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American Morning
Big Oil Under Fire; Preserving New Orleans' Military History
Aired November 11, 2005 - 08:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SOLEDAD O'BRIEN, CNN ANCHOR: Welcome back, everybody. A live picture from Washington, D.C. and the Vietnam Veterans Memorial. Many, many years ago, in 1938, this was actually known as Armistice Day. A little history for you there. Now, of course, it's Veteran's Day, the day that we say a big thank you to the men and women in the armed services who have spent their lives -- in many cases, gave their lives protecting those of us here in this nation.
MILES O'BRIEN, CNN ANCHOR: It's the 11th day of the 11th month, Armistice Day, now Veterans Day. And if you know a veteran, give them a call, make them dinner, buy them a beer...
S. O'BRIEN: Her.
M. O'BRIEN: Her, too. They deserve our enduring thanks.
(NEWSBREAK)
(WEATHER CENTER)
S. O'BRIEN: Record profits for big oil got people wondering if they were being gouged for gas. Well, this week Congress asked the executives of big oil to explain themselves and some of the senators were not exactly buying the answer that this is just business as usual.
(BEGIN VIDEO CLIP)
SEN. PETE DOMENICI (R), NEW MEXICO: Are you rigging the price of oil, or is somebody rigging the price? Who chooses to answer the question first? No volunteers?
(END VIDEO CLIP)
S. O'BRIEN: That was Senator Pete Domenici.
John Hofmeister is the president of Shell Oil Company. He joins us this morning. Nice to see. Thanks for coming in to talk to us.
JOHN HOFMEISTER, PRES., SHELL OIL COMPANY: Thank you, Soledad.
S. O'BRIEN: You hear that big gaping silence.
HOFMEISTER: Right.
S. O'BRIEN: How do you think that the hearings went? Was it contentious and mean sometimes? HOFMEISTER: They were very candid sessions. And I think everybody said what they had on their mind. I think the industry presented a coherent set of messages. We're all experiencing the same phenomena. I think the Senate is really trying to get to the bottom of everything. I respect the fact that there are people who have different opinions from the Senate.
S. O'BRIEN: I mean, it's a complicated issue, that's for sure, the pricing of gasoline. And then I'm sure you can explain it to me in two hours or so. But at the end of the day, what you have is record profits and you have people who feel like they've paid a ton of money for gas. And high heating oil prices are right around the corner. Do you feel like you understand why consumers are so angry?
HOFMEISTER: Oh, absolutely. I'm a consumer myself and I don't like paying what we're paying to fill up our tank at home, either. But, you know, this is like a daily auction. Every day...
S. O'BRIEN: A commodities market, generally.
HOFMEISTER: Every day Shell buys 3.5 million -- I'm sorry, Shell produces 3.5 million barrels of oil and gas. And every day we have to buy 6.5 million barrels. So we're out on the open market, buying what it takes to supply our stations. We have to pay a global price to get what we supply our stations.
S. O'BRIEN: The profit up 68 percent. But here's what my question is. The price of crude goes up 31 percent over a specific time period. How come the price of gas went up 45 percent? I mean, why wouldn't it go up a little closer to 31 percent?
HOFMEISTER: Well, it's an entire demand/supply relationship. And what happened in the most recent period is we had a 25 percent -- in the U.S. -- a 25 percent supply disruption, you know, where some nine or ten refineries were shut down after Katrina. And then after Rita, several more were shut down. And they haven't all come back up yet. So we're not producing as much oil for American people as they need right now and that pushes the price up.
S. O'BRIEN: There's been a theory, and we heard it a couple of times in the testimony yesterday, that the high prices actually helped consumers because they brought about lower prices eventually.
HOFMEISTER: Well, what happens is with the high prices, people choose not to buy. When people don't buy, that increases the available inventory. And as the available inventory sits there, stations want to move it so they lower the price in order to move the inventory. We're all in the business to move product.
S. O'BRIEN: Is there any plan in place to help people who have -- were paying a ton of money for gas -- and now the number's come down a little bit, but not as far as it probably could, I think in most estimations. And who -- around the corner, we're going to see very high oil heating prices.
HOFMEISTER: Yes. Well, the plan is to get as much production back up as quickly as possible. We've had people working 24/7 to get production back into the system, and the best way to bring prices down is get more supply.
S. O'BRIEN: Could it bring prices down quickly or is sort of -- this winter going to be a loss?
HOFMEISTER: Well, it depends how cold the winter is. A very cold winter -- keep in mind that through September and October, without refineries up and operating, we couldn't produce heating oil. That means the inventories of heating oil are short. So if we have a cold winter, it's going to mean that at least between December and January until all the refineries are up and operating, it's going to be in short supply.
S. O'BRIEN: As you know...
HOFMEISTER: So...
S. O'BRIEN: ... people want to legislate, though, having you do more than sort of wait and see what's going to happen. Is it going to be a cold winter? Can we get these refineries back online? They'd like to see and maybe even legislate that you give a certain percentage to help offset the cost for people who are struggling to pay. Any interest in doing that?
HOFMEISTER: Well, I think if there's something about helping people in need, that really is a function of government, not a function of industry. We, of course, don't set policy in this country. The Congress sets policy. We follow whatever the Congress says and we always have. But we really think that helping people in need is a function of the entire government and the entire American people.
S. O'BRIEN: See, but that might be the rub at the end of the day, because people might say, yes, but, you know, helping people in need might also be the function of oil companies who have made $33 billion as a whole in profit. So why not chip away at some of that profit and help people in need this winter, regardless of whether it's a cold winter and whether your refineries are back online?
HOFMEISTER: The best thing to do with our profit is put it back into more production. That's the real issue here is not enough production. And one of the reasons there is not enough production is less investment in the late '90s when oil prices are low. So now that oil prices are high, we should be producing -- or investing as much as we possibly can, and any money taken away from production investment will of course result in higher prices to consumers later on.
S. O'BRIEN: Short term for consumers then from the oil companies, what do we get?
HOFMEISTER: Well, the short...
S. O'BRIEN: And maybe not even what do we get. Maybe people who are really going to struggle this year, with low-income people, what do they get? HOFMEISTER: Well, in the short-term, conservation is the best answer. Conservation -- if we have five percent conservation in this country, we would see an immediate return to a good supply-demand relationship.
S. O'BRIEN: But no giving of the profit to people?
HOFMEISTER: Well, the profit has to go into the ground. That's in order to produce more oil in the future.
S. O'BRIEN: John Hofmeister is from Shell Oil Company. Nice to see you. Thank you for talking with us. We appreciate it -- Miles.
HOFMEISTER: Thank you. Thank you, Soledad.
M. O'BRIEN: Veterans Day in New Orleans. The battle now there trying to save some of the city's rich military history.
CNN's Daniel Sieberg visits the Jackson Barracks Military Museum.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Four horses.
UNIDENTIFIED MALE: Where is the rest of them?
UNIDENTIFIED MALE: It's a group of men who served as pilots, crew chiefs, gunners, mechanics.
DANIEL SIEBERG, CNN CORRESPONDENT (voice-over): Reporter: Like clockwork every week, a tight-knit group of veterans get together at the Jackson Barracks Military Museum in the New Orleans' Lower Ninth Ward.
UNIDENTIFIED MALE: This is Bret Whitney R-2800.
SIEBERG: They've been restoring engines and aircraft here for more than a decade.
CHARLES MONSTED, RESTORATION UNIT: They say everybody is retired, and they're wives may be anxious to let get them out of house once a week. So every Wednesday, we come down here and fix equipment.
UNIDENTIFIED MALE: Nasty looking goo coming out of this thing.
SIEBERG: Brackish water now drains from their labors of their love. Aging warbirds they work to restore, like this Cobra helicopter, were wrecked again when the levees broke.
PHIL VON DULLEN, RESTORATION UNIT: We got this about a year and a half ago, and we cleaned it all up, replaced a lot of rusty screws and stuff. Wednesday before the storm, we started painting the tail back there and worked our way up to this point here.
TOM ISBELL, RESTORATION UNIT: Everything here is start from scratch again, you know, went three steps forward, one step backwards and start over again.
SIEBERG: Museum curator Stan Amerski is happy to have help from the veterans.
STAN AMERSKI, JACKSON BARRACKS INTL. MUSEUM There is only three people here. That's a director, me and a desk sergeant, and that's it. It's a 10-acre site. It's got seven buildings, including a library.
SIEBERG: Nearly 9,000 military artifacts, dating from colonial times to today, are strewn about the museum. Many are laid out on drying pads like wounded troops. The mannequin of a buffalo soldier, mud-soaked epilets (ph), a priceless pre-Civil War knapsack.
(on camera): From tea cups to field radios, the items in this room date throughout Louisiana's history in battle. When the levees broke, the water rose up over my hand. Everything in here was submerged and floating in water, along with the identifying tags on each item. So now for people like Stan, the trick is to reidentify everything.
HARMON FISCHER, RESTORATION UNIT: It's very tedious, but very worthwhile once you get through with the process. When I look at all of it, I look at it as history with a little more history tacked onto it. Still going to be the same item. Just a little more history. It went through Katrina.
SIEBERG (voice-over): The same could be said for the men of the 122nd.
UNIDENTIFIED MALE: It's a setback, but we're hardheaded. We'll make it right one way or the other. Everything won't be exactly like it was, but we'll have a museum again and we'll have a restoration shop again.
UNIDENTIFIED MALE: Try the other end of this thing.
SIEBERG: Come rain or shine, or even Katrina, if it's Wednesday, they'll be here.
Daniel Sieberg, CNN, New Orleans.
(END VIDEOTAPE)
M. O'BRIEN: I guess they have a Katrina patina to them now, those artifacts.
Coming up on the program, the loud-and-clear message -- you didn't like that at all, did you?
S. O'BRIEN: No, no. Move on.
M. O'BRIEN: It's Friday, though. That's the good news for you, get a little break from me.
The loud-and-clear message from the people of New Orleans, give us a category-five levee system. I think a lot of people think that that's probably what they're getting. Well, it ain't a done deal, not even close. How is Washington responding to all of this?
S. O'BRIEN: Also a sexual-assault charges cost Kobe Bryant millions of dollars in endorsements two years ago. One company, though, continues to bank on him. Now they're going bigtime. Andy's got a look at that as he minds your business, just ahead.
(COMMERCIAL BREAK)
M. O'BRIEN: The rebuilding of New Orleans, lots of talk right now about the levees, how should the levees be rebuilt? Currently the plan is restore them by June 1st to their pre-Katrina levels, which was supposed to withstand a category-three storm. Of course most people in New Orleans would tell you, we got to do better than that. The question is, who is going to pay the bill for all of this? Among many other questions.
And joining us with some answers from the Crescent City, Walter Isaacson of Louisiana Recover Authority, former boss of ours, and David Downey with the American Institute of Architects.
Gentlemen, good to have you both with us.
Walter, let's start with you. What's the message that New Orleans is getting from Washington when the talk comes to in making the city hardened for a category-five storm?
WALTER ISAACSON, LOUISIANA RECOVERY AUTHORITY: I think the message is we had to get our priorities straight down here and work on it down here, and now we're very clear on the priorities. We had this good conference yesterday. We're going to it today. Priority one is to get good levee protection and coastal restoration. We're not just going to get back to pre-Katrina levels, as you were saying. It's actually what it was supposed to be before Katrina, which means better, because those levees weren't really working before Katrina. Now they'll be at those category-three levels as they were authorized or supposed to be.
And then, eventually, in the next five or six years, we have to get category-five protection.
The other big message is, people are drowning. It's a slow- motion drowning thing here for small businesses, so we need the small business loans right away, those bridge loans, or emergency loans they gave after 9/11.
And so far, neither Congress nor the administration has been able to get together to get those emergency loans.
M. O'BRIEN: You know, David, when I've been in New Orleans, one of the things people say they need more than anything, more than moving dirt and putting in the steel pilings that they used to hold back the water, is a clear statement from the federal government of intent -- here is what we plan to do by June, by next year, over the next 10 years, and that would give businesses, people, homeowners some reason to take some action.
DAVID DOWNEY, AMERICAN INST. OF ARCHITECTS: Certainly. And at the conference we're hearing directly that the people that want to see levee five -- category-five levees built. They want to know that they're safe, and they want to know that their investment is secure.
M. O'BRIEN: Well, and that seems like the bare minimums. Has anybody really, though -- and, David, you're an architect by background. Has anybody really looked at the issue of what a category-five system would look like? We're talking about flood walls in excess of 30 feet. And in many respects, some places may not be able to be inhabited.
DOWNEY: This conference is really just the beginning for the people in the affected area. It's a chance for them to begin to consider what are all the issues. And we're looking at flood control, we're looking at economic development, we're looking at the full issues of trying to rebuild an entire community in southern Louisiana. It's putting it altogether and it's giving the people an opportunity to have a voice and state their priorities.
This is the beginning. We'll move into the parish-by-parish rebuilding efforts. The Recovery Authority has a lot of work to do and I'm sure we'll do a fantastic job helping to sort it out. But the people are getting a chance to start to talk about this. They're starting to set priorities, set principles for the long-term recovery. And this is the intent of the conference. We have two more days ahead of us and we'll address all of the issues, including the building of communities in a safer environment.
M. O'BRIEN: Walt, so let's talk about...
ISAACSON: Miles, you're exactly right. We just need a clear indication we're going to be protected from hurricanes. The whole Gulf Coast, in terms of Category 5. That doesn't mean every single neighborhood and every single part's going to be done right away. But on the neighborhoods where there's businesses being built, for those businesses to come back, we have to say a clear statement from the federal government, which I think we're going to get.
I mean President Bush pretty much said he wants New Orleans rebuilt -- or he said he wants New Orleans rebuilt when he came to Jackson Square. So then you got to give the statement we'll have good hurricane protection, Category 5 protection. Not right away for every area, but that's our goal.
M. O'BRIEN: Well, how soon do you think you'll get that from Washington? Something definitive?
ISAACSON: I think you'll get a commitment within the next six months, and that's going to be the plan over the next five years.
M. O'BRIEN: Well, that's -- six months can be a long time, as you say. For small businesses, that can be certainly make or break time. Let's talk about one more subject, though, Walter. This whole notion of how the city will be rebuilt. The Lower Ninth Ward is what I'm thinking about primarily here.
The rich tapestry that is New Orleans includes the full socioeconomic spectrum. And the concern is that when it's finally rebuilt, a lot of poor neighborhoods will be forsaken and what will be left is kind of a Disneyfication of New Orleans. That's got to be a big concern of yours. You're from that city.
ISAACSON: Absolutely. I grew up in Broadmoor. It was an integrated neighborhood when I was growing up, it's an integrated neighborhood now. Ever since I left New Orleans, I've lived in segregated cities, whether they be Washington or Boston, places like Philadelphia.
New Orleans should never be a segregated city. We need to have neighborhoods that are fully integrated. We need to bring of all of our people back. We don't necessarily need to rebuild the exact places we rebuild, but every neighborhood in New Orleans has to got to have that rich fabric to be the America's only great integrated city.
Because that's what produces the music, the creativity, the food, everything else. And that's what we're going to do. We're going to make sure we don't just rebuild some of the old pathologies, but we rebuild a great integrated city.
M. O'BRIEN: I'm out of time, and I know you understand that, Walter. But just tell me, in a word, do you need a czar?
ISAACSON: Well, we've got a great guy, Don Powell, who the president's appointed to help us with federal stuff. And we've got a really good set of people working together now in Louisiana. We've finally gotten our act together in our priorities.
M. O'BRIEN: So no czar?
ISAACSON: Well, Don Powell is a coordinator, which is as good as a czar to me.
M. O'BRIEN: All right. It's all in the title, I suppose. Walter Isaacson, David Downey, thanks for your time. Good luck to you, gentlemen.
DOWNEY: Thank you, Miles.
M. O'BRIEN: Soledad?
S. O'BRIEN: Coming up this morning, we're "Minding Your Business." Kobe Bryant's legal problems are now behind him, but is he is still a bankable pitchman? One company's about to find out in a big way. Andy's going to explain, just ahead on AMERICAN MORNING.
(COMMERCIAL BREAK)
S. O'BRIEN: Here's a question for you. Is America ready to open its arms and, more importantly its wallets, to Kobe Bryant? Andy Serwer is "Minding Your Business." Good morning.
ANDY SERWER, "FORTUNE" MAGAZINE: Good morning, Soledad.
S. O'BRIEN: New ad campaign.
SERWER: It was two years ago -- that's right, a new ad campaign for Kobe. This coming from Nike. They have shoes for him. And it was two years ago that those allegations hit him and really kind of derailed his career, particularly when it comes to commercial endorsements. You may remember he was endorsing McDonald's and Sprite, Nutella and Nike.
Nike signed a $45 million deal with him to promote his sneakers. And they didn't shelve it -- you know, they didn't try to get their money back, because, of course, they had to wait and see what happened with the investigation. Of course, the trial ended or there wasn't a trial, and the charges were dropped.
There's Kobe this Wednesday against the T'Wolves. He can still play. He's leading the NBA in scoring right now, almost 35 points a game. But more importantly -- and this is the point -- is that Nike still sees him as a viable pitchman for his products. And they're going be rolling out a new shoe, this according to "The Wall Street Journal" -- sometime very soon.
S. O'BRIEN: Sort of over the top big roll-out or small little quiet roll-out to test the markets?
SERWER: I think that's what they're going to be doing, exactly, is kind of doing it discreetly, quietly, piece-by-piece, move-by-move, to see if the marketplace is ready to accept Kobe back. You know, he was the most popular player in the NBA at one point. And, you know, he still has that magic. People still love the guy. But will they buy his signature shoes?
S. O'BRIEN: And sexual assault charges are always tricky, whether you're cleared of them, whether it never goes to trial, or whatever. It's just never -- it's like the word indictment. It's a toughie to have next to your name.
SERWER: It's like, where do I get my reputation back, and you're tainted and all that kind of stuff. It will be interesting to see.
S. O'BRIEN: Yes, it sure it is. All right, Andy, thanks.
SERWER: Thanks.
S. O'BRIEN: Miles?
M. O'BRIEN: What are they going to call them? The Nike Perp Walkers or something?
S. O'BRIEN: Oh, you know, so inappropriate.
SERWER: See, it's people like you.
M. O'BRIEN: OK, I'm sorry.
Coming up on the program, could someone go to jail for the levee failures in New Orleans? To jail? That's ahead on AMERICAN MORNING.
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