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Who is Benefiting from Increasing Costs?; Political Candidates and Their Take on the Economy; Do You Really Need Premium Gas in Your Car?

Aired April 27, 2008 - 15:00   ET


ALI VELSHI, CNN HOST: Welcome to YOUR MONEY, where we look at how the news of the weeks affects your wallet. I'm Ali Velshi.

Coming up on today's program, heftier prices and leaner wallet. You're paying more for groceries, everything from milk to eggs, to a loaf of bread, we'll find out who is benefiting from those high costs.

Plus "ISSUE #1" in the race for the White House, what are the candidates saying, what they are not saying to relieve our fears about the economy.

And treating your car or train draining your bank account? Find out if you really need to be putting premium gas in your beloved automobile.

Those gas prices are soaring, the national average rose to a new high of $3.58 a gallon on Friday. That is according to the AAA, many people bracing for $4 a gallon, but drivers in some areas are already paying that, like in northern California, where the highest prices are amongst the highest in the country.

Chris Lawrence reports.


CHRIS LAWRENCE, CNN CORRESPONDENT (voice over): San Francisco drivers are getting past the shock. Now they're changing their lives to live with $4 gas.

DEBBIE JASMIN, CANCELED VACATION: We don't take your Expedition out usually.

LAWRENCE: People have permanently parked their SUVs. Traffic is down on Bay area bridges. And the trains have seen 7 percent more riders than this time since last year.

MARLOWE DOUGLAS, SWITCHED TO RIDING TRAIN: That's why I'm riding B.A.R.T. today because of the price of gas right now.

LAWRENCE: It's also changing when people drive and what. Overall car and truck sales are down, but hybrids are up almost 40 percent.

SCOTT DOUGLAS, PRIUS DRIVER: I used to have the luxury of not really even worrying about the price. Partly because I got the Prius, but now $43.

LAWRENCE: Think that's bad?

DOUGLAS: Oh, my god! Wow.

LAWRENCE: Scott Roberts just saw what the guy before him paid to fill up.

When was the last time you saw $115 spent on gas?


LAWRENCE: Especially for taxi drivers who buy their own gas.

UNIDENTIFIED MALE: When I first started, you know, it was, like, $2 something.

LAWRENCE: Now every press on the pedal eats into his wallet. Why don't you just raise the rates to make up the difference?

DIDDY DENNIS, TAXI DRIVER: Well, that would be a good thing if I could, but unfortunately I don't have any control over it.

LAWRENCE: Only the city can raise taxi rates to keep customers from getting gouged, but it's killing the cabbies and will probably force Diddy Dennis to quit.

DENNIS: It seems like I'm bringing home almost 60 percent less than what I was when I first started.

LAWRENCE: In a lot of Bay area families say there's no end in sight.

JASMIN: I don't think we'll be doing any big travels this year for this summer, at least by car.

LAWRENCE: Especially when you're paying $60, $70 a pop just to fill up. A lot of folks here have canceled vacations, sold off their big trucks and some companies in the Bay area are now running shuttles to pick up and take their employees to work.

Chris Lawrence, CNN, San Francisco.


VELSHI: All right. So these rising prices are taking a toll on consumers who are forced to cut back on driving or something else to make up for it. Let's take a step back for a second to look at why oil prices are increasing and if there's likely any relief in sight.

Peter Beutel joins us now, he is the president of Cameron Hanover. Peter good to see you. How many years are we talking about gas prices going up? A few of those you speculated they would go down. Fundamentally have gas prices gone down in the last ten years or oil prices at any point? PETER BEUTEL, PRESIDENT, CAMERON HANOVER: Well, you know, we were at very low prices back in 1998, when we got to $10.35 a barrel. But, really, since then, it's been almost all higher.

VELSHI: Let's talk about this for a second, Peter. There's definitely a lot of speculation. I've got "National Geographic" here which is about growing fuel and that's about the impact of ethanol on gas prices. Then we've got "Barron's" who talks about the commodities boon. It's got corn in there.

But really the issue here is commodities in general, including oil, have been traded up by speculators. Basically by people who make money off of the investment in the same way that you or I might buy a mutual fund or a stock or even a house and make money off it. To some people it's just an invest.

BEUTEL: Well, a lot of the investments that come in since August and September has not been the normal speculators and commodities. It's been refugees from the stock market. And one of the big tragedies of this whole thing is that with the Fed, having to try to reassert the -- reassure the economy, they've tipped their hand and let everybody know that they were going to cut interest rates.

When you cut interest rates, you then put pressure on the dollar as people go to other countries to find a higher bank rate of return. And all commodities are denominated in dollars, so as the dollar drops, it becomes less expensive for people, say, in Europe or Asia, to buy commodities, especially oil. So ...

VELSHI: But fundamentally we're talking about people who are involved in trading oil or other commodities who are not looking to take the oil and refine it into gasoline. We are talking about people who are in this market to make money and usually these are very wealthy people or hedge funds or that sort of thing, right?

BEUTEL: Well, yes, to an extent. But I guess the point I'm trying to make is that the people who have been doing it are not people who have traded commodities a lot recently. I mean, these are people who pretty much came in, in August and September and they used to trade stocks, now they're trading commodities. We need the regular speculators in this market to basically take the risks that producers and consumers want to lay off.

VELSHI: OK, so let's say that that hadn't happened. Let's say there weren't all these speculators who were coming in to invest in oil because it's a better investment at this point for them. Where would the price of oil be based on normal supply-and-demand and what you would call the normal amount of speculation in a commodity?

BEUTEL: Well, I think most of the move from $79 to $120 came because of the Fed tipping its hand and this new investment coming in to the oil market. So, I think we'd probably be below $90; very possibly we could be between $75 and $85.

VELSHI: So, there's 40 or 50 bucks in the price of oil that has largely not got to do with how much oil we've got to use on a daily basis. What happens? Does it keep on growing or at some point does somebody say the party's over and oil suddenly comes back down? What's likely to happen now?

BEUTEL: Well, on the morning that we all wake up and have no idea whether the Fed's going to cut rates, raise rates or leave them alone, then we're going to start to see a massive exodus from all commodities. And I believe at that point we're going to see prices drop very dramatically.

There is a silver lining to having speculators in this market on the long side. They have to get out. It's not something they can hold forever, because every contract has a specific time and date that it expires. So, when these people decide we no longer want this, they're going to sell, and the pendulum will swing dramatically the other way.

VELSHI: All right, let's hope for the sake of some people who are having a tough time managing these high gas prices and the effects that high oil prices have on the economy that that day will come.

Peter Beutel, good to talk to you. Thank you so much. Peter Beutel is with Cameron Hanover.

Coming up next on YOUR MONEY, food prices are on the rise and like this discussion about commodities, there are some people who benefit from your higher grocery bill. Stay with us. We're going to tell you who those people are.


VELSHI: Food prices are on the rise. A good portion of the extra money we're spending at the checkout counter has to do with an increasing oil and transportation cost, but there's another factor that you might not be as familiar with, inflation in the commodity markets. Commodity markets are where people trade, soybeans, rice, corn, wheat, among other things that we eat. Prices are high and only expected to climb.


VELSHI (voice over): As the housing market continues its plunge and stock markets gyrate, one market, the market for commodity futures, stays red hot. In the past year alone, corn futures have spiked more than 60 percent, soybeans over 90 percent. And rice has more than doubled.

Hedge funds and other pools of big money are pouring billions into commodities. They want a better return than real estate, the stock market, or the U.S. dollar can give them. Why do you care? Because this speculative fever is finding its way here, to the checkout line.

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: When we get the momentum in a market going one way, smart people can -- can make money doing that. And that is what their job is. What's happening now is that this is showing up and impacting, you know, people very much on Main Street and on their dinner tables. VELSHI: Now, to be fair, these high prices aren't just caused by speculators. Bad weather has caused the price of food grains to spike and growing demands from emerging markets like China and India and the weak U.S. dollar is also playing a part. But as futures markets rally, companies that buy crops to make food must swallow higher prices to guarantee future delivery of the raw goods that they need and that are driving prices even higher.

KENDELL KEITH, NATIONAL GRAIN AND FEED ASSOCIATION: It also adds to the cost of the marketplace for -- for merchandising and marketing grain.

VELSHI: Bottom line, at least some of the price boon appears divorced from the laws of supply and demand, proof, say some economists, easily traded commodities like corn and wheat are showing historic gain while commodities that aren't widely traded like rubber and burlap are up by a much smaller amount. Others say that connection is tougher to make.

VIC LESPINASSE, GRAINANALYST.CIM: It's very difficult to say exactly how big of a role speculations played. I think it's relatively minor. Speculators are not setting the trending. They're just following the trend.

VELSHI: Traders say the fundamentals play a much bigger role than speculation. Drought in wheat-growing Australia, for instance, and they say don't forget, higher oil and gas prices make it more expensive to produce and transport food. Now, you think farmers here in the U.S. would be happy about these high prices. But even some of them are complaining that all of this speculation has thrown the whole market out of whack.

They say they're not feeling the full benefit of the price increases, and they're asking the U.S. government to somehow limit speculation in food markets. Easier said than done. But speculation in commodity markets is provoking food rage.

ACHUTHAN: When you have, you know, your milk price double or your bread double or something like that because of some financial gyrations, and you say, something's wrong here, and I think that's what people are really reacting to and feeling right now.

VELSHI: And it may be wrong to some, but a global market is a hard thing to stop.


VELSHI: Our good friend Jennifer Westhoven "Headline News" correspondent is with us. Jennifer, we know the story. Anybody who shops knows this story. One of the interesting things that's developing is rice is also one of these commodities we don't think of top of our mind in the United States, not our basic grain, but rice prices have also soared.

JENNIFER WESTHOVEN, CNN CORRESPONDENT: That's a big problem. Let's take a look at what has really soared in terms of the basics that we do eat a lot in the United States. For eggs you are paying nearly 35 percent more than last year. White bread, 16 percent more, milk, 13 percent more. I mean, I don't know about you, Ali, but I look at my paycheck, not many of us got ...

VELSHI: We're not getting those kind of raises.

WESTHOVEN: That's right. And that's for the whole country. A in new Gallup poll, Americans said that food prices are their number two worry for right behind gas prices. How are they going to feed their families? It's a difference for us in terms of being worried about food and then whether or not we can get it.

Now, that's an exaggeration, right? But we had this story this week that got a lot of people's attention the fact that two of the nation's biggest warehouse chains are limiting large sales of rice. Sam's Club says you can only buy four 20-pounds of rice, Jasmine, Basmati, and other long-grain rice. Sam's is a Wal-Mart's warehouse business.

VELSHI: It's not the average person who is buying it. Restaurants?

WESTHOVEN: Mostly. And then Costco said they had not just rice but they were talking about flour and oil, but only in a very few stores. So, it's not rationing. We want to be really clear.

VELSHI: Let's be clear on that. You can buy all the rice you want. You just can't buy more than 80 pounds of it at a time at Sam's Club.

WESTHOVEN: You can probably go back the next day and get 80 pounds. But who is buying that amount of rice? Yes, we're talking about mostly restaurants. We're also talking mostly about imported specialty rice here. The United States grows a huge amount of rice, more than we basically eat. We export a lot of our rice. So, that's really not a problem.

Sam's says this is really a temporary cap. It was just designed to make sure that supply is steady, so if you go in, there's a bag of rice waiting for you. You don't half to come back the next day. So, yeah, again, who is really buying 100 pounds of rice? Mostly restaurants. That's something that's been talked about a lot. Restaurant prices have doubled in the last year.

VELSHI: With a lot of them, most bigger restaurants have a distributor. So a truck comes and gives you all the food you need. But there's a delivery charge and gas prices there, so a lot of small mom- and-pop operations take their own vehicle over to Costco or Sam's Club and load up what they need. And that's the people that are buying the rice.

WESTHOVEN: I think the story, though, really caught the public imagination in some ways, because just the very idea in this country there would ever be any limit to how much you could buy caught people by surprise. VELSHI: In a circular, it will say eggs this much, limit one dozen per person, it's not as unusual as it seems, but the concept is a little frightening.

WESTHOVEN: I want to say the concept of shortage is not here in the United States, but that is something we're starting to see around the world. A lot of the Asian countries that have made a lot of rice have stopped exporting that. You need a lot of wet, flatland to grow rice.

The available land in Asia is shrinking, there are more people. Droughts have wiped out crops in Australia. There's a mill, a lot of people don't know about this, it made rice for 20 million people. And it just closed, there's no water. There's no rice.

VELSHI: Because it's not our staple grain, it doesn't mean it's not somebody else's.

WESTHOVEN: That's exactly right. It's the staple for half of the world. And the World Bank says there are 33 countries now that could see unrest because of high food prices. Just today the U.N. Secretary- General Ban Ki-moon is calling the food crisis global crises, he said that Friday. He's really urging for some kind of leadership between the countries.

VELSHI: I've been talking around, "Time" Magazine had something on ethanol, "National Geographic" had corn on the front cover from a couple of months ago. "Barron's," it's all about the commodity surge, corn is a big issue here. Meat, rice, eggs, chicken, all of this stuff; it's a big problem for our viewers and for Americans as well.

Thanks, Jennifer.

Coming up after the break, how next weeks Fed's decision will pay a role in what you will pay at the checkout counter. Stay with us we will make that connection for you right here on YOUR MONEY.


VELSHI: All right, as we've been discussing, you can't help but notice that prices are rising everywhere you look. Inflation from gas to food, our own Greg Hunter says the cause for the spike remains the same. What is it?

GREG HUNTER, CNN CORRESPONDENT: Well, listen, it all comes down to the value of the dollar and right now the dollar is way down, with no sign of recovering anytime soon. That means you are paying more for just about everything you consume. Who's to blame? Some say, the Federal Reserve, but don't take my word for it. Noble Peace Prize winning economist Milton Freeman summed it up best saying inflation is always and everywhere a monetary phenomenon.

In other words, inflation is caused by the Federal Reserve. When the Fed cuts rates, it prints hundreds of billions of dollars to bail out banks and brokerages for bad decisions they made on bad mortgage debt, the result you feel on the streets is big inflation. Like paying nearly $4 a gallon for gas or milk.

Congressman Ron Paul also Republican presidential candidate had this to say about inflation to Ben Bernanke when the Fed chief visited Capitol Hill earlier this month.


BEN BERNANKE, FEDERAL RESERVE CHIEF: When we allow our banking system to inflate the economy, it causes the bubbles to occur, and then we have to inflate to prevent them from breaking, and, you know, deflating. So, it goes on and on, and we perpetuate our problem.


HUNTER: Bottom line according to John Williams of, the real inflation rate is between seven and 12 percent. Shadowstats also says the Fed is creating money at a rate of -- listen to this - 15 percent a year, which means at that rate the money supply will probably just about double in less than five years.

Williams also says, he sees 20 percent inflation the way he calculates it, within the next two years. So, the Federal Reserve policies are the real cause of these big price spikes you're feeling right now and to be fair to Ben Bernanke, he walked into a buzz saw. These problems weren't caused by him, but he's got to deal with them.

VELSHI: Peter Beutel at the beginning of the show talking about gas prices said the same thing you did, the big spikes in commodity trading happened when people figured out the Fed was going to cut rates and cutting rates lowers that dollar, it creates more money.

But listen, the government says inflation compared to last year is 4 percent higher at the retail level. Four percent you're saying seven to 12 percent. You seek college education, you see health care, you see the price of food, and I'm more likely more inclined to believe Shadowstat's numbers than the government's numbers. Why are they so different?

HUNTER: They are different because they go back in and calculate inflation the way they did in 1980, that would be 12 percent. In 1990 that would be seven percent. They have these techniques, these academic techniques, geometric measuring, smoothing that understate inflation.

But if you take the government's four percent inflation rate, the Federal fund rates is 2.25 percent you are lending money lowering than the government's rate of inflation which is underscored, so that's highly inflationary. People are speculating and people are looking for ways to --

VELSHI: Other than becoming a trader at the Chicago Board of Trade and making money on commodities, what do I do about this?

HUNTER: Listen, you have to save money where you can. I went to New Jersey and went to Costco, and that place is packed. I'm not telling you to buy Costco stock, but people are looking for ways to save money. Count your trips. Let's not drive a car to here, here, and here, let's make one trip and make one gas-saving trip to make our gas work. Let's buy your food in bulk.

You have things on this show talking about buying food right at the farm so people can save money. People are going to need to stretch out their dollars, because their raises aren't going to keep up with seven and 12 percent inflation, Ali Velshi.

VELSHI: Many people aren't keeping up with four percent. In fact, many people are losing jobs. Thank you, Greg Hunter.

Well coming up, the primary battle wages on, but are any of the candidates offering solutions for the things that we've been talking about with you today and that we talk to you about every day?

We're going to find out, but first this week's "Right on Your Money."


VELSHI (voice over): Adjustable-rate mortgage, those can be very scary words in this housing market. Many homeowners stuck in subprime a.r.m.s that are resetting are being forced into foreclosure, but if you're in the market for a mortgage, there's a chance that an adjustable-rate mortgage might be right for you.

GREG MCBRIDE, SENIOR FINANCIAL ANALYST, BANKRATE.COM: There are a couple of prerequisites. If you won't be in the home for very long, this might be right for you. If you expect a big income increase, it can work for you.

VELSHI: With a fixed rate mortgage, monthly payments will be steadily, but with an adjustable rate mortgage, your payments will vary over time.

This is not a decision you're making based on the out look for interest rates, if you are a good candidate for an adjustable rate mortgage, over time your window is short enough that it can work as a fixed-rate loan. The fixed-rate loans are still very low. If you saw a big disparity between adjustable and fixed rates, for somebody who plans to be in the home less than ten years, that could be enough to tip the scales in favor of that adjustable-rate loan.

VELSHI: And that's this week's "Right on your Money."



VELSHI: The Pennsylvania primary is in the books. I can't believe I got Pennsylvania wrong given how many times we had to say it over the past eight weeks. Hillary Clinton survives to fight on with Indiana and North Carolina up next on May 6th. Money continues to be the primary issue of the primary season. As the economy struggles, voters want to know what the candidates are going to do about their money struggles. Mike Duffy joins us now he's the nation's editor at "Time." Mike good to see you. Thank you for being with us. Are they solving the problem? Have we got a solution with our candidates if we have to go through this in Indiana and into North Carolina?

MICHAEL DUFFY, NATIONAL EDITOR, "TIME:" Well, we are going to have to get through it. But you have to remember the most important fact about all presidential campaigns and economic policy, Ali. That is we're a good year between now and the time anything ...

VELSHI: Right.

DUFFY: Any of these campaigns or candidates can actually enact what they propose to do. They have to get elected. They have to make the proposal. They have to get it through Congress, you know, and a record time for that kind of a plan, whether it's taxes or tax cuts, spending or spending cuts, is at least a year and probably more from now.

VELSHI: Which is interesting because what we've seen some of the candidates do is propose things that they think should be done right now, by this administration. Hillary Clinton and her emergency mortgage remedies, Barack Obama have remedies he wants taken care of right now.

John McCain talking about the federal government taking off the 18 cents that they put on gas taxes for the summer. So, they're trying to appeal to this administration and to voters about what they can do now. Is any of that going to work?

DUFFY: No, none of it is going to happen. It's all about, designed to get attention, and by the time they actually became president in January, the situation economically will surely look, if not a lot different, certainly different, and those ideas and proposals may have no relevance or purchase.

So, these are very short-term, headline-grabbing ideas. The five- year moratorium on mortgage rates that Hillary Clinton has proposed, they've now backed away from. We just meant that to be voluntary. That was a strange idea. So, you know who knows? Even these short-term things will look like in a few months.

VELSHI: Generally speaking, history will show the short-term issues tend to be that, they tend to be short term, and the long-term structural issues that we want the president to deal with tend to be longer term. So if you are a voter and I'm not asking you to tell people who to vote for.

But how do you make your decision? You get that the economy is slowing down? You get that we might be in a recession. You get that it's housing, jobs, and inflation and gas. What are you supposed to use to make your decision about which candidate is the best for your economy?

DUFFY: Well the first thing you have to realize are the presidents having very little to do with affecting the economy. The government is not the engine of the economy. It doesn't control it. It doesn't do much but regulate it at the very margins. So there's not much a president can do to actually change things. He can affect fiscal policy. How it taxes, what it taxes.

And most of the campaigns tinker on those margins, you know. John McCain would cut a lot of taxes, corporate taxes, personal taxes, death taxes. The Democrats tend to be better at either removing those tax cuts for a while, temporarily, some of them, or increasing spending. But these are changes, Ali, at the very margins of the U.S. economy and probably won't have much impact on people at all.

VELSHI: If the government's not the engine of the economy, and that's a very good point, what do you think it is? Is it business, or is it as we say the all-powerful American consumer?

DUFFY: Well, now you're into an area of which no one would come to me for advice. You know? All I know is the politics of this, about the economics are generally involved in trying to get voters' attentions in key states as they try to woo support and lock up this nomination. But actual running economic policy is something the president does only after he gets into office. Even then whether you're George W. Bush or Bill Clinton, the last two, they realize they don't have much impact on it.

VELSHI: Yeah, and sometimes they inherent problems and sometimes they cause them.

DUFFY: Or pass them on.

VELSHI: Michael Duffy good to talk to you, thank you for that. Michael Duffy is the nation editor at "Time" Magazine.

Still to come, saving money every time you fill up at the tank? It might be easier than you think. We'll tell you how to do it.

And plus, making gasoline out of coal. It can happen, but can it happen here in the United States? We will tell you about that when we come back on YOUR MONEY.


VELSHI: Gasoline prices hitting $3.58 a gallon for self-serve unleaded. Without having to go near the premium pump. The bad news is that more automakers are introducing cars that use the costlier mix. According to "Kelly Blue Book" the number of new models that need the pricier gas has risen from a 166 in model year 2002 to 282 this year. You may not need to use the costlier premium.

Our good buddy, Mike Quincy, automotive content specialist of "Consumer Reports" is here to sort it all out for us. Mike thank you for being here. We had a discussion amongst our producers the other day, we should explain to people whether they should or shouldn't. There's no discussion to have here, if your car calls for premium, you put it in. If it doesn't, you don't. Believe it or not, that's not common knowledge. MIKE QUINCY, "CONSUMER REPORTS:" Exactly, I mean you're absolutely true. When the automaker says the car is designed for regular fuel, you're just throwing money down the drain by putting in premium.

VELSHI: Someone said to me, are you not getting better gas mileage out of using premium gas if your car doesn't use it? Are you getting better mileage?

QUINCY: Not at all. In "Consumer Reports" testing, we've put premium in for normal cars and have seen no benefit. It's a waste of money.

VELSHI: I used to recall seeing campaigns for the premium gas. It sort of implied that it is cleaner or cleans your engine, has detergents in it. Tell me about that.

QUINCY: Pretty much nonsense. All the modern engines have these very sophisticated electronic engine-management systems so you can retard the ignition and the car won't ping, because it automatically will adjust to whatever kind of octane you're putting into it. But like you hit on before, if it says "required" then I'd put in premium. Otherwise don't even spend your money on it.

VELSHI: What is the effect of putting in regular gasoline in a car that says it requires premium?

QUINCY: Well, the thing that people have to understand is that there's a difference between recommended and required. A lot of the owners' manuals will say, you can put in premium if you want to. It will probably run fine without it. In a model, for example, that says it's required, that's when we put it.

When "Consumer Reports" goes to test a model, we look at what is written inside the fuel filler cap, if it says premium fuel only, that's what we put in when we test it. That's the only time. We won't even bother with it.

VELSHI: The octane numbers is that something somebody has to pay attention to?

QUINCY: Not really. When your owners' manual says regular fuel, you'll get 87 octane which is pretty standard across the board. So, again, the owners' manuals, all of the advice that our parents said, read the directions, read your owners' manual, totally true. All the information is in there. Minimum octane 87 is pretty much standard across the board.

VELSHI: And that midgrade, who is that for?

QUINCY: I don't really know. To be honest with you, who buys midgrade gas?

VELSHI: Either you need the premium or you need the regular. Midgrade is just ...

QUINCY: Exactly. A lot of high end automakers ...

VELSHI: I don't want to really overspend, I kind of overspend.

QUINCY: It's like white chocolate, you know?

VELSHI: What is the purpose of premium gasoline? The cars, these models, that require them, why is that? Are the engines different? What happens if you put regular into them?

QUINCY: The premium gas is usually required for high-end models; we are talking about luxury cars, sports cars, cars with a higher compression engine. What is probably going to be the wave of the next few years is smaller engines are going to be attached with superchargers and turbo chargers, this raises the compression ratio in the engine which requires the higher-octane fuel. The octane basically manages the engine. If your engine is pinging or running rough, then you might have to put premium in it.

But, again, read the owners' manual, make sure you know exactly how much money you need to spend on fuel before you go wasting out fuel you don't need.

VELSHI: I always pull off the road when there's a Pep Boys or whatever and they got the bottle of octane boost that can put it up to 104 octane. Who is that for? People that like to spend money?

QUINCY: People that race their cars. Some of the older engines that were originally designed to run on leaded fuel; you can get an octane booster or lead substitute, for example. I have an old Mustang and I sometimes throw octane boost in it, but, again, most of this is a waste of money. Your car's engine is smart enough to be able to run fine on regular.

VELSHI: All right. Good to see you, Mike.

QUINCY: Thank you.

VELSHI: Michael Quincy is the automotive content specialist at "Consumer Reports."

Any way you slice it, prices at the pump are high, even if you stick with the regular gas. One innovative energy company based in South Africa thinks it has a workable solution. For decades it's been turning coal and natural gas into gasoline.

I recently sat down with the company's CEO, Pat Davies, and asked him to explain how Sasol does it.


PAT DAVIES, CEO, SASOL: The first we do is take the coal, convert it into gas and then convert that into waxy crude oil, and then we refine it as a conventional refinery. There are much bigger reserves of gas and coal in the world than there are of oil. So, clearly, we see our way into the future adding more and more into the supply of high-quality fuels from these reserves rather just than being reliant on crude oil.

VELSHI: Is that fuel that comes out, the diesel or the gasoline, the jet fuel; is it the same for the end user? Do I have to have a car that's special to use a fuel that comes from coal?

DAVIES: No, that's one of its great advantages. It's entirely fungible, you can use the same cars and trucks and it goes straight into your tank. But it has the advantage of producing a much cleaner emission stream that comes out of the tailpipe.

VELSHI: We have a lot of coal in the United States. It's actually the cheap source of energy for electricity. Why is this not happening in the United States?

DAVIES: We working actively on an opportunity in the United States. Because you have all the oil you need. It's just stored in the form of coal and now technology converts it into the oil that you need. In fact, you have more coal here in oil equivalent than all of the Middle East has in proven reserves.

VELSHI: Here in the United States as you know we've had a lot of refinery expansion, but no new refineries. Very hard to get permits for them, and they are largely thought of as filthy. What's the effect of plants that turn coal into -- into usable transportation fuel?

DAVIES: Coal to liquid produces a fair amount of co2. Any coal- producing industry produces a lot of co2. How do we get it to produce less carbon dioxide which is a greenhouse gas which causes climate change? We're an innovative company and we working on solutions all over the world to safely capture that carbon, and safety store it under ground, or use it for advance oil recovery. We need to do some more work.

VELSHI: If we were to start making gasoline from the technologies that you use particularly out of coal in the United States, would Americans feel that at the pump? Would they see prices coming down as a result?

DAVIES: In time, one would say effect, but it would be more to mitigate the ultimate what I believe is going to be something of an energy crunch around transportation fuel. Having more alternatives obviously must translate in the longer term into lower prices.


VELSHI: He makes an interesting point there and Michael Quincy is still with me. This is not about lowering the cost necessarily of gasoline, it is about creating alternatives and particularly coal is something you don't eat, unlike corn, which makes ethanol.

Sasol is looking to open some facilities here in the United States and its conducting feasibility studies that would take years before the first coal-to-gasoline fuel could possibly enter the U.S. market but with the price of oil where it is today, Pat Davies, who I interviewed, believes that more countries around the world will find that method worth exploring. What do you think of this? You must have encountered this before?

QUINCY: Well, certainly any alternative to regular petroleum is a good step, but there's almost always going to be kind of a good news/bad news scenario. I noticed that he didn't actually come out and say how much it was going to cost compared to regular gasoline once his coal-produced fuel reached the open market.

So, that is kind of a big unknown, and, yes, if there are more alternatives out there, then perhaps the price will come down. But how is it going to compare right now to regular gasoline? For example, diesel fuel, which is excellent fuel, a lot of vehicles can run on it very efficiently. But it's way expensive. It's much more expensive than regular fuel.


QUINCY: So, you know, what is the good news, what is the bad news, because there are both?

VELSHI: All right. Michael Quincy thanks a million for joining us. Michael Quincy once again from "Consumer Reports."

Coming up next on YOUR MONEY, high-paying jobs, where are they and how do you get one? Stay tuned we are going to talk to somebody who knows exactly how to do it.


VELSHI: The jobs report comes out next week and that's going to give us a good picture of the current employment situation here in the United States. Generally speaking economists say that we could see a weaker labor market in the months ahead, but the outlook for employees at the high end of the job market is actually expected to remain strong, according to the head of a national recruitment company.

And he joins me now, Gary Burnison is the CEO of Korn/Ferry which is really known as one of the very big, high-end, top job placement companies in the world. You also do a lot of other things; you deal with jobs across the board.

GARY BURNISON, CEO, KORN/FERRY: That's right. And we're in 40 countries around the world. Eighty percent of our business is the executive search, dealing at the high end, 20 percent is an outsourced hr business and the leadership development business.

VELSHI: All right, so the economy turns in cycles. If I'm maybe in college or I'm newly out of school and I really want to end up earning a lot of money in my career because education's costing me a lot of money. What are the things that you need to do to get there? What are the things somebody who is watching you or listening to you that doesn't typically get access to you, what do they need to do to make a lot of money in their career?

BURNISON: We found in our research over the last 25 years is the number one competency for executives as they rise is learning agility, self-awareness, being able to continue to develop, continue to grow, and get new skills.

VELSHI: What does that look like on a resume? What is the agility and self-awareness, how does it translate? Is it something you learn? Is it something that comes from the experiences?

BURNISON: Absolutely. It comes with age and experience, and it comes with different settings, cultural settings, job settings and it's upwards progression in terms of your career.

VELSHI: Are there commonalities in the -- when you place the CEO at a company, what you've done so many of them, are there commonalities about their experience or their education, the types of experiences they've had, the places they've worked geographically or industries?

BURNISON: Well, the thing that companies are looking for now are global change agents, executives that can manage a diverse workforce. You got to remember that 80 percent of the world's population lives in a merging economy.

The United States is five percent of the world's population, so as you look at places like Vietnam and India and Russia, you're looking for executives that can manage, that can motivate, and that can inspire a very diverse workforce.

VELSHI: OK, so there are two things they have to be able to manage and they have to understand diversity. How do you get that?

BURNISON: Through experience. You have to get experience. You have to be in different countries. You have to understand the cultures, and, you know, what big companies are looking for are change agents, people that can transform their business. And to change, you have to meet people where they are, rather than where you are. So you have to understand the local customs and the cultures and then get them to move over time.

VELSHI: So what are we talking about? Exchange programs, internships, placements or joining a company first out of college that you know that there are international opportunities? Which of those things do you think are important?

BURNISON: All of the above. All of the above, absolutely. International rotations are critical to -- you know, if you've never lived in a country and understand the culture, it's very difficult to learn it through a textbook.

VELSHI: Best way to learn how to manage people. We talk so much on the show to people who are struggling with their managers, how to handle reviews, how to handle poor managers. You come at it from the other way. What's the best way to learn to not be one of the people we're talking about on this show, to be a good manager?

BURNISON: Well, if you look at a leader's job, whether it's a CEO or a line manager, it's really about vision, mission, culture, and strategy. What are the strategies to achieve the vision that you've set out. If you look at every study that's been done on employee engagement, it's really about giving them a sense of purpose. They want to belong to something. They want to be a part of a journey. They want to be developed. They want feedback. They want to be treated equitably, those things are critical to motivating a workforce over time.

VELSHI: And those are the things that people can do, I guess, at a time like this where the economy is struggling, it does cause a lot of people maybe at the college level to think about what their future's going to look like, so thank you for coming by and giving us some sense of how they might design it so they actually do very well and earn well. Gary good to see you.

BURNISON: Thank you.

VELSHI: Gary Burnison is the CEO of Korn/Ferry.

Up next on YOUR MONEY, a booming business in the time of high food prices, why pick-your-own is becoming all the rage in some parts of the country. You're watching YOUR MONEY on CNN. We are coming right back.


VELSHI: Food prices are soaring, and that's forcing people all over the country to look for different ways to save a buck. And small farmers and pick-your-own farms are reaping the benefits.

Ed Lavandera reports.


LYNN REMSING, OWNER, GNEISMER FARMS: In a given day, everybody will come in and pick any where from one to two gallon.

ED LAVANDERA, CNN CORRESPONDENT (voice over): Everything Lynn Remsing grows gets gobbled up.

REMSING: We have seen a tremendous increase in the number of people that are picking their own fruits now.

LAVANDERA: Thousands of people are flocking to Remsing's farm in this Ft. Worth, Texas, suburb, to pick their own fruits and vegetables, on this six-acre plot, sales have doubled in the last year.

REMSING: This year has been an extremely good year for us, because the number of people that I think has found fresh vegetables because they are looking for a cheaper source of food out there in the marketplace.

UNIDENTIFIED FEMALE: That is $4 for the onions.

LAVANDERA: Remsing says the organic fruits and vegetables he grows are consistently cheaper than the nonorganic foods sold in nearby supermarkets, that because he doesn't have transport and packaging costs. Here you pick strawberries right off the bush. Do you think this is the wave of the future?

REMSING: I think it is. I think we're going to see this come. If you've ever been to seen the European market, they do a lot of green houses. They do a lot of local, small farms.

LAVANDERA: Local farmers are reporting a boom in sales all over the country. In the last ten years, the number of farmers' markets has nearly doubled nationwide. And for the first time, the farm bill before Congress will allocate nearly $2 billion to help specialty crop growers expand where they sell their food.

ROBERT GUENTHER, UNITED FRESH PRODUCE ASSOCIATION: Expanding the availability of produce. Creating commodities, you know that those are the types of things that I think will help -- could help bring prices down. But it's a global problem, as you're aware.

LAVANDERA: Of course, what many local farmers are fighting is the expectations games. For example, someone in Michigan come December or January in the middle of winter wants an orange, that's not something that's grown locally, so that has to be shipped in.

Ed Lavandera, CNN, Dallas.


VELSHI: And here, YOUR MONEY at CNN we're going to stay on top of rising food prices. That's it for this edition of YOUR MONEY.

Coming up in the next week, the Federal Reserve is going to make a decision on Wednesday on interest rates, we will find out about jobs on Friday, we will break that all down for you next week on YOUR MONEY.

We want to hear from you and your questions and your comments about the Fed, the job market, anything that has to do with your money, anything you don't understand that you want us to cover, drop us a line our address is We will try to get to those questions on air next week.

Thanks for joining us. We will see you back here next time, Saturday at 1:00 and Sunday at 3:00. See you then.