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American Morning
Oil Field Shutdown; Impact on Prices; Crisis in the Middle East; Iraq Rape-Murder?
Aired August 07, 2006 - 06:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SOLEDAD O'BRIEN, CNN ANCHOR: Good morning. Welcome, everybody. It is Monday, August 7. I'm Soledad O'Brien.
TONY HARRIS, CNN ANCHOR: And I'm Tony Harris in this week for Miles O'Brien.
Here is a look at what's happening this morning.
O'BRIEN: This morning, the oil company, BP, shutting down parts of the largest oil field in the U.S. Production at the Prudhoe Bay oil field in Alaska is going to be cut by 400,000 barrels a day and that represents about 8 percent of the U.S. oil supply. BP found a small spill and severe corrosion in a pipeline there. Overnight, the news sent crude oil futures up $1.62 to $76.38 a barrel. A little bit, Andy Serwer is going to join us to talk about what this will mean for all of us at the gas pump.
HARRIS: A new round of violence in the Middle East. Early today, Israel launched several airstrikes on Hezbollah targets in Lebanon, including some near Tyre. Lebanese officials say a separate strike killed at least seven civilians in the southern part of the country.
Foreign ministers from the Arab League will soon meet in Beirut. Egypt's foreign minister says the session is meant to show Arab solidarity with the Lebanese people.
O'BRIEN: The United Nations Security Council is expected to vote on a Mideast cease-fire proposal. The question though is when? The plan calls for Hezbollah to stop all military actions and also requires Israel to stop its push into Lebanon.
President Bush is vacationing in Crawford, Texas this morning. He and Secretary of State Condoleezza Rice are expected to issue a statement today on the crisis in the Middle East. We're expecting to hear from them at 10:00 a.m. Eastern Time.
HARRIS: In Baghdad, at least three people are dead after a joint U.S.-Iraqi raid on a Shiite militia stronghold early today. U.S. officials say troops were trying to catch extremists suspected of running torture cells.
Also in Iraq, day two of a preliminary hearing into an alleged rape and murder at this home in Mahmoudiya. A group of U.S. soldiers are accused of raping and killing a 14-year-old girl back in March. They're also accused of killing her family. O'BRIEN: Cuba's vice president says Fidel Castro will be back at work in just a few weeks. Last week, Cuban officials said Castro had intestinal surgery and no other details have been released.
In New York City, Mayor Michael Bloomberg says officials are going to investigate the deaths linked to last week's heat wave. He says they want to know whether more could have been done to prevent them. At least 22 deaths are blamed on the heat.
Brings us right to Chad Myers, he's at the CNN Center with the forecast for us this morning.
Hey, Chad, good morning.
CHAD MYERS, CNN METEOROLOGIST: Good morning.
(WEATHER REPORT)
Back to you guys.
O'BRIEN: All right, Chad, thanks for watching it for us.
A sudden blow to America's oil supply could have a huge impact on what we pay at the pump. BP has shut down the largest oil field in the U.S. indefinitely, they say, after finding corrosion in a pipeline in Prudhoe Bay on the north coast of Alaska.
BP spokesman, Daren Beaudo, joins us by phone from Anchorage.
First, is the loss, half your production, as has been reported, and what does that mean in terms of barrels per day?
DAREN BEAUDO, SPOKESMAN, BP: Well it's not technically half of BP's net production. What it is, it's about half of the total North Slope output. BP operates 13 fields on the North Slope. There are some other operators up here. Four hundred thousand barrels is a significant amount of production from Alaska.
And we regret the action that we have had to take. We apologize to the nation and to the state of Alaska for any adverse impacts. However, this decision was made due to discovery of unexpectedly severe corrosion and a small spill from a crude oil transit pipeline.
O'BRIEN: How bad was that corrosion? What did you discover?
BEAUDO: Well, we have not actually been able to eyeball the leak site. What took place is on Friday we received some data from a process called smart pigging. And this is really an industrial diagnostic tool that literally travels the length of the pipe and gives us magnetic data back to show if there are any anomalies or areas where the wall of the pipe might be thinning. And on Friday we received the data that said we found 16 anomalies in 12 locations on an oil transit line. This is in the eastern part of the Prudhoe Bay field.
So through the weekend we were going through the process and Sunday morning of removing insulation on this line to try to confirm that data. It was through the course of this confirmation attempt that we noticed some staining, some oil staining on the underside of some insulation...
O'BRIEN: Wow!
BEAUDO: ... that's used to keep the pipeline warm. And so we made the decision...
O'BRIEN: So that's an indication that really it's almost beginning to drip out of the pipeline, right?
BEAUDO: Well that there's something down there. And what happened was, as we were mobilized with spill containment equipment in that area, we actually observed a leak onto the tundra of about four to five barrels. So we responded to that. We've got that area contained. We're working with the state on an approved state cleanup plan and we are capturing any other oil that might be dripping from that line.
O'BRIEN: What's the plan now? How long do you think you're going to be shut down for?
BEAUDO: Well the current plan is, first of all, to safely and with protection to the environment, take down the facilities. This is not a small operation. This is -- we're talking about several facilities that separate oil, gas and water. We're talking about adjoining pipelines. So it's really quite an undertaking. And we're taking down the eastern operating area first and that will take a matter of hours, perhaps you know 24 to 36 hours. Overall, we could be talking you know a few days to take the entire field safely down.
O'BRIEN: And then how long do you think you're going to be out of commission for? How long does it take, I guess is what I'm asking, to analyze, to repair, bring that pipeline back up, because you're talking about 8 percent of the crude that the United States uses, right?
BEAUDO: That's certainly an important question, and it's important to us. We know it's important to our customers in the United States and to the people of the state of Alaska. But we won't resume operation of the field until we and government regulators are satisfied that they can be operated safely and pose no threat to the environment. So we will be working in conjunction, in partnership, if you will, with regulators to help us determine when these lines are fully safe to put back into service.
O'BRIEN: Daren Beaudo is a BP spokesman -- Tony.
HARRIS: OK, we've already seen the price of oil jump this morning. And with ongoing tensions in the Middle East and the hurricane season, it comes at a particularly bad time.
Andy is here with more on what we can expect.
OK, this could be pretty bad for us. I mean could we see a $10 jump in the price of a barrel of oil?
ANDY SERWER, "FORTUNE" MAGAZINE: I think we certainly could. You know we don't want to be alarmists here.
HARRIS: Yes.
SERWER: The price of a barrel of oil already over $76 this morning, Tony, the record high being $78. And of course this does translate into higher gasoline prices that we pay here domestically.
I think what this really highlights, though, is the very, very tight relationship between supply and demand. Any little production problem like this, and of course this is a significant production problem, means the price of oil is going to jump and the price of gasoline will follow. The good news is supplies of oil in the United States right now at a five-year high. So the effect will be more psychological more than anything else, at least initially.
The one ominous note here -- there is the price of oil right now overnight. The one ominous note here from the BP people is they have suggested, they don't really know how long it will take to shut down...
HARRIS: Yes.
SERWER: ... these pipelines and check them out. And they don't really know how long it will take to get back on-line. The one good thing here, Tony, is that they're really trying very hard to avert any sort of environmental disaster. They talked about a little spill. They had a bigger spill back in March. And of course...
HARRIS: That's right.
SERWER: ... the real big one was the Valdez problem and that was 11 million barrels.
HARRIS: Hey, Andy, do we know what the ratio is? You get a bump of a dollar a barrel and what that means for us all here at home at the pumps, how much more will we have to pay?
SERWER: There's so many different factors at play there.
HARRIS: Yes.
SERWER: Some people would suggest it's 10 cents to every dollar.
HARRIS: That's right.
SERWER: But the relationship changes, there's a big difference on a percentage basis, obviously a dollar at 30 versus a dollar at 70, so it's very hard to say. And then you have local prices of gasoline in different states. If this continues and it's worse than expected, expect the price of gas to go up a bit.
HARRIS: Yes. We remember what happened after Katrina...
SERWER: Yes.
HARRIS: ... and gas prices went through the roof. We'll just keep our fingers crossed and hope for the best here.
SERWER: That's all we can do right now. And it sounds like BP, the people are responding, but a huge area.
HARRIS: Yes.
SERWER: And it's a problem that's not really quantifiable quite yet I think.
HARRIS: Yes, OK, Andy. Appreciate it. Thanks.
SERWER: Thanks.
O'BRIEN: All right, let's get you caught up on what's happening in the Middle East now. A new round of Israeli attacks to tell you about this morning. In southern Lebanon, Israel is again hitting suspected Hezbollah targets near the port city of Tyre, huge explosions there. For weeks, Tyre and the surrounding area have been under almost constant attack from Israeli planes and artillery.
Let's get right to CNN's Ben Wedeman. He's standing by for us in Tyre.
Hey, Ben, good morning.
BEN WEDEMAN, CNN CORRESPONDENT: Yes, good morning, Soledad.
Yes, we've had probably some of the most intense artillery bombardments in this area since the fighting began. In fact, just about 10 minutes ago, there was a 15-minute artillery barrage. I counted at least two dozen rounds coming down in the groves and the hills behind me. We also had airstrikes as well in some of the surrounding suburbs to Tyre.
Now the situation here is becoming fairly precarious because the only road out of here to the north was hit overnight by an Israeli airstrike. There's now really no way out. The Lebanese Army has a bulldozer which basically creates a temporary road, but they're afraid to bring that bulldozer out because it might get struck. So, at the moment, Tyre and us are cut off from the rest of the country.
Now what's going on it appears is that the Israelis are in some sense moving forward with their artillery. We're hearing reports of commandos on some of the ridges to the south of here. What they want to do is obviously get a much better view of the valley here below, the area along the coast, because it is from here that many of the Katyusha rockets that are fired into northern Israel are launched. In fact, last night we heard what we thought were the same rockets that went and hit Haifa yesterday evening -- Soledad.
O'BRIEN: Ben Wedeman with an update on what's happening in Tyre today.
Ben, thanks -- Tony.
HARRIS: And, Soledad, suspected Hezbollah strongholds in southern Beirut also under attack this morning. Israeli warplanes launched at least eight airstrikes. Those new strikes coming not long before Arab League representatives were scheduled to land at the heavily-damaged Beirut airport.
We get more now from Anthony Mills in Beirut.
(BEGIN VIDEOTAPE)
ANTHONY MILLS, CNN CORRESPONDENT (on camera): The residents of Beirut awoke this morning to the sound of thunderous explosions echoing across the city once again. The target, the southern suburbs of Beirut, the Hezbollah stronghold part of this city that has been pounded repeatedly in the course of this now week's-long old crisis.
Meanwhile, in an hour or so, the building behind me, that's the prime minister's offices here, will house a meeting of the foreign ministers of the Arab League amid tight security. The road is blocked off. Vehicles, at least public vehicles are not allowed to circulate. And there's a lot of security in place to ensure that there will not be a repeat of the violent demonstrations that racked this part of the city just a week or so again when the United Nations headquarters to my right was attacked by an angry mob that smashed its way in.
As far as the outcome of the Arab League meeting, well, there will be, it appears, a unified face on the demand that any resolution include an immediate demand of Israel that it withdraw its forces from southern Lebanon.
Anthony Mills for CNN, Beirut.
(END VIDEOTAPE)
HARRIS: And moving now to the other side of the border, the Israeli city of Haifa was on the receiving end of a heavy barrage of rockets after sunset last night.
CNN's Paula Hancocks is in the coastal city.
Paula, good morning.
PAULA HANCOCKS, CNN CORRESPONDENT: Hello, Tony.
Well there has been a bloody weekend on this side of the border as well. We saw 15 Israelis killed yesterday just by rocket fire. Now this morning, this Monday morning, we've seen about 56 rockets. The police say they are still counting. At least five injuries. And we've been hearing the air raid sirens sounding right the way across northern Israel, from the Mediterranean Sea to the Sea of Galilee. So, obviously, these rocket attacks are showing no signs of letting up at the moment.
And we're also hearing from the Israeli Defense Forces that one soldier has been killed in southern Lebanon, in Bint Jbeil, an area the IDF has been operating in for some days now, and a few days ago actually said they had control of. So fierce fighting, we understand, still ongoing in that particular area.
But here in the port city of Haifa, it had been fairly quiet rocket-wise for almost a week. There had been very few injuries. But that all changed on Sunday evening.
(BEGIN VIDEOTAPE)
HANCOCKS (voice-over): Just before 8:00 Sunday evening, six Hezbollah rockets shattered the uneasy calm in Haifa in one of the heaviest barrages on the city so far. Part of this building in an Arab neighborhood collapsed. One woman was killed instantly. Others had to be pulled from the rubble.
This paramedic tried to perform CPR on one badly injured man. He estimates at least 50 people were taken to hospital.
Anxious residents tried to get to the scene of the most deadly rocket attack. Police stopped them, trying to disperse the crowd by shouting more rockets could be on the way.
And despite the fact that an Arab rocket hit an Arab neighborhood, the anger on the streets was not directed at Hezbollah.
This former Arab Member of Parliament says they are victims of Israel serving American policies in the region.
(on camera): In at least a week here in Haifa, and many had been lulled into a false sense of security.
(voice-over): This resident directs his fury at the Israeli government, saying there are no bomb shelters in the Arab areas. We need bomb shelters.
These attacks in Haifa, and a particularly bloody day for Israel, the Israeli government, though, still insists it is winning this war.
MARK REGEV, ISRAELI FOREIGN MIN. SPOKESMAN: And we have no doubt that if we look at the number of launchers we have taken out, if we've hit their infrastructure, we've hit their command and control, we are sure, we are confident that we are winning this.
HANCOCKS: But the view from Jerusalem seems to be shared by few of those who find themselves directly in the line of rocket fire.
(END VIDEOTAPE)
So there will be more funerals being held this Monday as there will on the other side of the border. And even though there are talks ongoing towards this draft U.N. resolution, to the people on the ground, it makes very little difference at this point until there is agreement on a cessation of all hostilities -- Tony.
HARRIS: CNN's Paula Hancocks for us in Haifa, Israel.
Paula, thank you.
O'BRIEN: Still to come this morning, we're live in Baghdad with the very latest on a preliminary hearing for a group of U.S. soldiers charged in the rape and killings of an Iraqi girl and her family.
HARRIS: Then the insurance industry crash test results are in. Find out which cars earned top marks for safety.
O'BRIEN: And Floyd Landis, he's firing back at the International Cycling Union. We'll tell you what he said about his second round of positive test results.
Plus, Andy Serwer is in for Carrie Lee with some business headlines.
Good morning.
SERWER: Good morning, Soledad.
A brand new marriage made in techno entertainment heaven, MTV and Google partnering up. We'll tell you all about that coming up next on AMERICAN MORNING.
(COMMERCIAL BREAK)
HARRIS: And happening this morning.
In Alaska, BP has shut down the biggest oil field in the United States. The move comes after the company found a small leak and severe corrosion in a pipeline.
The U.N. Security Council is expected to vote soon on a Mideast cease-fire plan. It calls for Hezbollah to stop all military actions. It also requires Israel to stop its push into Lebanon.
And in Phoenix, one of the suspects in that serial shooting spree says he's innocent. In a newspaper interview, Dale Hausner says the other suspect, Samuel Dieteman, might have taken his car and guns to commit the crimes.
O'BRIEN: The U.S. military is hearing testimony again today to determine if a group of soldiers will face a court-martial. It's in connection with those alleged killings of an Iraqi family in Mahmoudiya. The soldiers are accused of raping a 14-year-old Iraqi girl and then killing her and her family.
CNN's Harris Whitbeck live for us in Baghdad with more.
Good morning to you, -- Harris.
HARRIS WHITBECK, CNN CORRESPONDENT: Good morning, Soledad.
This is day two of the Article 32 hearing. This hearing is meant for investigators to determine whether there are enough elements for courts-martial to proceed. Five U.S. soldiers accused of participating in the rape and murders of an Iraqi family near the town of Mahmoudiya. The family lived near a U.S. military checkpoint. This incident occurred last March.
In today's session, military crime investigators talked about how they heard testimony from one of the accused soldiers, Specialist James Barker, and they talked about how he described in much detail how the soldiers went into the house, how they -- how two of them separated the 14-year-old girl who was raped from the rest of her family, how the rest of the family was shot and killed and how this young girl was allegedly raped by two of these soldiers.
The defense brought up combat stress in today's hearing. And they asked the accused soldiers' unit commander if the emotional riggers of combat might have had something to do with their state of mind at the time of the incident. Lt. Col. Thomas Kunk said while most soldiers in his unit could deal with the emotional riggers of losing comrades in battle, earlier in the year, three of the accused soldiers were -- quote -- "wallowing in self-pity." And he said that they had sought help for combat related stress.
One of the accused soldiers, Private Steven Green, was discharged honorably from the military a few months ago after he was described by the military as having a -- quote -- "personality disorder." He is facing similar charges in a civilian court in the United States.
Again, the hearing taking place today will determine if courts- martial will proceed -- Soledad.
O'BRIEN: Harris Whitbeck for us this morning on what's happening in that really horrific case out in Mahmoudiya.
Thank you very much, Harris -- Tony.
HARRIS: And still to come, more on that oil field shut down in Alaska slowing production by 400,000 barrels a day. What will it mean for gas prices? Andy is "Minding Your Business." That's next.
And find out which carmaker is number one in safety, earning high marks in the insurance industry crash test.
Stay with us on AMERICAN MORNING. We'll be right back.
(COMMERCIAL BREAK)
HARRIS: Well this is a fun story. It's not official, but about 100 cheese factory workers, Soledad, in Wisconsin say they have the winning $208 million Powerball ticket.
O'BRIEN: I wish I worked in a cheese factory.
SERWER: Yes.
HARRIS: Happy Monday, everyone.
SERWER: That's a lot of cheddar.
HARRIS: Workers at the Sargento cheese factory tell a Milwaukee TV station the winning ticket is locked in a safe. Smart. The ticket was sold at a ma and pa grocery in -- help me, -- Soledad.
O'BRIEN: Fond du Lac.
SERWER: Fond du Lac.
HARRIS: Fond du Lac.
O'BRIEN: In Wisconsin.
HARRIS: OK, it's not the first time a winning ticket has sold there. Ma and pa sold a winning $6.5 million Mega Bucks ticket in 1994, for your information.
O'BRIEN: Wow!
SERWER: I'm shopping there from now on.
(CROSSTALK)
O'BRIEN: That would be worth it to go to Fond du Lac and get your ticket and come right back.
SERWER: Yes, it would.
HARRIS: Exactly.
SERWER: Ultimately it would be worth it.
O'BRIEN: Wow! So how many, 100 people.
HARRIS: Yes.
O'BRIEN: Two hundred and eight mil.
HARRIS: Split 100 ways gets you a nice payday, a nice payday.
O'BRIEN: Fifty percent, it's $500,000 per person after taxes.
HARRIS: After taxes, yes.
SERWER: That works.
O'BRIEN: I'm getting so good at doing that math. One day maybe I'll even win.
SERWER: Yes.
HARRIS: Speaking of the math, trying to do the math here, BP shutting down that line.
SERWER: Right.
HARRIS: OK. We were trying to figure out what it might mean in terms of gas prices here. Right after Hurricane Katrina, Gulf of Mexico oil production was reduced by, what, 1.4 million barrels a day?
SERWER: Right.
HARRIS: And we saw what happened with gas prices, it went a little nuts.
SERWER: Right.
O'BRIEN: They said 400...
HARRIS: And they're talking...
O'BRIEN: They're going to drop 400,000.
SERWER: This is 400,000, so that was bigger last fall.
HARRIS: Yes. Yes.
SERWER: And you saw the spike. But you know we're talking about this decision by BP to shut down production of its Alaskan North Slope oil field, 400,000 barrels a day of oil. That amounts to 8 percent of U.S. production. And as Tony is suggesting, it's significant, not as bad as last fall's hurricane season. But because supply and demand the relationship is so tight right now, the price of oil is going to go up and you could expect the price of gasoline to follow.
Other business headlines to tell you about.
The Federal Reserve meets tomorrow and there will be a big decision on interest rates. There's actually some drama this time around because there are some real questions as to whether the Fed will continue its rate hike campaign. The economy has been slowing a little bit. And so the question is do we really need to tighten rates anymore?
Other things to tell you about, GNC, General Nutrition Centers, scheduled to do an IPO to go public some time this week. We'll be watching that for you.
And let's take a look back at last week to see what the markets did. And you can see here a mixed bag. To show you here the Dow up a bit, Nasdaq slipping, S&P up. And this morning, as you might expect, futures are down a little bit, Tony.
HARRIS: Yes.
SERWER: Of course this is in response to the problems in Alaska.
HARRIS: So, coming up, we are going to talk about this marriage between Google and MTV, correct?
SERWER: Yes, we are.
HARRIS: OK.
SERWER: And it's all about convergence. Get that to you.
HARRIS: All right, Andy, thanks. SERWER: Thank you.
O'BRIEN: The morning's top stories are straight ahead, including new violence to tell you about on both sides in the Middle East conflict. We're live on the scene of one of the worst hit areas.
And Secretary of State Condoleezza Rice and President Bush now pushing for a U.N. resolution to help end the violence there. We'll tell you what it says and why it's already drawing complaints.
Those stories ahead on AMERICAN MORNING. We're back in a moment.
(COMMERCIAL BREAK)
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