Transcript for April 30

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?

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