Crossfire

Who's to Blame for the Rising Cost of Gasoline?

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ROBERT NOVAK, CO-HOST: Tonight, pump it up and up and up. As gas prices accelerate is it time to cut the federal tax on gasoline? And why are some Republicans blaming Al Gore?

ANNOUNCER: Live from Washington, CROSSFIRE. On the left, Bill Press. On the right, Robert Novak.

In the CROSSFIRE, Democratic Congressman Ken Bentsen of Texas and in Dallas, Republican Senator Kay Bailey Hutchison.

NOVAK: Good evening, welcome to CROSSFIRE.

If the politicians were looking for something for people to really gripe about, it's here: fast-rising gasoline prices. The Lundberg survey shows average national gas prices are up 12 cents a gallon, to $1.59. What's worse, they're likely to hit $2 by summer, just as vacationing Americans are ready to hit the highways.

And it's not only the cost of driving your car. Nearly all the airlines have just raised their ticket prices, blaming increased fuel costs.

In response, the Clinton administration is trying to get OPEC- producing countries to produce more oil, and the secretary of energy has been on the road performing that mission.

Bill Richardson returned home with this report today.

(BEGIN VIDEO CLIP)

BILL RICHARDSON, ENERGY SECRETARY: You will see gasoline and diesel prices start stabilizing and gradually going down, so they will not be burdensome on the American consumer, but it's going to take a little while after the OPEC decision, maybe four to five weeks, until consumers really feel some of the benefits.

(END VIDEO CLIP)

NOVAK: Five weeks? Mr. and Mrs. American consumer won't like that. So Republicans are pressing for lower gas taxes and claiming the Clinton administration was asleep at the switch -- or are they just grasping for an election issue?

Bill Press is in San Francisco -- Bill. BILL PRESS, CO-HOST: Senator Hutchison, here in California I can remember at least six times in the last 10 years when we have been through this same crisis. The prices go up, everybody panics, then the prices go down and nothing happens. Senator, I know. I have read a lot of your articles about this, that you know this is a long-term problem requiring a long-term solution. Wouldn't the biggest mistake that we could make right now be to rush in and cut that federal sales tax on gasoline?

SEN. KAY BAILEY HUTCHISON (R), TEXAS: I think, Bill, you're absolutely right. We need to have a long-term solution but the idea that Bill Richardson would say, wait five weeks, that's pretty cavalier. These prices are very high, and working people are suffering. People are canceling summer vacations because gasoline prices are out of sight.

So I think we can do something right now, and I think cutting the gasoline tax on a temporary basis would be the first thing. But if we just do that and we continue the dependence on foreign oil and we don't fix our domestic production problem, we will be fiddling while Rome is burning, which is what this administration is doing.

PRESS: Well, let's stick with the sales tax for just a second, Senator, because your Republican colleague, one of your Republican colleagues from Texas, Congressman Bill Archer, who's chairman of the Ways and Means Committee, has said cutting the sales tax is not a good idea. Number one, it's so small people are not going to notice that much difference in the price of gas.

And secondly, in California and a lot of other states, the law provides that if the federal tax is cut they'll just raise the state sales tax to make up the difference so there won't be any net effect of it. Are you saying that your chairman doesn't know what he's talking about?

HUTCHISON: Well, no, I don't say that at all, because, of course, Bill Archer voted against the BTU tax, which this administration pushed through the House. And remember that it was Vice President Gore who broke the tie to give us this 4.3 cents-a- gallon tax on gasoline. This is a terrible tax, and I don't think that -- I don't think that Bill Archer's position is wrong. But the fact of the matter is we don't have to take it out of highway funds, and certainly I don't think a state today is going to increase the gasoline tax if the federal government lowers the gasoline tax.

PRESS: Well, in California, actually, the law is automatic, Senator. But as -- again, Congressman Archer mentions -- and by the way, you know, there was a 4.3-cent increase in '93, which you alluded to. There was also the five-cent increase that President Bush pushed through in 1990. Cutting either one, though, as Congressman Archer points out, is going to take money away from public transit, money away from building highways, money away from repairing highways. Are you willing to take responsibility for shutting down highway construction in this country?

HUTCHISON: No, and it wouldn't do that because the -- it takes two years before you even get to what's happening today. Everything is already in the pipeline, and it's paid for. And all we're talking about is a temporary cut to give relief to hard-working taxpayers in this country. And by the time we would need that to be in the pipeline, we would make it up by just going into the general fund.

We would not stop highway construction, but we need relief now. We need a short-term fix and we need a long-term fix. And if we don't do both, it is irresponsible. It is irresponsible to continue to depend on OPEC countries to bail us out.

NOVAK: Congressman Ken Bentsen, just to make sure who's on what side, I take it that you don't agree with Senator Hutchinson and you would like to continue this oppressive tax on the poor, hard-working Texans in your district, is that right?

REP. KEN BENTSEN (D), TEXAS: Well, this a question -- Mr. Press made the point very clear, as did Chairman Bill Archer in what he said in the press. In 1998, the Congress passed the highway bill, and we shifted the 4.3-cent gas tax into the highway trust fund, and those funds now are allocated and rolled out on an annual basis in the highway, construction and mass transit. So if you were to repeal this tax, you would be taking that out of a state funding for highway construction, for mass transit.

The second thing that I think is interesting is that we've heard this proposal before. There apparently is some correlation between presidential elections, gas prices, the prices of oil and repealing this 4.3-cent tax. Senator Dole proposed this back in 1996, when oil prices at that time were high. What we saw subsequently after Congress didn't do that was oil prices came back down. Let's remember, oil prices were $12 a barrel in January of 1999.

NOVAK: Well, you're suggesting something shocking, that there is something political about gas taxes in an election year, but -- so it is a political question. And I would like to go to one of the most astute and successful politicians that I know of, and that's the mayor of New York City.

And let's hear what he said over the weekend.

(BEGIN VIDEO CLIP, CNN'S "THE CAPITAL GANG")

MAYOR RUDY GIULIANI (R), NEW YORK: It shows, really, the unfocused nature of the Clinton-Gore foreign policy. Ultimately, it's a much deeper issue than just the price of gasoline. It gives us a chance as Republicans to illustrate a lot of problems in the Clinton- Gore foreign policy. And I think that's something George W. Bush could do very effectively.

(END VIDEO CLIP)

NOVAK: That is what the case is, isn't it, Mr. Bentsen? That they were -- that your administration was caught asleep at the switch, had no idea it was coming around, so they send Bill Richardson hat in hand going around begging them to cut oil prices?

BENTSEN: Well, this is, this is...

NOVAK: I mean, I'm sorry, to increase oil production.

BENTSEN: This is a question of market economics that you, Mr. Novak, would understand as well as anybody in the press corps. What you have is a situation coming out of 1998, where you have had a significant increase in world demand for oil against a cutback in production due in large part to the prices that were low, at $10 a barrel, less than two years ago. That's what's happened here is the supply-and-demand curves have mismatched, and you have this problem with low refinery stocks that have pushed up the price.

Now I don't like the fact that gasoline is going up to $1.50, $1.60 a gallon when it was in some parts...

NOVAK: It's going to go to $2, though.

BENTSEN: ... which in some places in Houston a few months ago it was under a dollar a gallon. And it does hurt the American consumers. But what we're seeing is the market at work. And the Republicans, unfortunately, are trying to make politics out of this like they did two years ago.

NOVAK: Well, Congressman, you kind of evaded the point that I was trying to make and that Mayor Giuliani was making, and that is, of course, that OPEC reduced oil production, as they did before, and they don't care what effect that has around the world. And really, isn't it one of the silliest things in the world -- they did it in the past administration. They did it during the Nixon administration, they did it in the Ford administration, they did it in the Carter administration -- going around and begging the OPEC countries to produce more oil as Bill Richardson does?

BENTSEN: Well...

NOVAK: Isn't that an exercise of futility?

BENTSEN: Let me say this, I think we're all surprised, including the Federal Reserve, if you read their most recent document when they testified before the House Banking Committee. Everyone is surprised, first of all, that OPEC and Mexico and Norway, which work along with OPEC, actually abided by one of these agreements.

But I don't think it's wrong for the United States to go and talk to our allies in OPEC and say, you -- your cartel pricing scheme now has the potential of having a negative impact on the world economy as we are entering the ninth year of an expansion. We're seeing Europe and Asia start to experience economic growth, and maybe you ought to consider a more stabilized pricing structure than what you have right now.

PRESS: Senator Hutchinson, we know that the OPEC ministers are expected -- are scheduled to meet, rather, on March 27th, just a couple of weeks. They're also expected at that time to announce they're going to increase production. So there's really no need to panic here, is there, senator? I mean, this thing could be over, you know, by the time you guys get around to voting on anything.

HUTCHISON: If this administration had an energy policy that was for the United States of America, they wouldn't wait for OPEC to meet. They would come to Congress and say let's start exploring for domestic production in our country.

When this administration took office, our country was 48 percent dependent on foreign oil. Today it is 56 percent. We shouldn't be waiting for OPEC to meet. We should be saying we're going to encourage drilling and exploration in our own country.

But the fact of the matter is I have been reading articles all over this country that say that even at $30 a barrel people are not willing to take the risk, because they do not believe that these prices would even stay anywhere close to where they are. We don't want them to stay this high anyway. But if we had domestic production, we wouldn't see the spikes, and people are not even encouraged that we would have a break-even price, which is about $17 a barrel, in order to go out and have the expense of redrilling a well.

PRESS: Senator, I'm all with you for a long-term energy strategy, but in the meantime, maybe we also ought to be honest with the American people about this perhaps $2 a gallon that they might have to pay this summer -- I doubt it. But when you look at prices of gasoline around the world -- I am sure you know this -- for example, in the UK, today, $4.61 a gallon. In the Netherlands, people are paying 4.22 a gallon. France, 3.94. That compares to the United States, what we're all so panicked about, $1.67. So even at $2, senator, isn't it true Americans are paying one half what our friends in Europe are paying in Europe?

Do you think we have some divine right in the United States to have cheap gasoline?

HUTCHISON: I think we have two things, Bill: We have an economy that is much more efficient than all of the countries that you've mentioned. That's one of our areas of competitiveness, and we must keep it.

Secondly, we have domestic potential, which they do not have. We could be in charge of our own destiny. We have that capability. It is a security interest in America that we are not dependent on foreign oil, especially when we see these kinds of spikes. And I think it is our responsibility to make sure that we have a stable price, that we don't have spikes, that we keep our economy under our control, not under the control of OPEC countries.

PRESS: All right. We'll take a break, and when we come back, could the key to higher domestic production in fact be higher price of gasoline? When we come back.

(COMMERCIAL BREAK)

PRESS: Welcome back to CROSSFIRE. Here in San Francisco, gas prices are higher than they are anywhere else in the country. Today it's $1.91 per gallon for unleaded regular, and a whopping $2.11 a gallon for premium.

But the highways are still crowded and there are no riots in the street -- yet. Will there be and will higher gas prices be this year's hot political issue?

Who better to debate that than two Texas. Joining us from Dallas tonight, Republican United States Senator Kay Bailey Hutchison, and in our Washington bureau, Democratic Congressman Ken Bentsen, who represents the city of Houston -- Robert.

NOVAK: As I understood Bill Press' argument, Congressman Bentsen -- and I've heard it from many of his ilk over the years -- and that is that it's OK for Americans to have $2 a gallon gasoline or even more because our European brothers have $3 or $4 of gallon gasoline. Now, is that something you could tell your constituents in Houston?

BENTSEN: I don't think that is the right analysis. I think the right analysis is this: You have a free market at work with fluctuating prices. Now, Senator Hutchison said we should increase domestic production: I don't disagree with that. I think that's right. But I think a key factor you can look at is what's going on in the capital markets.

We have not seen a dramatic increase in stock prices of oil in production -- oil production companies, and the reason is because they don't expect this price to continue at this rate. And the reason why we don't have domestic production -- I think the biggest reason we don't have it is because you don't have a stable price in the oil markets, and it is hard to raise capital to fund production.

Now there are regulatory issues. There are issues related to where -- what federal lands that you can drill on. But the large function of it, I think, is the ability of a stable price of oil to match revenues to match the ability to raise the capital to fund it.

NOVAK: With all due respect, I think there's something going on. And I would like to have you listen to one of your colleagues, Charlie Norwood from Georgia, Republican of Georgia. He's a pretty smart guy. Let's hear what he says.

(BEGIN VIDEO CLIP)

REP. CHARLES NORWOOD (R), GEORGIA: The president said that the prices need to be high in order to -- and I quote, ladies and gentlemen -- "encourage the use of alternative fuels and to prevent global warming," end quote.

Now, Mr. Chairman, I find that a little offensive. We do not need to be furthering the Clinton/Gore administration's liberal global environmental wacko agenda on the backs of the American working poor and elderly.

(END VIDEO CLIP)

NOVAK: Isn't that what's really going on? I've been hearing this sort of stuff since the Carter administration. If we can get the price of oil high enough, we will force the American people to get off petroleum, fossil fuels and have these alternative fuels.

BENTSEN: Bob, that would be the case if the government was actually raising the price, but this is a function of markets at work. The fact that OPEC has cartel pricing power has driven up the price, and artificially driven up the price of oil, combined with the fact that world demand is up while production is down. This is simple microeconomics that every college student in America learns in economics 101.

To give the Clinton administration credit that they're talking the price of oil will -- you will have to in return give them credit when the price comes down for talking it back down.

NOVAK: Well, that isn't quite the point.

BENTSEN: Well...

NOVAK: It isn't that they're talking it up. It's that they want it to go up because they want to get away from fossil fuels. You know, when you have the vice president, who is your party's putative nominee for president, saying that he would like to see the combustion engine eliminated -- and he repeated that in a closed-door meeting of environmentalists in New Hampshire this year -- this is all part of that pattern.

BENTSEN: Let me -- let me say this: In January of 1999 when West Texas crude was at $12 a barrel, I didn't hear anybody complaining about the price of oil except in producing states such as Texas and Louisiana. And at that time you had Governor Bush and others who were pushing tax cuts for oil producers because they were suffering because they couldn't...

NOVAK: Which you supported.

BENTSEN: ... get the revenues off -- it was in the state legislature, so...

NOVAK: You both...

PRESS: Senator...

BENTSEN: And you didn't hear the Clinton administration or anybody else out there saying oil prices should go up.

PRESS: Senator Hutchison, I have heard you say several times tonight we need to increase domestic production, we need a long-term view. I agree with that. Let me play you a quick bite from someone else who I think you might agree with, Energy Secretary Bill Richardson. Please listen.

(BEGIN VIDEO CLIP)

BILL RICHARDSON, U.S. ENERGY SECRETARY: We are too dependent on foreign oil. We have got to look at alternative sources of energy. We have got to look at more fuel efficient vehicles. We have got to recognize that we have got to boost our own domestic production so that we don't rely entirely on foreign sources.

(END VIDEO CLIP)

PRESS: My question, Senator, isn't the key to higher domestic production higher price-per-barrel of oil so people will be willing to invest there and get the payback which means a higher price of gasoline?

HUTCHISON: No, what we need is stability. And I think that Secretary Richardson is talking the talk, but he's not walking the walk. He's not coming to Congress and saying, let's put a floor so that if we go below break even, which is about $17 a barrel, we will have tax credits to allow these people to stay in business so that they won't have to put cement in those wells and close them forever.

We lost 150,000 small wells when those prices were $9, $10, $11 a barrel, because people could not make it. Those wells cannot come back except through great expense, so we need incentives for people to go back and dig those wells out.

PRESS: All right, Senator...

HUTCHISON: We could probably get about half those wells back if we had a -- an energy policy in this country that would encourage those people that we would have a stable price, and if the price fell below $17 a barrel, that they wouldn't have to go out of business.

NOVAK: Ken Bentsen, I just want to ask you, as a loyal Democrat, loyal supporter of the Clinton/Gore administration, but also a Texan, are you in favor of the ratification of the Kyoto global warming treaty?

BENTSEN: I think -- well, first of all, as a member of the House, you know, I don't have the right to vote on that.

NOVAK: I know that. I know that.

BENTSEN: You'll have to talk to the senator about that. I think that the Kyoto treaty has some flaws in it and if I were in the Senate I would have problems supporting it, because it has some flaws in how it treats LDCs versus industrialized nations and so because of that I would have problems. How that effects, though, the price of oil, Bob, I just don't see the connection. I think this is economics.

NOVAK: Well, I would like to -- I would love to explain it to you if we had more time, but thank you very much, Ken Bentsen.

BENTSEN: Thank you very much for having me.

NOVAK: And thank you, Senator Kay Bailey Hutchison.

And Bill Press, the oil man from San Francisco, and I will be back with closing comments.

(COMMERCIAL BREAK) NOVAK: Bill, you're in your element in San Francisco tonight, and I have been hearing the clap trap I have heard from the left for 30 years and that is, get that price of gasoline up like it is in Europe and then we can have windmills and alternative sources and all the good things the environmentalists want as the American people suffer.

PRESS: Bob, you're just afraid you're going to have to sell your Corvette. That's your problem.

NOVAK: You're right.

PRESS: Look, you know, you Republicans are silly to try to make this an issue. It's a long-term problem. What we need is, yes, Bob, more wind energy, more solar energy, more fuel-efficient cars, saving energy. And the way to get that, Bob, is a higher price of gasoline.

And from the left, I am Bill Press, good night for CROSSFIRE.

NOVAK: You never disappoint, Mr. Press.

PRESS: Damn right.

NOVAK: From the right, I'm Robert Novak. Join us again next time for another edition of CROSSFIRE.

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