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CNN LIVE EVENT/SPECIAL
Price Manipulation in Gas Prices; Hypermiling to Save Gas; Tips to Save Gas
Aired June 1, 2008 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICK SANCHEZ, CNN ANCHOR: Now, four bucks for a gallon of gas. How did we get here? Where is it going? And what's it going to do to us.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: If I could ride my bike to work, I would. Or you know, do anything to conserve on gas. I would definitely do that.
(END VIDEO CLIP)
SANCHEZ: Laugh out loud? No. Cry? Maybe. Scream? Definitely. Considering that already some Americans are having to choose between food and fuel.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I'm going to stay home and save my pennies.
(END VIDEO CLIP)
SANCHEZ: When a gallon of gas costs four bucks, what's next? This is America's fuel nightmare.
Hello, again, everybody. I'm Rick Sanchez. As we begin this hour, let me pose a question that no doubt many of you have thought about yourself. Is it possible that somebody is playing games with the price of oil? As in price manipulation.
Federal regulators are now saying that they are actively investigating and have been for sometime -- that price manipulation. Is that why prices are so high? Also this hour, how you can save not pennies but dollars at the pump. We're going to tell you. And we're also going to be telling you about a new reserve of oil. It said to be huge that's just been discovered. We'll tell you where.
Of course, it's also hurricane season this weekend. What would another major storm do and what's being done to protect the rigs out of the Gulf Coast.
All right. Let's start with the big news, though. Federal regulators, again, looking at price manipulation. What does it mean? What could it mean for all of us? And what's been going on?
Ali Velshi is in New York. He's been looking into this for quite sometime now.
Ali, who and what are they looking at?
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Good question, Rick. Good to see you. Here's the news. The speculation, the thing that many people say drives the price of oil higher might be behind the price of oil that we're paying right now over $125 a barrel.
A federal agency announced that it is six months into an investigation of possible manipulation and abuse in the oil futures trading market. Now this agency is the Commodities Futures Trading Commission, CFTC. It says it doesn't even normally disclose that it's got investigations under way. It only did so because of the unusual price increases that we've seen in oil. One former agency official that I spoke to says political pressure has been building on this agency to act.
(BEGIN VIDEO CLIP)
MICHAEL GREENBERGER, FORMER DIRECTOR COMMODITIES FUTURES TRADING COMMISSION: For two years they have been telling Congress this is a supply-demand problem. We are watching these markets. They have nothing wrong. Yesterday they say we've got an investigation. And now there's all this data we don't have that we have to get from the exchanges that are not regulated.
(END VIDEO CLIP)
VELSHI: That's Michael Greenberger. He says that a lot of oil is traded on exchanges. He said those exchanges that are not regulated. Exchanges with loose rules. Rules that could encourage excessive speculation. And at these prices, Congress wants answers.
(BEGIN VIDEO CLIP)
GREENBERGER: On top of that, there's now a bipartisan outrage. You've got conservative Republican members of Congress who are very angry with the CFTC for having sat on this problem while oil went from 50 to 75, and now, yesterday, even before the announcement touched $135.
(END VIDEO CLIP)
VELSHI: Now, Rick, Michael Greenberger was the former head of trading and markets for the CFTC -- the Commodities Futures Trading Commission. The CFTC is not disclosing. What it's investigating or who is being investigated. But the agency said it is publicizing this now because of today's unprecedented market conditions.
SANCHEZ: What are the possibilities? Could it be somebody on the political side? Is it somebody on the distribution side? Perhaps, somebody overseas or are they all still fair game?
VELSHI: They are all options. The oil market is huge. It's not like even a particular stock market. It is traded all around the world. The issue is though that some of it is regulated here in the United States and some of it isn't. But that oil all looks the same. So if there is trading going on that is not aboveground, it's not clear, not aboveboard, it's not clear that any agency would track it.
So now they are looking at patterns or looking at whether people made big trades in oil before, some kind of a price spike. But this is going to be like looking for a needle in a haystack, Rick.
SANCHEZ: A lot of times you get your answers by looking at the agency that's actually doing the investigating. In this case they are called Federal regulators. Who are these people? What have they been mandated to do, and why have they been doing this investigation apparently since December without anybody even knowing about it.
VELSHI: Unbelievable. And by the way, in December, oil was 96 bucks or 97 bucks a barrel. Where were they as the gentleman that I just referred to said, where were they when all it was 35 and 50 and going to 75 and 80. Why did they choose December to be the place?
Shouldn't these agencies be protecting us all the time? Like the Securities and Exchange Commission, like the various agencies that are supposed to oversee the things that we do, the places where our money is traded. So it is very, very good. A lot of questions -- more questions than answers right now about why they haven't done this until now.
But what is interesting is the CFTC, this agency, the head of that agency just recently said he doesn't even think there's any speculation in the oil market. So at least we're going to get to the bottom of the fact that this can't just be supply and demand. There has got to be something to it.
VELSHI (voice-over): Record gas prices for three weeks straight, mostly because of oil. In fact, about three-quarters of the price of a gallon of gas is determined by the price of oil, which according to at least one economist is headed higher.
JEFF RUBIN, CHIEF ECONOMIST, CIBC MARKETS: I see oil prices averaging $150 within two years. And by 2012, probably averaging well over $200. We have a forecast of about $225 a barrel, which would translate roughly into around $7 a gallon gasoline.
VELSHI: In a recent CNN Opinion Research Corporation Poll, 78 percent of Americans expect gas to hit five bucks this year, and that's forcing some changes. Ford says truck and SUV sales have stalled. It's cutting production and staff to make fewer trucks and more fuel efficient cars.
General Motors might shift workers from truck factories to car plants. Chrysler is guaranteeing gas at $2.99 if you buy certain models. And Honda is revving up production of its popular civic to meet increase demand.
Rubin says high gas prices affect more than just what people drive.
RUBIN: For example, where people live. Because people aren't going to be able to commute 50 miles to work every day, because the cost of filling your tank is going to make that prohibitively expensive. So property values in the suburbs will start to fall. Property values in the cities will start to rise.
VELSHI: Author and economist Stephen Leeb says this puts suburbanites in a position to lead the change.
STEPHEN LEEB, AUTHOR, THE OIL AUTHOR: There's no doubt that people living in suburbia are suffering more. But those are the people that will say, we've got to do something about this. The auto companies have to retool. They have to supply us with plug-in hybrids and things like this. I mean, we can do this, that's the whole point.
VELSHI: Leeb says attitudes are already shifting but only because oil prices are so high.
LEEB: But I feel the first correction in oil down to 100, 110, people will say -- oh, gasoline came down to $3.80. We don't have to worry anymore. Well, you really do. And this is a long-term problem that absolutely will threaten our way of life.
VELSHI: And Rick, that is the big deal. If people really don't think that gas prices are going down again, they are going to have to change. We're all going to have to change the way we get to work, how we live, what we do. And we have heard so many stories from Americans about the habits that they have changed in order to try and save gas.
Saving all your errands for one day a week, car-pooling, using public trans, and buying a bicycle. Trading in your car for a smaller car. And we know that when the national average is $4 a gallon, that is another milestone that people are going to use to make different decisions.
SANCHEZ: And going back to this investigation, Ali, I got to tell you something. Americans are angry. They are fed up. Probably as angry about this as they have been about anything in a long time.
So if at some point -- and I know you don't have them yet -- but if at some point names are named on this thing, this can be the kind of issue that can rile up Americans so much, it can be a turner as far as the election goes. Don't you agree?
VELSHI: Nothing touches us the way this does. Because it affects everything we do. And remember, Rick, we're talking about the price of oil. We see the price of gas every day. But every truck across this country brings food, or things to the stores, runs on diesel. Every farm has equipment that runs on fuel. Every refrigerator, every storage house, every warehouse, every manufacturing plant, every house that has to be heated. This is not just about your gas. This is everything we do.
SANCHEZ: Thanks, Ali. Here is one for you. Can you use the Internet to find out where gas prices are cheap? We sent Allan Chernoff to find out. And he says -- not really.
ALLAN CHERNOFF, CNN CORRESPONDENT, (voice over): Riding into Brooklyn with the tank near empty, hoping to use the Internet to save a few bucks on a fill-up.
(on camera): The zip code here is 11217. Let's punch that in and find some cheep gas.
(voice-over): Automotive.com promoted itself to CNN. So we're checking it first. But the repeated response on the web site, data is not available. So we begin with a printout from automotive.com, just a half hour old.
(on camera): Automotive.com says the price here is $4.19 a gallon. But the actual price? It's $4.29.
When was the last time you were charging $4.19 here?
UNIDENTIFIED MALE: Oh, it was two weeks ago.
CHERNOFF: Two weeks ago.
UNIDENTIFIED MALE: Yes.
CHERNOFF (voice-over): Now the website is providing prices online.
(on camera): Automotive.com says the price at this Shell station is $4.25. But the actual price is $4.19 for regular. Six cents cheaper than what the web site says.
(voice-over): Next, Automotive.com directs us to a Mobil station on Third Avenue. It turns out, though, there's no Mobil station here. It's a Citgo.
(on camera): It says you're a Mobil station.
UNIDENTIFIED MALE: I'm not Mobil.
CHERNOFF: Have you ever been Mobil?
UNIDENTIFIED MALE: No. Just since we started here, Citgo. And it's been Citgo always. It's been here more than 10 years. More than 10 years.
CHERNOFF: For premium, what are you charging?
UNIDENTIFIED MALE: For premium, I charge $4.42.
CHERNOFF: Wow. It says $4.32.
UNIDENTIFIED MALE: $4.42.
CHERNOFF (voice-over): Only one of the five stations we checked on automotive.com was entirely accurate. The website says the prices come from credit card transactions, but concedes its data provider, which it would not name, is not always timely.
JAMES BELL, AUTOMOTIVE.COM: There may be four or five to seven days before a dealer -- sorry, a gas station can upload us with the new information that then goes into that vendor and then is supplied to automotive.com.
CHERNOFF: There are at least a half dozen websites claiming to find cheap gas. MapQuest gas prices shows stations in New Jersey when we plug in our Brooklyn zip code. Gasbuddy.com, which relies on spotters who report prices, did a better job. This price was accurate. But at this Sunoco, the price quoted online was six hours old.
With gas stations changing prices so quickly, sometimes several times a day, it's almost impossible for the cheap gas web sites to keep up, even when they're getting reliable prices.
(on camera): We came to this Mobil because GasBuddy said the price was only $4.05. But by the time we got here, $4.09. What are you going to do? Fill it up and keep on paying.
Allan Chernoff, CNN, Brooklyn, New York.
SANCHEZ: What can you do? Well, here's what we are going to do. We're going to read the very latest on this federal investigation, the price manipulation of your gas money.
Also, hypermiling. What is that? And how is it going to be able to save you money. We're going to tell you. Also, what vehicle is everybody trying to get rid of and nobody seems to want. We're going to take you to the dealership and see what's happening with SUVs. Hang tight. We'll be right back.
SANCHEZ: And we welcome you back to this "ISSUE #1" special. I'm Rick Sanchez. I want to introduce you now to a guy who takes being miserly to an entirely new level. Miles O'Brien.
No, it's not Miles O'Brien who is miser -- well, although some might argue that it's a guy that Miles has done a story on that he wants you to meet.
Miles, who is this guy?
MILES O'BRIEN, CNN CHIEF TECHNOLOGY AND ENVIRONMENT CORRESPONDENT: Well, you know, you can start calling me Hyper Miles from now on, Rick Sanchez. You know, take a look at the people in this traffic here. If I were to stop and talk to them and I said to them -- Rick, would you like to double your mileage, what would you say?
O'BRIEN: Of course. The question is how do you do it? To do it, you've got to be pretty darned obsessed. And I met a guy who takes his obsession to the ends degree.
O'BRIEN (voice-over): Wayne Gerdes may look like he's out of gas. But actually he's just kind of hyper about saving every drop he can. And I mean hyper.
WAYNE GERDES, HYPERMILER: We're in neutral (INAUDIBLE), starts was going --
O'BRIEN: Wait. You just went -- that was like immediately into drive.
GERDES: Right. There's no point wasting any fuel.
O'BRIEN: Wayne is the reigning king of the gas mileage misers known as hypermilers. A ride with him is a real eye-opener, not to mention a filling loosener.
GERDES: On your camera --
O'BRIEN: Yes. No, hold on. I'm going to hold on.
That's what happens when you take a turn without touching the brake pedal. Wayne avoids it like, well, gas stations. He routinely gets 50 miles per gallon in his plain old Accord, twice what Honda promises.
GERDES: And I'm already going to shut it down. This is an advance technique.
O'BRIEN: He kills the engine whenever he can. Never tail gates but does draft behind big trucks. He always drives the speed limit and plans trips as if they were the D-day invasion.
So it forces you to think entirely differently about how you drive.
GERDES: Yes. I'm thinking that like three lights ahead in a suburban traffic area. And now I'm going to use the (INAUDIBLE) drive.
O'BRIEN: In Wayne's world, angry tailgaters are proctologists.
GERDES: Guys that ride in your butt.
O'BRIEN: And when you pass them --
GERDES: They're the mad, rather.
O'BRIEN: And big SUVs are FSPs as in --
GERDES: Fuel sucking pig.
O'BRIEN: I almost didn't have the heart to tell him about my Yukon XL. But when he came to New York the other day, he held his nose and plugged in a gadget that displays fuel economy and we were off like a heard of turtles for hypermiling 101. GERDES: Easy back off a little bit. No sense of race. Shift to first. We're going to really slow enough to first. I want your foot on the brake and I want you to shut off the car at 1100 rpm. And you're working your butt off right now.
O'BRIEN: Hard work in it.
Using his techniques, I instantly curtailed my FSPs thirst for unleaded by 30 percent, but still a long way from 50 miles a gallon.
GERDES: This vehicle just isn't meant for downtown.
O'BRIEN: You think?
GERDES: That's why I have to watch my own speed on this.
O'BRIEN: Wayne started doing this after 9/11 made him reconsider our dependency on foreign oil. He runs a website with tips. And with gas where it is now, he has a growing, all be it slow moving, following. He sure made me a believer.
OK, call me Hyper Miles.
In fact, you might say I'm pushing the concept.
O'BRIEN: So Rick, the deal is this. It's not just the driving technique; it's how you set up your car. You have to inflate your tires to the maximum. You have to make sure the oil filters. All the filters have changed out. And you have to use low viscosity oil which actually helps the engine work a little better.
And one other thing, every hypermiler (INAUDIBLE) has one of these scan gauge. And it plugs into the do hotkey (ph) that the mechanic uses in the garage to find out what's going on with your car. And it will show you -- this is $150 for this thing -- you know, show you instantly, your mileage and everything else about your engine.
A lot of things that probably you don't want to know or need to know and as you drive along you'll know how you're doing. So get the scan gauge and get started and see how you do.
SANCHEZ: I got to ask you something because as I was watching, especially that one part where he turned the ignition off, is this dangerous some of the things that he's doing.
O'BRIEN: Well, you know, as he put it, that's an advanced technique, not for the faint of heart. He goes the speed limit. And sometimes, frankly, that can be dangerous, because nobody goes the speed limit.
But he says -- hey, I'm the one that's following the law. The other people are breaking. As far as turning off the car, save that for your advanced hypermiling stages. A lot of things you can do sort of turning off the car every now and then to save gas. SANCHEZ: That's it. That's a great report, though. I mean, what interesting stuff. I mean, something a lot of people wouldn't have thought of.
O'BRIEN: One thing that I did know, in a fuel injected car, every time you stop at a stoplight, you should turn it off. The break point between turning it off and turning it on is only ten seconds. It used to be on carburetor cars. You'd rather keep it running for a couple of minutes if it's more efficient than turning it off. Not the case with fuel injected cars. Turn it off.
SANCHEZ: We're going to get into that now because what I always do, is I put mine in neutral. But I'm going to let you go. We're going to bring in another expert who's probably almost as smart as you are, to talk about something like this. There's a lot more information out there about saving gas.
And by the way, you know, some of the information you get in some of these websites is dead wrong. So don't rely on it unless you talk to an expert. You know, things like tire pressure. Should you have your radio on and off? Should your windows be up or down? Should you put your car in neutral as I have been prone to do? What's right and what's wrong. Interesting questions nowadays, aren't they?
Rik Paul is joining us now. He's the automotive editor of "Consumer Reports." And he's good enough to be here with us to talk about some of these things.
What are some of the biggest myths out there that some people think -- oh, you know, by doing this everyday I'm saving myself a ton on gas when they really aren't saving themselves a heck of a lot, Rik.
RIK PAUL, CONSUMER REPORTS: Well, one thing people say is to buy your gas in the morning rather than the afternoon because it's cooler in the morning than the afternoon. And this is based on the fact that gasoline, like a lot of liquids, all liquids, will expand with heat. And therefore if you're filling up in a warm afternoon, you're getting fewer molecules per gallon of gas.
But in our test, we find that there's very little difference from the gas actually coming out of the nozzle. And this is because the gas storage tanks at gas stations are stored underground. And the temperature variation underground is a lot less than aboveground, so you're not going to see a big difference.
SANCHEZ: Let me ask you what about air conditioner. How much does the air conditioner use up gasoline and how much better would it be if you just had your windows rolled down?
PAUL: That's kind of a wash on highway. We've measured that. Air conditioning would take about a mile per gallon off your fuel economy in both city and highway driving. But putting the window down would also take about a mile per gallon off your fuel economy, because it disrupts the aerodynamics.
So we say if you need your air conditioning, go ahead and use it because air conditioning makes a driver more comfortable, more alert, more focused and that's a safer driver.
SANCHEZ: Probably less drag as well, because the car would certainly be more aerodynamic.
How about the air filters themselves? I know, people have a tendency to let that thing get real dirty, right?
PAUL: Well, certainly you want to maintain your engine as well as you can because a clean engine is an efficient engine. But we found that a dirty air filter does not necessarily detract from your fuel economy. We found -- we actually inserted a dirty air filter on a Toyota Camry and Mercury Mountaineer SUV.
There was no difference in fuel economy because the modern engines have computers that automatically reduce the amount of fuel being injected with the air that's coming in. Now what we did see is a lot slower acceleration. So you're giving up performance but not necessarily fuel economy.
SANCHEZ: All right. Let's talk about the good things, then. The things that really do work. Certainly buying tires with a lower rolling resistance would be important, right? Take us from there and list us the whole thing, if you would, Rik.
PAUL: Yes, sure. Tires have different levels of rolling resistance. And that's just the energy it takes to roll it down the road. And we've seen in our tire test, there can be a one to two mile per gallon difference just in this factor. So if you're placing your tires, look for ones with a low rolling resistance rating. But also don't focus just on that, because sometimes that can sacrifice cornering and braking capability.
So look for a good all around tire with also a long rolling resistance rating. You also want to keep your tires at the recommended tire pressure. If you overfill them, you know, you're reducing your traction a bit. And that could be a safety concern because it could compromise your braking and handling. So you do want to keep it at the manufacturer's recommended inflation pressure.
SANCHEZ: Let's go ahead and cut to the back of the line here. You talk about avoiding idling. That's important.
PAUL: Well, when you're idling, you're getting zero miles per gallon. And so, you know, don't just sit and idle while you're waiting for somebody. I don't know if that would turn off -- you know, that ten seconds it turns off into a traffic.
But certainly if you're waiting in a fast-food line or some situation where you can turn it off, we say turn it off if you're going to be waiting more than 30 seconds.
SANCHEZ: All right. Between Rick Paul and the other reports that we've been filing for you. There you have some meat to put on the bone in terms of some of the things you can do to actually save yourself some money nowadays and we're all doing it.
Rik, thanks so much for the information.
SANCHEZ: All right. Coming up, new sources of oil have just been found off the coast of Latin America. Where exactly is it? How much will it affect the price of gas? And how soon? Oh, and is it enough? We'll see you on the other side.
SANCHEZ: Welcome back to 4 BUCKS, WHAT'S NEXT? I'm Rick Sanchez. I'm going to bring in our brain trust now to try and help us get a full read on what's going on in the economy and especially with the situation with the price of oil.
Peter Beutel is the president of the Cameron Hanover. He's an energy risk management firm. Neil King Jr. is an energy reporter from the "Wall Street Journal." He joins us now from our Washington studios. Ali Velshi is our go to guy here at CNN.
Thanks, gentlemen, for all of you for being with us. Let's take a shot at this situation with federal regulators looking at this price manipulation. Anybody care to take a stab or a guess at what we'll be talking about three, four, five months down the road when they actually release their findings.
PETER BEUTEL, PRESIDENT, CAMERON HANOVER: Well, you know, they are going to find something, but it certainly not going to be the smoking gun they are looking for. They are going to probably find somebody who was front running or jumping in front of orders. But they are not going to find that somebody was capable of pushing prices from a dollar to $4.
They are not going to find somebody responsible for something like that. They will probably find somebody who made a little bit of extra money on the dole.
SANCHEZ: You know, Ali, as I look at this, I know that there are people out there. And you know, you and I talked about this just a little while ago --angry people are in this country.
What do you think the reaction will be if they have a news conference, a massive one at that, covered by all types of media from all over the world and they announce that part of the reason the United States is paying so much for gas is because somebody was playing with the numbers.
VELSHI: I wouldn't want to be that somebody who is named. There is nothing that has been as far reaching. When you think of the early corporate scandals of the early 2000s it was still largely limited to people who worked for those companies or people who invested in them in terms of their stock.
There's nobody in this country, nobody in this country who is not affected by the price of oil or the price of gasoline. So if this were the case, as Peter said there's always speculation in a market, markets wouldn't exist without it. And any market this big, there are incidents of manipulation. Could they take the price of oil from $64 a barrel a year ago to $125 or more today? I don't know about that.
That's what we have to understand. There is a very, very large part of this that is, in fact, supply and demand. We are growing our use of oil faster than we are growing our availability.
SANCHEZ: Yeah, but that seems so simplistic. Could that possibly be all it is? Simply that China and India are using a whole bunch of this stuff, so suddenly the price has gone up.
VELSHI: That's the problem. That's why it's going to be hard to find the smoking gun. Because there are so many factors in the price of oil, the increase in demand, the types of places using more oil, the places we're getting oil from, how easy or difficult it is to get it. The fact some people invest in oil. They don't use the end product. They invest in it because it is a good investment and gives them a better return then something else would and it makes it attractive to them. So very hard to pinpoint where the malfeasance, where the trouble actually would be.
SANCHEZ: Neil, let me bring you into this and change the topic a little bit. Because this week we read there was this huge source, I suppose you would call it a reserve, off the coast of Brazil. What's your read on that? How big is it? And is it enough to be a savior of some sort?
NEIL KING JR., "WALL STREET JOURNAL": Well, for one, there is no savior. I think personally this is a day of reckoning for the United States. Personally all this is being driven overwhelmingly by actual fundamentals. And we're in search of all these bogeymen, OPEC, oilmen, manipulator, I think we're kind of having to deal with that as a country. On the Brazil thing, yeah, there's big pools of oil in Brazil. But it's emblematic of what we face. When you get to the floor, you are having to go through thousands of feet of salt. When you get to the oil, it's incredibly high pressure and it's incredibly hot. So you're having to deal with bringing incredibly hot, very sour, very salty oil to the surface under high pressure, it's very difficult. This just one of many examples of how finding the oil, the politics is more difficult, the spare capacity that is out there is very tight, demand is going up, particularly actually in the oil producing companies.
Everyone talks about India. India actually is almost a non-factor at the moment. The biggest increase in demand at the moment is going on in Saudi Arabia and other Gulf countries. Which means less oil is leaving the oil producing countries for the rest of the market.
SANCHEZ: And what seems so amazing about this as you look at it, you would think our government, members of Congress, the executive branch, would have been somehow in crisis mode to deal with this over the last four, five, 10 years given what's going on in the Mid-East. It seems like we're almost back stepping into this now. It seems to us, looking at it from this vantage point to be extremely frustrating. Would you gentlemen agree?
UNIDENTIFIED MALE: I would agree that it's frustrating.
VELSHI: There's a bit of an asleep at the switch here. While everybody in American has been paying more for heating oil and gasoline and food, it does seem to be that there's a bit of a lag affect. It may have something to do with the fact it's an election year. All of a sudden all of Congress is up in arms about the price of oil and needs investigation. Where were they when it was $65 a barrel, which was a lot more than it was a year before that. The price has been going up for a few years.
SANCHEZ: You know what people would say who are watching the show, they would wonder, pardon the pun, if somebody has been greased. That's why they have been silent. After all, there's a lot of money here in this topic.
Gentlemen, we've got to let it go. We'll pick this conversation up again. My thanks to all of you. Bring in Veronica Dela Cruz now. Time to talk about some of the i-Reports that you've been sharing and sending to us. What have you got?
VERONICA DELA CRUZ, CNN CORRESPONDENT: People are frustrated, angry, like you've been saying. And they have been sounding off from coast- to-coast about these skyrocketing gas prices. We have been checking out prices across the country. We have seen everything from $4.09 in Connecticut to $4.59 in Los Angeles, California. And Rick, check this out, $5.16 a gallon in Death Valley, California.
SANCHEZ: That's not diesel, right?
DELA CRUZ: $5.16 regular unleaded. This is from our i-Reporter Vivek Joglekar. I think that is the highest I've ever seen, $5.16. And in State College, Pennsylvania, Rick, Ronda Reid, she paid $70 to fill her tank, $3.95 a gallon. She says that she quit her impulse shopping, the cost of her groceries, they have skyrocketed. People are angry. What are they doing about it? What are the alternatives.
James Stallings of Jonesboro, Arkansas says, "I put about $2.00 worth of gas in a scooter, put about $60 worth in the basket. That's about two days worth, Rick, for his family, a family of three, he gets about 100 miles to the gallon, he uses the scooter on a daily basis. He's on a fixed income. He's disabled. He doesn't have any other choice.
SANCHEZ: Good for him.
DELA CRUZ: Richard Martinez, this is Richard Martinez in Delaware. He ditched his SUV for a smart car. Now he calls -- he says he enjoys commuting, probably the best part of his day. Also a couple of three wheel scooters. Now he calls this his fun fleet and he says he actually enjoys commuting. This is probably the best part of his day.
And then check this out, J.D. Walker drives 40 miles to and from work every day. And what is this, a weather proof bubble bike. A bubble bike, it looks kind of like a space ship. He says the windshield is actually bulletproof.
SANCHEZ: Really? Kind of a Popemobile, but on wheels, you do your own navigating, I suppose. Wow.
DELA CRUZ: So the bottom line, these probably are not realistic options for most people. So Bret Burns in Gulf Shores, Alabama, he decided to take his frustration out. He decided to sing all about it.
DELA CRUZ: Pain at the pump, my wallet is in a slump. There is a little bit of humor. For the most part people are angry, they are frustrated, and they are scared because they don't see an end in sight. And the bottom line is, Rick, these prices are continue to go up, but it's not like paychecks are increasing along with it, you know?
SANCHEZ: What's interesting, you get people out there who are upset, America is divided as red and blue, Republican, liberal, conservative. On this issue, everybody is in the same boat. Everybody is expressing the same amount of frustration. Thanks so much. That's good stuff.
Coming up, Ali Velshi and Gerri Willis are going to join me. Here is an option they might be talking about. Why take coal -- or why not take coal, I should say, and convert it into gas. This is already happening and many argue it's working very well. Then there's the environmental concern. We'll tell you what that is.
Also, what would another hurricane like Katrina do to gas prices? It's a scary prospect. We'll be right back.
TOM FOREMAN, CNN CORRESPONDENT: I'm Tom Foreman in Washington, DC where a meeting of the Democratic National Committee's Rules and Bylaws Committee has finally settled that thorny issue of what to do about the vote in Florida and Michigan. It was a passionate and contentious meeting. As you may recall, all the delegates from those states were suspended, were counted out of the voting basically at the convention, for picking a president after they moved the convention -- their primaries up too early. Today, however, it was voted to reinstate essentially half the delegates from both states, widely seen as a victory for Barack Obama, because it will make it much harder for Hillary Clinton to close the gap at all in terms of her delegates. Many of the Clinton supporters left here angry, vowing they will carry the fight all the way to Denver, where the national convention will be held later on this summer.
In other political news, Barack Obama is breaking with Trinity Church, the church where he had associations with the pastor that caused him so much trouble early on, and where recently a Catholic priest said some things about Hillary Clinton that many people found offensive. He said he carefully considered the decision with his wife Michelle. But they decided they did have to part ways with the church. Take a listen.
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: Michelle and I told Reverend Otis Moss that we were with drawing as members of Trinity. It was a decision that Michelle and I have discussed for quite sometime after the National Press Club episode. I had discussed it with Reverend Moss. We had prayed on it. We have consulted with a number of friends and family members, who are also connected to the church.
And so this is not a decision I come to lightly. And frankly, it's one that I make with some sadness.
(END VIDEO CLIP)
FOREMAN: Really quite an amazing day in American politics. We will have all the details here on CNN coming up in the 10:00 Eastern hour. Make sure you are there. Right now "Four Bucks, What's Next?" will continue in just a moment. I'm Tom Foreman in Washington.
SANCHEZ: We welcome you back, I'm Rick Sanchez. Can you take coal and somehow convert it to gasoline? Sounds crazy, doesn't it? Well, here is Ali Velshi.
VELSHI (voice-over): The airport is on a mission.
ASST. SEC. BILL ANDERSON, U.S. AIR FORCE: We are testing multiple aircraft within the Air Force aviation inventory on a blended fuel that includes a 50 percent portion of normal jet aviation fuel made from petroleum and a 50 percent blend of synthetic fuel.
VELSHI: So far the U.S. Air Force has certified the B-52 to fly on a synthetic fuel blend made from natural gas. But they say they hope to use coal in the future. Performance-wise, they say there's been no downside. In fact, the synthetic fuel burns cleaner. The United States has the world's largest known coal reserves. More than a quarter of a trillion short tons. That's 545 trillion pounds.
ANDERSON: You look at available in the ground resources that this country has, we are considered, based on the amount of coal that's in the ground, to be the Saudi Arabia of coal.
VELSHI: And Montana has the country's largest reserves of coal. The Air Force is prepared to lease out 700 acres of Malstrom Air Force Base to anyone qualified and willing to build and operate a plant to make jet fuel out of coal. The price tag, though, could be a billion dollars. Ultimately the Air Force hopes the coal to fuel model crosses over into the commercial aviation industry.
SANCHEZ: Hmm. Ali joins us once again live. What's the real danger? Is there any kind of downside to this thing? VELSHI (on camera): Yeah. There's two down sides. One is coal, while the fuel that comes from it might burn more cleanly, it's dirty to process into that fuel, so that's the environmental concern.
The other one is hey, listen, remember what happened to ethanol, we decided we were going to take corn and make it into fuel. It's the same thing with coal, half the country's electricity is generated by plants that use coal. If all of the sudden coal becomes popular for something else, that starts to become a demand on coal, the price of coal goes up, the price of your electricity bill goes up. But at $4.00 a gallon for gasoline, everything has to be on the table. We have to look at all the answers in front of us.
SANCHEZ: Yeah, it's about time.
Ali Velshi, thanks so much to you. In just a little bit.
Hurricane season official starts with weekend and a big storm like Katrina could have a huge impact on oil and gas prices. Whether experts are saying this is likely to be an above normal season. They are predicting 16 named storms. As many as five of those could be major hurricanes.
Could they make prices go even higher, perhaps even prohibitively high? Here's CNN's Sean Callebs.
SEAN CALLEBS, CNN CORRESPONDENT (voice-over): Port Fourchon is perhaps the most vital yet vulnerable link in our nation's energy supply that you have never heard of. A bustling hub far down on Louisiana's coast that supports the offshore oil industry. Nearly 20 percent of all the oil used in the United States, one-fifth of our gasoline supply, depends on this port being up and running.
TED FALGOUT, PORT FOURCHON EXECUTIVE: Whether it be the farmer in Idaho or the cattleman in Montana, they certainly require energy. And this facility is key to a huge amount of this country's energy supply.
CALLEBS: In 2005 Hurricanes Katrina and Rita hammered this port. Widespread flooding led to a massive shutdown and an instant spike in fuel prices. And so critically important to the economy that National Guard troops were summoned to protect the area.
DAVIE BREAUX, GREATER LAFORCHE PORT COMMISSION: The hardest thing was clearing the debris off the roadway, because the road gets taken over by water and debris builds up on the roadway.
CALLEBS: Now that we're in the hurricane season once again, it's time for the Port Authority to hold its breath. You think you're paying a lot for gas now.
FALGOUT: If this port is rendered inoperable, we will see a huge inefficiency in our ability to bring in oil and gas.
CALLEBS: Another Katrina or Rita could instantly raise prices at the pump 10 to 15 percent according to Fourchon officials. The weakest link along the coast, a 17 mile stretch of highway that cuts through marshlands to the port, 1,200 trucks a day rumble through here carting supplies to the 15,000 offshore workers in the Gulf.
(on camera): Are there nights that it keeps you awake worrying if this happens, boy, people don't realize how punishing it's going to be to the economy.
FALGOUT: What I think scares me the most is the ounce of prevention and the pound of cure thing.
CALLEBS: Fourchon is now getting an elevated highway but won't be complete until 2011. But even that will only cover a portion of the 17 mile stretch. Port Fourchon are begging the federal government to step in and help. Everyone here remembers what happened a couple of hours to the north.
FALGOUT: We professed that the levees in New Orleans and other areas needed to be done and we did nothing until the catastrophe hit. Then we pay 10 times more to get it fixed. I see this happening here.
CALLEBS: And when you're below sea level, it's amazing how shallow the words "I told you so" can sound. Sean Callebs, CNN, Port Fourchon, Louisiana.
SANCHEZ: And then there is this other story. Anyone want an SUV? I could probably get you one cheap. So could tens of thousands of other sellers out there. As prices go up, resale values plummet. A whole new kind of sticker shock. Next.
SANCHEZ: We welcome you back to our special "Four Bucks" as in for a gallon of gas. What's it doing to people who own SUVs? Can you say, sell? Who is buying, though? Here is CNN's Chris Lawrence.
CHRIS LAWRENCE, CNN CORRESPONDENT (voice-over): It's been weeks since David Lavi put his truck on the market.
DAVID LAVI, TRYING TO SELL TRUCK: Nobody has offered what I want.
LAWRENCE: He wants out so he can buy a small car. But gas prices have sent SUV and truck sales plummeting.
LAVI: I get a lot of calls, people looking for a better price.
LAWRENCE: So what's flying off the lot now?
JORGE FERNANDEZ, WHOLESALE AUTO DEALER: Chevy Impalas, Malibus, Fords, cars that weren't that popular before.
LAWRENCE: Call it revenge of the nerds. Remember this, last year the government adopted a new mileage formula to correct the exaggerated claims made when those old economy cars were first sold. Still, that hasn't stopped the run on four cylinder cars.
(on camera): What do people say when they bring in SUVs like this excursion and say, hey, this is what my truck is worth?
FERNANDEZ: When they find out what you think their truck is worth, they think you're trying to rip them off.
Some '07s were worth 50, 60,000 just three months ago and they are in the high 30s now. It's just, it's amazing.
LAWRENCE (voice-over): Some owners now owe $20,000 on a truck that's only worked 12. They are as upside down as a bad mortgage and think buying a smaller car will save them.
CHUCK NERAD, KELLEY BLUE BOOK: But what they might be doing is spending thousands of dollars to save hundreds.
LAWRENCE: Kelley Blue Book editor Chuck Nerad says if the numbers are working against you, don't sell your big truck.
NERAD: If you are making a trade, you most often are going to spend more to make the move than sucking it up and paying gas prices.
LAWRENCE (on camera):: Some officials at Kelley Blue Book say we've reached a tipping point in the day of SUVs and trucks dominating the market. That's done.
Chris Lawrence, CNN, Los Angeles.
SANCHEZ: Isn't that crazy, from 50,000 to 30,000. Times are tough in the SUV market. If you're looking to unload your gas guzzler, personal finance editor Gerri Willis is here to let you know. Gerri, what do you do if you've got one of these things and don't want it or can't afford it anymore?
WILLIS: Rick, I have to tell you, you're between a rock and a hard place. For most folks, most folks, I've run the numbers, get this, it makes no financial sense to sell your SUV and buy another car. Think about it. You've got to pay for the other car. Even though gas prices are high, they aren't that high. Let's talk about that, something you can all understand. If you can double your miles per gallon rating, the mpg rating, you stand a good chance making financial sense of buying a new car. But so many folks are in a situation where they are under water on their loan. They owe more on the car than it's worth. That means they have to put money up when they trade it in. It doesn't make a lot of sense for so many folks out there.
And like Chris Lawrence points out, it's a very good package he just had. Reality is dealers don't want these cars. KBB, Kelley Blue Book said on average SUVs have lost 10 percent of their value over the last year. You know how much money you lose when you just drive that car off the lot the first time. Think about it now.
SANCHEZ: What about somebody who is dead set, I want to get that Prius, I'm going to get a hybrid. I'm going to sell this thing no matter what.
WILLIS: Look. If you drive a lot in your job, maybe you're a salesperson on the road all the time, it may make sense. You put so much gas into your car. OK. I buy that. Go out and buy a hybrid. But do your homework. Know exactly what the first car, the car you're trading in is worth. Go to KBB and understand that. Go to some great Web sites and find out what you can get for your car. Go to autotrader.com. This is a place you can sell it, the SUV, unload it, without having to buy a new one. Go to carmax.com, another good website. Autotrader.com. You really have to do your homework.
But the good news is there's a lot of things on the Web to help people who want to sell.
SANCHEZ: Gerri Willis, always great advice. Thanks so much. We appreciate it.
WILLIS: My pleasure.
SANCHEZ: When we come back, we're going to answer the age old question, the high prices of gas. Are they going to stabilize? Are they going to drop? Or are they going to continue to go up? Stay with us.
SANCHEZ: Welcome back. I'm Rick Sanchez. A couple of final thoughts before we wrap this puppy up.
Let's bring in Gerri Willis once again and Ali Velshi. I do want to get to whether the price of gas is going to be stabilizing, going up or going down. But before we get to that, I want to ask each of you what you think was the biggest news hit of the week when it comes to fuel? Do you think it was this report out that we just heard that said they are going to be investigating price manipulation?
VELSHI: Yeah. I think that's a really big deal. I don't understand why the federal government hasn't been investigating this the whole time. Apparently they have been investigating for six months. But absolutely, Rick. Americans are so frustrated. But it's not just because of the price. Because they have no idea why this is happening, why it's going up quickly.
WILLIS: This is part of the problem with the regulatory environment we've had for a while now.
We have a lot of problems consumers are facing. Not just high gas prices. For goodness sakes it's also what happened in the housing market. Regulators were absent there as well. It's a continuation I think of the problem.
SANCHEZ: You mentioned that a little while ago, Gerri. I was thinking when I was watching Chris Lawrence's piece. Imagine somebody with a house they can't sell. Because essentially their mortgage got upside down there. Then they have an SUV or a couple of them, and they are upside down on those as well.
VELSHI: And they drive 30 miles to work, they have a family they have to drive around. This is hitting you across the board.
WILLIS: We get e-mails like this all the time from people who have lost their house, lost their job. The car is the least of it, I've got to tell you. They are defaulting on their credit cards. They're in big trouble. A lot of folks are in big trouble out there. I've got to tell you, as much as I like this coal to gas idea, a lot of these solutions aren't going to happen overnight. People are going to have to solve these problems on their own. They have to come up with their own solutions.
SANCHEZ: That's what I was going to ask you now, 30 seconds left Christian is telling me. Up or down guys, see any hope on the horizon cost of gas is going down, stabilize or going up?
VELSHI: Gas prices going down? I don't see it for a while.
SANCHEZ: Up. Gerri?
VELSHI: I think we're going to see these prices go up for a little while still.
WILLIS: I think they could. But I've got to tell you. Summertime they go up. I think we will see relief but only later in the year. It's anybody's guess. It will be interesting to see what happens with this investigation.
SANCHEZ: We've got to let you go. We're out of time. Great stuff. Appreciate having you guys with us.
We'd be remiss not to give you friendly ISSUE #1 reminder as well. Smart money is on Gerri Willis and Ali Velshi, weekdays at noon eastern. Right here on CNN, the most trusted name in news.
And as for one of the most highly watched and rated shows on CNN every Saturday and Sunday night at 10:00 p.m. Eastern, that's where you'll catch me. I'm Rick Sanchez. See you then.