices to continue to climb, at least in the short term.

    TAIBBI: The reasons: a weak dollar, continuing unrest in the Middle East , an increasing demand for oil and energy products in the summer months, all leading to the possibility of a gas price surge even beyond today's grimmest predictions.

    Mr. RICHARD HASTINGS (Strategist, Global Hunter Securities): If we get a hurricane season when -- that hits the Gulf of Mexico in just the wrong spots, you're going to get a gasoline spike. It is really quite possible that you could blow well above $6 if we have a bad scenario late in the summer this year because of hurricane location.

    TAIBBI: But for some drivers, the car will be in the garage long before that.

    Unidentified Man #3: If the prices go up to 5 bucks, I'm definitely riding my bike every day I go to work, for sure.

    TAIBBI: Well, if you have to drive and you're cruising around looking for the cheapest price, don't forget to keep one eye on the fuel gauge. AAA is reporting a big increase in the number of road service calls for frustrated drivers who simply run out of gas. Willie :

    GEIST: And, Mike , those numbers over your shoulder are absolutely staggering.

    TAIBBI: I know, I know.

    GEIST: Mike Taibbi , thanks. Lou Ann Hammond is the CEO of Lou Ann , good morning.

    Ms. LOU ANN HAMMOND ( Good morning.

    GEIST: OK, so the trends here are not good. Gas prices have climbed every day for the last month. We've now seen six states already over $4 a gallon . Mike just reported it could go up to $6 a gallon in some places by this summer. What's behind this?

    Ms. HAMMOND: You know, it used to be that America had so much gasoline that they could use. We could get it from anywhere. But Libya being offline right now, 2 to 3 percent, that's huge because we have emerging countries and they're using a lot more gasoline than they used to do.

    GEIST: Well, we just had that report from Libya . The violence in Libya has lead to Moammar Gadhafi stopping the exporting of oil, but the truth is the US doesn't get much oil, if any, from Libya . So why does that affect prices here?

    Ms. HAMMOND: Because other countries have to get it somewhere else. And they -- they'll get some of what we're using and they'll pay more for it than we would have paid. So it takes that supply pie and you have to divvy it up in different ways.

    GEIST: So this is a supply problem?

    Ms. HAMMOND: It's a supply problem because we have people that won't -- that don't want to use less. And so we -- it does make the demand go up.

    GEIST: Interesting yesterday that President Obama created this task force. He said, quote, "to root out any causes of fraud or manipulation in the oil markets that might affect gas prices ." Is there really price gouging out there, or is this purely political so the president can say, 'Look, I'm concerned about oil and gas prices '?

    Ms. HAMMOND: I think the president is concerned. But I think every president that has had -- seen 5 or $6 a gallon has been concerned and has done this. So they've never really found price gouging , and so it's not going to -- probably not happen now. But it's a good political move.

    GEIST: And the ripples, of course, go far beyond the gas pumps with a story like this. Memorial Day , about a month or so away. People are going to be traveling a lot this summer. How does this impact consumer spending beyond what they're paying for gas?

    Ms. HAMMOND: It's going to impact it in every way. The difference, though, Willie , is in 2008 when we had this gas raise -- price raise again -- before, there -- the -- used cars weren't really in demand. But because of the Japanese shortage that we're having, because the used car prices are so high, that if they want to sell the pickups right now, you can sell it at a good price and get a decent car that gets 40 miles to the gallon ; some of them are getting 50 miles to the gallon . I was at the New York Auto Show for the last two days and the one question I asked every executive, 'Is are you ready?' And they have been saying, 'Yes, we're ready. We have Fiesta that gets 40 miles to the gallon . We have Mazdas that get 40 miles to the gallon . We have Chevy Volt that gets -- electric.' It's only fitting that tonight at the Tribeca Film Festival it's "Revenge of the Electric Car ."

    GEIST: Hm.

    Ms. HAMMOND: So...

    GEIST: Maybe a silver lining here that we're going to get better, more fuel-efficient cars out of all this. Gas at 3.85 a gallon and climbing. Lou Ann Hammond , thanks so much.

    Ms. HAMMOND: Thank you.

Barack Obama
Pablo Martinez Monsivais  /  AP
President Barack Obama shakes hands during a town hall meeting to discuss reducing the national debt on Thursday at ElectraTherm, Inc. in Reno, Nev.
updated 4/22/2011 8:05:45 AM ET 2011-04-22T12:05:45

President Barack Obama announced Thursday that the Justice Department is assembling a team to "root out any cases of fraud or manipulation" in oil markets that might be forcing up gasoline prices in the United States.

The national average price for a gallon of regular gasoline was $3.84 on Thursday, about 30 cents higher than a month ago and almost a dollar higher than a year ago.

Obama, decrying such levels as yet another hardship "at a time when things were already pretty tough," said Attorney General Eric Holder was forming the Financial Fraud Enforcement Working Group.

"We are going to make sure that no one is taking advantage of the American people for their own short-term gain," Obama said at a town-hall style meeting at a renewable energy plant in Reno.

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Story: Obama talks energy policy as gas prices climb

The working group will focus some of its investigation on "the role of traders and speculators," Obama said. The group will include several Cabinet department officials, federal regulators and the National Association of Attorneys General.

In a statement in Washington, Holder promised to "be vigilant in monitoring the oil and gas markets for any wrongdoing so that consumers can be confident they are not paying higher prices as a result of illegal activity. If illegal conduct is responsible for increasing gas prices, state and federal authorities should take swift action."

Video: Obama vows to slash oil imports (on this page)

No evidence yet of fraud, price manipulation
However, in a Justice Department memo accompanying his statement, Holder suggested no evidence had turned up yet of unlawful price manipulation.

"Based upon our work and research to date, it is evident that there are regional differences in gasoline prices, as well as differences in the statutory and other legal tools at the government's disposal. It is also clear that there are lawful reasons for increases in gas prices, given supply and demand," the memo said.

There's not much Obama can do to affect the price of gasoline in short term, something he acknowledged in his remarks.

Gas prices have risen steadily as a result of tensions in the Middle East and northern Africa and rising demand from China and other emerging economies.

Given that no evidence has yet surfaced of actual fraud or price manipulation in oil markets, Obama's remarks appeared, at least in part, as more of an attempt to assuage public anger over rising gas prices.

In an Associated Press-Gfk poll last month, 51 percent of adults said they thought recent increases in gas prices were due to "oil companies that want to boost profits" rather than changes in the global oil market. Nine percent said higher prices stemmed from a combination of both, 37 percent from changes in the market.

Obama renewed his proposal to end roughly $4 billion annually in various government subsidies to oil and gas companies "at a time when they're making record profits and you're paying near record prices at the pump. It has to stop."

Asked by a member of the audience about prospects for advancements in clean energy, Obama predicted that, with time, prices of now-expensive devices such as electric cars would come down.

At Facebook HQ, Obama again touts deficit plan

"Having a flat-screen TV used to be a big deal," Obama said. But he said now such TVs are commonplace because prices have dropped so much.

While acknowledging he doesn't spend much time these days behind the wheel, Obama said, "I've been in one of these Chevy Volts. This is a nice car. It drives well."

Obama's West Coast visit — his most extensive travel since announcing his re-election bid — offered a glimpse of how he will seek to re-energize the independents and first-time voters who carried him to victory in 2008. Obama argues that more work must be done to make the vision of America he promised a reality, and that he is the only one who can see those hopes through.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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