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CNN Larry King Live

Gas Crisis

Aired June 30, 2008 - 21:00   ET

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

LARRY KING, CNN ANCHOR: Tonight, crisis. Gas today reaches historic highs. Out of control prices have a death grip on millions, putting the squeeze on consumers, threatening the American way of life, forcing decisions no one should have to make. Eating or filling the tank? We'll take tough questions to the head of an oil super giant and demand answers as struggle and sacrifice consume the country. Pain and panic at the pump, next on LARRY KING LIVE.
Good evening. The national average for a gallon of gas is $4.09, with consumers in 33 states paying that or more. Gas prices have risen almost 3 percent in the last month, almost 38 percent higher than a year ago. Oil prices passed a record $143 a barrel for a time today. We'll go live to gas stations all across the country tonight.

But first, we begin with a return visit with David O'Reilly, he is chairman and CEO of Chevron, we thank you for coming, David.

DAVID O'REILLY, CHAIRMAN, CEO, CHEVRON: Thanks, Larry, nice to be with you.

KING: What's going on, oil and gas prices all time highs, your company making billions in profits, explain.

O'REILLY: Well let me talk about oil prices first, because they affect gasoline prices. Since last year, oil prices have doubled from about $70 a barrel to $140 a barrel, as you just pointed out. That means oil has gone from $1.60 a gallon to $3.30 a gallon. So $3.30 a gallon is the price of crude oil in that gallon of gasoline.

KING: That's what you pay?

O'REILLY: That's what somebody will pay for that crude that they buy to refine. So when you add 50 to 70 cents per gallon for taxes, in California, it's over 70 cents, you're up to $4 a gallon, you haven't paid to refine it yet. You haven't paid to transport it to the gas station or to market it to the gas station yet. So it's no surprise that we're at that $4 plus --

KING: So where did the billions of profit come from?

O'REILLY: Well, 75 percent of our profit is made outside the United States, 25 percent in the United States. Now we do make profits on our crude oil production and our natural gas production.

Let me tell you a little of why crude oil is so high today. If you look at over the last decade or so, we've had plenty of crude oil supplied globally for the world, but demand has continued to grow. And over the last few years as demand has grown, particularly in the developing world - in fact, in the developed world, gas demand has not grown very fast at all in the last few years. Most of the growth has been in the developed world. As hundreds of millions of people have striven for higher quality of life like we have here, that's what's driving up the demand.

KING: Nobody's to blame?

O'REILLY: No, I think we're seeing the consequences of a large growth in demand globally because of the global economic benefits that are being moved to people around the world.

KING: Does the margin or the percentage of profit remain the same no matter what the price is?

O'REILLY: Well our profits have been actually as a company have been relatively flat, in terms of percent per revenue. It's about 7 percent on the base as a profit margin, 7 percent profit margin, which is very close to the industry average. Now you've got to keep in mind that the numbers are very big. We made $18 billion of profit last year but we're investing $23 billion of money this year in new supplies.

KING: So there is no, for want of a better term, Dave, guilt?

O'REILLY: Well I think if there's guilt, the guilt is that we should look in the mirrors and ask ourselves have we been too complacent about energy.

KING: We meaning all us of?

O'REILLY: We meaning all of us. Do we really have a good long- term energy policy? And I think as I mentioned a couple years ago, now is the time for that to be. This is becoming acute. We have been able to take our oil and import it from the rest of the world for decades. But with the growth and demand in the rest of the world as the economies of the rest of the world are growing, we can't count on that forever.

KING: Got an e-mail question from Peter in Westlake Village, California. "People are taking what used to be disposable income and putting it in their gas tank. Do you feel you, the oil companies should take personal responsibility for the state of the economy? If so, what do you plan to do about it?"

O'REILLY: Well I think - first of all, I certainly emphasize with people because prices have gone up for gasoline, no question about it. But I think we all have to take responsibility for where we stand today. We have been too cavalier about our use of energy, and I think being more efficient in how we use energy and working on the supply side to bring new energy supplies to the market are pretty important.

KING: All right, American oil detainees own and have owned, as I understand it, millions of acres of oil leases both on shore and off, as well. Why haven't you drilled?

O'REILLY: Well, I've heard this story and this is the biggest red herring that I have heard in quite some time. Let me explain. Let me give you an example with Chevron.

We have 2,100 federal leases today, 1,400 of them are producing today. There are hundreds more that are in the act of being developed. We are actually spending billions of dollars building equipment, wells, producing facilities, pumps, putting them on top of those leases to produce.

Those are counted as undeveloped even though billions of dollars are being spent to actually produce the oil which will be coming on-screen over the next few years. There are also unfortunately some of those leases that are dry. Not every lease has oil and gas on it. We have success and we have failure. When we have failure, we turn it back to the government.

We have given 400 leases back to the government for them to decide what to do with it because we couldn't find any oil. We couldn't develop them. So this idea that we're sitting on a whole bunch of leases is flawed. And I would encourage the Congress, frankly, I'm so upset at this. They ought to call us into Congress, let us give them the facts, and I'm confident that when they see the facts that this will be refuted.

KING: Are you saying you're getting a bum rap?

O'REILLY: On this one, we certainly are.

KING: Senator Obama wants a windfall profits tax on bill oil to give a break to the consumer. Let's watch.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: I believe it is time for a president who will take on the big oil and gas companies so we can finally meet our energy challenges. I'll make oil companies like Exxon pay a tax on their windfall profits and will use the money to help families pay for their skyrocketing energy costs and other bills.

(END VIDEO CLIP)

KING: David?

O'REILLY: A bad idea. We tried before. We had windfall profit taxes 25 years ago and Congress even studied the impact of those taxes at the time. They found that domestic oil production declined more rapidly during that period and we became even more dependent on imported oil. These are the same people that are calling for more independence. This will make us more dependent.

KING: Will we ever see cheap gas again? We'll talk about that. We'll visit gas stations live all over the country. Lots of other guests joining us and Dave is going to stay with us, too. Don't go away.

(COMMERCIAL BREAK)

KING: We're with David O'Reilly, the chairman and CEO of Chevron. Let's go to a gas station here in Los Angeles. A consumer stands by. His name is Mark. Mark, can you hear me all right?

MARK, LOS ANGELES: I hear you, Larry.

KING: What's the price of gas where you're at?

MARK: $4.79.

KING: Do you have a question for Mr. O'Reilly, chairman of Chevron?

MARK: Well, OK, sure, they talk a lot about personal responsibility, and I am very responsible. Other than cleaning on the inside of my car, I always keep air in my tires, you know, well maintained. It's a good running car, and yet I am a piano tuner. I make about $100, $110 for a job, takes me about an hour and a half. And it costs that much to fill up my tank, at least.

KING: So your question is what, why?

MARK: Well other than personal responsibility, what more can I do except for raise my prices?

KING: That's a good question. Let's get an answer. I got you.

O'REILLY: Well first of all, I complement him for airing the tires and also driving conservatively. You can save 10 percent on your gasoline consumption just by driving at speeds, not over accelerating and doing the things that he's doing.

KING: But does he have to charge more?

O'REILLY: Well, I have an idea for him. We have an election coming up. I think that the issue of energy is key in this election, obviously, it should be. And what I would suggest he does is demand a policy from each candidate. Compare those policies and then vote for the one that he thinks will help bring that gasoline price down. That's what he needs to do.

KING: Can a candidate do that? Of your explanation, how can he do it?

O'REILLY: Well, I think with a long-term focus. Because we got into this scene over a long period of time. I think with a long-term focus and some patience, we can bring our energy system into better balance.

KING: You favor the offshore drilling?

O'REILLY: I do because it can be done safely. It's being done safely in the U.K., Norway, Netherlands. Unfortunately, it will take some time. But, the reality is it can be done. It's urgent enough that if we don't start today, my kids and my grandkids will suffer because of it.

KING: We have an e-mail question from Robyn in Rindge, New Hampshire. "I'm terrified to think what my financial situation is going to be six months down the line if gas keeps going up and we're going to be desperate soon. With the crisis going on right now, how can you justify not putting more of your profits into lowering the price?" In other words, take less.

O'REILLY: Well, if you lower the price, you send the wrong signal to the market. The incentive to invest is there when the price is high. And I think it's very important that market signal be there so that it attracts the right investment.

I think I mentioned earlier, we're investing more than we earn as an industry and as a company to bring new supplies to the market. Let me give you an example. This year, we're bringing on a new production facility in the deep water Gulf of Mexico in thousands of feet of water. We discover the oil in 2001, we've been developing it, appraising it, engineering and constructing it and a billion and a half dollars later, that platform will come onstream this year. It will produce 60,000 barrels a day of oil. That's a billion and a half dollars for 60,000 barrels of oil. So the investment, the money is going back into investing for new supplies.

KING: Would you be happy if everybody in America bought a low engine car that don't run on much gas?

O'REILLY: Well I think the market is already seeing that happen. If you look at what's happening, the SUV sales are declining. It looks like smaller cars are making a comeback.

KING: Do you like that?

O'REILLY: I think it's essential that people start doing that because I am concerned about ability to supply long-term.

KING: What about drilling at the North Pole? Cheaper to drill there?

O'REILLY: Drilling up in Alaska, or the North Pole, it's very expensive to drill there because it's more icy and harder to get at. But it can be done safely as well.

KING: We're told we have no refining capacity. How will we refine the oil we're going to take out of the North Pole, aren't we?

O'REILLY: Well, nobody's really finding oil at the North Pole yet. But I do think that your question about refining capacity is a good one. We are I think investing in new refining capacity. You see more signs of it around the country as we speak, more capacity. We ourselves have expanded our refinery here in Los Angeles just last year to make more gasoline as well as our refinery in Mississippi.

KING: We have a King cam question. Let's watch. (BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Hi, Mr. Riley. My name is Ali. I have a question for you regarding the gas prices and situation that is driving everybody mad. How much you guys are making. Are you taking advantage of the situation?

(END VIDEO CLIP)

O'REILLY: Well I don't think we're taking advantage of the situation.

KING: The public perceives that. You have to admit that.

O'REILLY: Well, of course the public perceives that and that's one of the reasons that I'm right here talking to you. I really - first of all, appreciate the question. It's a very commonly asked question. The reality is that our profit margins are typical of the industry at large and we are reinvesting that money, the vast majority of that money to bring new supplies to the market. That's what we do. That's our job and that's what we're committed to do.

KING: Do you think you and other heads of the major oil companies should be doing more appearances like this?

O'REILLY: Well, I hope it makes a difference. I think we should. I think it's one thing to talk to the business community, which many of us do anyhow. But to appear on a show like yours with a broad audience, much broader audience than you typically get on many other shows, I think it's a good thing to listen to the questions and try to explain what's going on.

KING: I believe we have someone, I didn't get the name at a gas station in Washington, D.C. Grayson, are you there?

GRAYSON, WASHINGTON D.C.: Yes, sir. How are you tonight?

KING: How are you, Grayson? What's the price where you're at?

GRAYSON: Doing well. The price where I'm at is $4.19 for regular and $4.45 for premium.

KING: Do you have a question for David O'Reilly, the chairman of Chevron?

GRAYSON: Yes, sir, I do. Mr. O'Reilly, a lot of discussion has been made about increasing domestic production. I'm wondering whether you think Anwr offshore drilling or oil shell is the most viable alternative that we have for increasing domestic production in the near future?

O'REILLY: I think -- thank you for the question. I think all three of them are viable. Offshore oil and gas exploration and Alaskan oil and gas exploration are more near term in the sense that we know how to do that today. We have the technology to do that and we are doing it that way in many places in the world very safely. Oil shale, although we have plenty of it as a resource is still further off because we have still perfect the technology there. Now that work is under way in places like Colorado, where oil shale is plentiful. But that's a little further off, maybe a decade or so. But clearly, the other two are nearer term and could be done given the opportunity.

KING: Thanks, Grayson. Is gas in Iraq 40 cents a gallon?

O'REILLY: You know, I don't know.

KING: Because if it is, what refinery are they using?

O'REILLY: Well many places in the world, Larry, subsidize their gas prices. A lot of the developing world, particularly in the Middle East where they have plenty of oil, gasoline is almost free in many of these places.

KING: Double in Europe, though?

O'REILLY: Yes. They have much higher taxes in Europe.

KING: Robert F. Kennedy Jr. joins us right after the break. He doesn't see eye-to-eye with oil companies. Stay around for some pretty good viewing. You're watching LARRY KING LIVE.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: What may take some years, the fact that we are exploiting those reserves would have a psychological impact.

OBAMA: A psychological impact. In case you're wondering, in Washington speak, what that means is, it polls well.

MCCAIN: Yes, it's easy to say no to everything. That's what Senator Obama is doing.

OBAMA: Time and time again, when he has a chance, Senator McCain has opposed real solutions to the energy crisis.

(END VIDEO CLIP)

KING: We're back. Joining us now, David O'Reilly remains, chairman and CEO of Chevron. He's here in Los Angeles. And in New York, Robert F. Kennedy Jr., senior attorney, National Resource Defense Counsel.

Robert, what do you make overall of what David O'Reilly has stated so far?

ROBERT F. KENNEDY, JR. ATTORNEY: Well if the solution to this issue which he suggested is really on the demand side. It's not about drilling offshore, which even the president has said the White House energy advisory administration has said that's not even going to touch our problems. We won't get the first oil from offshore until 2020 and we'll have an insignificant impact on prices in this country. We don't even know whether it's going to be sold in this country.

First of all, even if we drilled every bit of oil on all of our public lands in Alaska, it's less than 3 percent of proven global reserves. We're using less than 25 percent of proven oil reserves in our country in our oil. So we can't drill our way out of the problem.

The issue is a demand issue. We need to change demand and we do that by changing to other sources of to wind, to solar, to geothermal, to tidal and conservation.

The fastest way for us to solve our energy problems in this country is immediate conservation. If we improve fuel economy standards in our automobiles by one mile per gallon, we generate twice the oil that's in the Arctic National Wildlife Refuge. If we raise fuel economy standards by 7.6 miles per gallon, we can yield more oil than we are currently importing from the Persian Gulf. We are borrowing.

KING: Hold it right there, Robert. David?

O'REILLY: Well, I agree, that first of all efficiency is the very first thing we ought to be working on. And there are new cafe standards in place that will obligate the automobile manufacturers to be more efficient and in fact you can see a shift already towards more efficient cars.

KING: Is he right?

O'REILLY: Well I disagree on the point of oil exploration. We've gone from 9 million barrels a day of production in this country to 5 million over the last 20 years. We are more and more dependent on that imported oil. We are going to have to use some oil in our transportation system during the next 20 or 30 years while some of this transition is taking place. It would be much better for us to develop it here at home rather than be dependant on imports that are coming extremely strained because of the demand in the rest of the world.

KING: Robert?

KENNEDY: Well, let me say this. I'm involved with a company called Better Place, which made a proposal a couple years ago to Israel to get Israel completely off of gasoline cars within three years. And Israel is going to do that. Within three years, they will be off of gasoline automobiles.

We can do that in this country, too, using shifting to electricity and electricity gives us a lot more versatility, it allows us to harness wind. We have -- the Midwest this is the Saudi Arabia of wind. We have enough harnessable wind energy in North Dakota, Kansas and Texas combined to supply all the electrical needs of our country, even if every American were driving an electric car.

We have the "Scientific American" just published a report that shows in 19 percent of the most barren desert lands in the desert southwest, we have enough solar energy to provide all the electrical needs of our country. KING: David?

KENNEDY: What we need now is a national policy that say, OK, let's go out and get those electrons and get them into the marketplace, let's have a premarket economy.

KING: Wouldn't that put you out of business, David?

O'REILLY: It won't. I'm confident it won't. But I encourage all these alternatives.

I think there's room for all of them. I'm very concerned because the reality is today that these alternatives are a very small percentage. And just like it takes a long time to drill an offshore well, it takes a long time to find and develop and put in the sort of equipment that Mr. Kennedy is talking about.

What bothers me about this is everyone portrays it as an either/or debate. It's not and either/or debate. It's an and. We need alternative and we need efficiency and we need conventional oil and gas.

KING: We've got a call from Eureka, California, hello.

CALLER: Hi Larry, thanks for taking my call. And for Bobby Jr., I think your uncle, JFK was a good president and your father was a good guy. My question is to the oil guy. How much money does his oil company make off these ridiculous gas prices and I also blame the Congress for not doing anything.

KING: What does Chevron make?

O'REILLY: Well as I mentioned earlier in the first quarter, we made $5 billion, which is 7 percent of sales and exactly the median for all of the industry.

KING: Twenty years ago, 7 percent?

O'REILLY: Yes, about 7 percent of sales.

KING: So the percentage doesn't change?

O'REILLY: The percentage has been about the same. You've got to keep in mind that as the revenues are going up, the costs are also going up. So it's not as if this is all going to the bottom line.

KING: Do you agree, Bobby, that is there some misconceptions over this? That a lot of this perception is wrong, that what seems like billions is really not billions?

KENNEDY: Well I really think that they talk windfall profit tax, whether it's good thing or it's a bad thing, it's not a long-term energy policy. What we need is really a long-term -- and drilling off the coast is not a long-term energy policy. What we need is an energy policy. Today, Larry, we are borrowing a billion dollars a day mainly from countries that don't like us to import oil from countries that don't like us.

When I was a little boy, our country owned half the wealth on the face of the earth. We are now transferring that wealth at a historic rate to other countries, again, mainly nations that don't like us. We have solutions. Unfortunately, we have a Congress that's really brain dead. I'll tell you something that the Congress did today. First of all, they killed the investment tax credits for solar and wind which are absolutely vital to the growth of this burgeoning industry.

Second of all, today, Congress and the White House declared a moratorium, a two year moratorium on any solar plants being built on federal lands while they study supposedly the environmental impact. This is an administration that is opening up --

KING: I have to get a break, Robert. You want to comment, quickly?

O'REILLY: Well first of all, I think if we are concerned about the billions of dollars going overseas, couldn't we shut some off by developing more of our oil here? Wouldn't that be a good thing? I think this idea --

KENNEDY: Can I answer that?

O'REILLY: Certainly.

KING: Do it quickly, I've got to get a break.

KENNEDY: It's 2 percent of the oil, it's 2 percent of global reserves. It's going to do nothing. If we develop those 2 percent of global reserves, all the Saudis have to do is drop their production 2 percent. We don't even know that oil is coming here. Are you going to guarantee if you get those oil leases that they're going to come to the United States?

O'REILLY: These oil leases are in the United States.

KENNEDY: I know they're here. But you're not going to sell the oil here. You don't have to sell the oil here.

O'REILLY: That's the most ridiculous.

KENNEDY: I know it's going to benefit you, but I don't see how it will benefit the people of the United States.

O'REILLY: It is going to benefit the people of the United States and it's far better to produce it here at home, where we don't have to go overseas, we don't have to send that money out of the country. It's a far better value.

KING: We have to get a break, guys. Can either of the presidential candidates do anything about the price of oil? Supporters of each make the case next. (COMMERCIAL BREAK)

KING: Have gas prices changed your summer travel plans? Go to CNN.com/LarryKing. Cast you quick vote now. Something tells me the answer is going to be yes. David O'Reilly and Robert Kennedy Jr. remain. Joining us now from Santa Fe is Governor Bill Richardson, Democrat of New Mexico and a supporter of Barack Obama, and in Washington Nancy Pfotenhauer. She is a senior adviser to Senator John McCain. I want to go to one more question from someone at the gas station. It's Danny in Los Angeles. Danny, are you there?

CALLER: Yes, I'm here. How you doing?

KING: What's the price where you are?

CALLER: The price where I am is 4.99 -- five dollars do for supreme.

KING: What's the question for the guest?

CALLER: It's ridiculous. The question is who determines the raising of the gas prices in Los Angeles? Because Los Angeles prices are much higher than they are in Missouri. I always wondered why is it a difference in the gas prices in Los Angeles?

KING: Good question. Why is there a difference? Thank you, Danny.

O'REILLY: Let me tell you why the gasoline prices here are higher than just about anywhere. First of all, California has its own gasoline. It's separate from everything else. There is less of it available. It is unique and it's more expensive to make.

Secondly, California has some of the highest taxes in the nation, has the highest gasoline taxes. We have a federal excise tax of 18 cents, a state excise tax and then we have the sales tax on top of the price, as well as the taxes. So it's high taxes.

KING: Let's go to Governor Richardson and to Nancy. First, I just asked David O'Reilly if he was supporting a candidate. He said, no, he wants to hear their energy policy. Concisely, Governor Richardson, what is Barack Obama's energy policy?

GOV. BILL RICHARDSON (D), NEW MEXICO: Well, what Senator Obama wants to do is have a comprehensive Manhattan style project that basically says by the year 2020 we're going to have dramatic reductions in fossil fuels. That means strong conservation measures, fuel efficiency at perhaps 50 miles per gallon, dramatic efforts to promote renewable energy, solar, wind, biomass and alternative fuels. Also, if we're going to drill, do it responsibly, do it in the United States.

I would say to Mr. O'Reilly, what I would like to see our major oil companies do is drill more in the United States rather than overseas, build more refining capacity and invest more in renewable fuels and renewable technology, in solar, wind and biomass. That would be a dramatic shift from current policy. I'd like to see this comprehensive. I think Senator Obama wants to be sure we have a comprehensive policy, one that also asks the American people that they have to pitch in, that they have to be more sensitive towards appliances, mass transportation, the way we live.

KING: Nancy, what is it -- Nancy -- hold it, Bill. Nancy, what is the McCain policy?

NANCY PFOTENHAUER, SR. ADVISER, MCCAIN CAMPAIGN: Senator McCain has a plan that -- I will borrow a term from Bill Richardson and say comprehensive plan. And I would distinguish it from Senator Obama's by saying that Senator McCain's plan has provisions to immediately offer some relief, but also make sure that we are increasing domestic production to help in the mid-term and we're developing alternatives in the long-term.

If I could just compare and contrast, because this is the fundamental difference, is that Senator Obama does not have a real plan for increasing domestic production. If you project out 20, 30 years, the big flaw in his proposal is that he has no part for nuclear and really not much part for clean coal technology. I don't care if you're Republican or Democrat, if you look honestly at this issue, there's no way we're going to meet our demand, if you will, even with conservation, that everyone supports, even with alternatives that everyone supports. We're not going to get where we need to be unless you've got nuclear and clean coal.

KING: I will tell you both, we will have you both back because we have a time problem tonight. I got backed up. I do want to do this. A new ad by House Democrats using a Bush impersonator tries to link incumbent Republicans to Bush on oil and gas prices. Watch.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: W here. Wanted to thank you for your support of the big oil energy agenda. Appreciate you voting to give billions in tax breaks to the big oil companies. Sure, gasoline is over four bucks a gallon and oil companies are making record profits. What's good for big oil is good for America, right? I guess that's why they call us the Grand Oil Party.

(END VIDEO CLIP)

KING: We're going to have Bill and Nancy come back. They only had a short time to answer but we're running close on time. Are you offended by that, David, by the way?

O'REILLY: Yes, I am. I think in reality -- I just don't think that's very constructive. What we ought to be doing is solving the problem and not pointing fingers at each other.

KING: Montana's governor says he's got an energy idea that could change the world. We'll tell you what it is after the break.

(COMMERCIAL BREAK) KING: We're back. Remaining, David O'Reilly and Robert F. Kennedy Jr. Joining us now in New York is John Stossel, the co-anchor of ABC's "20-20," and in Jacksonhole, Wyoming, Governor Bryan Schweitzer, Democrat of Montana. He's in Wyoming for the Western Governor's Conference. I understand, Governor Schweitzer, you think the solution to the energy crisis is coal?

GOV. BRIAN SCHWEITZER (D), MONTANA: That's one of them. We need to produce American energy designed by American engineers and built by American workers. This is an energy source that could be exported all over the world. We can use coal. We have nearly an infinite supply of coal. But coal has a problem with carbon dioxide. We need to sequester the carbon dioxide. We have win power. We have solar power. We do have oil. We have oil shale.

We need multiple platforms in this country. But it doesn't make sense to me to continue to drill in the third world and send 400 billion dollars a year to these dictators who would like to destroy our way of life. In America, we can produce our own energy system. We can produce the cars that run on electricity. And then those cars can be exported all over the world. We'll produce electricity with wind and solar. Those cars will have batteries, so whenever the wind is blowing, whenever the sun is shining, they will store that energy. And the first 50 or 60 miles will be on electricity. After that, they'll run on oil or some kind of gasoline.

Point is, we could eliminate all of our import needs. This is not like splitting the atom in the Manhattan Project. We already have this technology. We have an infinite capacity of producing energy. What we have is lack of leadership in Washington D.C.

KING: John Stossel, what do you make of this whole oil debate?

JOHN STOSSEL, ABC'S "20-20": I think a lot of it is silly. I think we have an energy policy in America and the world and it's called the free market. When oil is above 100 dollars a barrel, coal, as he's saying, becomes viable. We don't need Washington to do it. It's a fatal conceit to say the politicians can lead this. Higher prices will lead to alternatives.

KING: How do I put coal in my gas tank?

STOSSEL: You won't have to. They'll refine it and make it into oil.

KING: They'll do that?

STOSSEL: Yes. Governor Schweitzer can tell you all about that.

KING: You're not troubled then by five dollars a gallon?

STOSSEL: Of course I'm troubled. It seems a little excessive when it costs twice that in some countries. I think these oil companies are heroes. Think what it takes to bring this stuff to us, across an ocean, refine it into three types of gasoline, put it in trucks that cost 100,000 dollars each, ship that to gasoline stations that have to have this expensive equipment so we don't blow ourselves up pumping our own gas. It still costs less per ounce than the bottled water they sell at some of these gas stations.

KING: David, makes you feel good?

O'REILLY: That's nice to hear someone on our side.

KING: Robert, would you elaborate a little what you said a little earlier about offshore drilling and going over seas with it?

KENNEDY: One of the points Mr. O'Reilly made and Mr. Stossel has made a lot is that it's safe for us to drill offshore. Chevron is the biggest producer of oil in Cook Inlet in Alaska and it dumps billions and billions of gallons of highly toxic production waste every year into Cook Inlet. It has contaminated the salmon stocks. It has contaminated the beluga whales. We have the technology to reinject those wastes, but they're not doing it. Now, they're saying we should open up Florida and we should open up California and the offshore places there, and we're going to do it right.

The other point I would make is what John Stossel is saying, a free market would be good. We don't have a free market in the energy industry. Everybody knows that. We give a trillion a year in subsidies, direct and indirect subsidies, to oil, and somewhere near a trillion dollars to coal. We also -- nuclear energy is also highly subsidized. If we had a real free market that does what a market is supposed to do, which is to reward good behavior and punish bad behavior and inefficiency, wind, solar, geothermal and tidal would easily triumph in the marketplace. You would see them immediately taking over the marketplace. The biggest impediment is these huge subsidies we're pouring into incumbents.

KING: Governor, is he right?

SCHWEITZER: He's partially right. Frankly, we had a one plank energy project in this country, and it's been about oil. There was a little problem back in 1948, when we started importing more than we were exporting. It got to be a bigger problem and we complained when we got to 50 percent of oil. Then we complained at 55. Now, we're at 65 percent of our oil that is imported.

Look, you can not trust the multi-national oil companies just to do business with dictators around the oil. If Chevron would like to drill some oil, come to Montana. You don't have a single well in Montana and yet, we have one of the largest new discoveries in the continental United States. We could have as many as 15 billion barrels in a single formation and yet Chevron has not built a well in Montana.

STOSSEL: If they could find it in Montana, they would go to Montana.

SCHWEITZER: The independents are drilling it, not be multi- nationals.

KING: Got to get a break. Want to save money on energy, we'll show you some alternatives, I hope, coming up.

(COMMERCIAL BREAK)

KING: An e-mail for David O'Reilly from Bruce in Montana; "do you ever foresee the day when Chevron will make more profits by selling alternative fuel that is better for the global economy or will fossil fuel always be number one for money?"

O'REILLY: I think fossil fuel will be the predominant energy source for the next generation or so. If you wind back to -- my grandkids were born in the first decade of this century. By the time they're my age and beyond, I think the energy system will be quite different and maybe it will be.

KING: John Stossel, is Robert Kennedy right, this is not a free market if they're subsidized?

STOSSEL: Yes. It's wrong that there are all these subsidies. We should have a free market. But even without the subsidies, these alternatives are just not going to make much of a dent for a long time. They just are much too expensive. It's interesting that Mr. Kennedy says he wants wind power, but he objects to a wind farm off his family's compound on Cape Cod.

KING: Robert, can you quickly answer that? I got to talk to the head of AAA.

KENNEDY: On that issue, on Cape Wind, I have no objection to Cape Wind. I support that wind farm. I just think they should move it away from the fishing grounds, because it's going to put out of business every fishermen on the Cape.

On the answer that wind and solar and the renewables can't compete, that's completely wrong. Look at the nations that have de- carbonized their economy. In 1970, Iceland was the poorest country in Europe. It was 100 percent dependent on imported coal and oil. They said, we're not going to do this anymore. It switched. Today, it's the fourth richest country in the world.

Our addiction to oil is the single biggest drag on American capitalism. As soon as we can get off of it, and we can get off of it very quickly, much quicker than these people are saying, our economy is going to explode.

KING: Let me go to Lake Mary, Florida. Geoff Sundstrom is standing by. He is Triple-A's fuel price analyst. Are you there?

GEOFF SUNDSTROM, FUEL PRICE ANALYST, AAA: Yes, I am, Larry.

KING: What's the latest from Triple-A on the gas price projections coming up for the Fourth of July?

SUNDSTROM: We're probably looking at 4.10 a gallon nationwide, based on where the price of oil closed today. We actually set a new all time record high today for the United States at 4.09 per gallon.

KING: Geoff, what will be the effect on driving this weekend? Are we going to have less driving?

SUNDSTROM: Well, for the first time this decade, Larry, Americans are telling us their intent to travel is declining for the summer travel vacation season. It was true for Memorial Day holiday. It will be true again for the July Fourth holiday.

We talk about the impacts of this gasoline price dilemma on the consumer. But it has a huge impact on businesses, large and small. The tourism industry, in particular, is very worried about these prices and what it's doing to their costs, as well as to the consumer.

KING: What state is the most expensive and what's the cheapest?

SUNDSTROM: Well, actually, the most expensive is Alaska, California within the lower 48. And Missouri, South Carolina and Oklahoma are all pretty well tied for the lowest prices in the nation.

KING: Thanks, Geoff. Geoff Sundstrom, AAA's fuel price analyst. Thanks to David O'Reilly, Robert Kennedy Jr., John Stossel, and Gov. Brian Schweitzer. We'll have them all back. Good seeing you, David.

O'REILLY: Thank you, Larry. Nice to be here.

KING: Ed Begley Jr. has been ahead of the curve for years and he's got the goods on going green, when LARRY KING LIVE returns.

(COMMERCIAL BREAK)

UNIDENTIFIED FEMALE: Aren't you coming, Ed?

ED. BEGLEY JR., ACTOR, PROMOTER OF ALTERNATIVE ENERGY SOURCES: I prefer a vehicle that doesn't hurt Mother Earth. It's a go-cart, powered by my own sense of self-satisfaction.

(END VIDEO CLIP)

KING: That was Ed Begley Jr. on "The Simpsons," the actor, long time promoter of alternative sources. His book is "Living with Ed, One Man's Guide to Living an Environmentally Friendly Life." His reality TV series, "Living With Ed," can be seen on the new Discovery Network, Planet Green. There he is in front of his hybrid cars in Studio City.

We visited with him at his home recently. Here's a look at how Ed lives in his environmentally conscious green home. Watch.

(BEGIN VIDEO CLIP)

BEGLEY: Hi, Larry. Thanks for coming to visit. Come on into my environmentally sound structure. On the way in, you'll see a recycled plastic fence made all from recycled milk jugs. It never needs to be painted, no termite damage, no water damage. It's a 100-year fence.

Come on in. We go in the kitchen here. You can see, looks like a normal kitchen. But if you look at the counter top, right away, we're using recycled materials. This top is made from recycled Coke bottles. Every appliance is the highest energy efficient rating. We have double pane windows here. I took out the old 1936 windows, put in the same look of window, but double pane. So it's very energy efficient.

As we come outside, you can see up above, I got a lot of solar panels. Solar electric up there that you can see. Beyond that, we have solar hot water. I put this in in 1990 and it has paid for itself now.

My wife wanted a lawn. I said, I will get you a lawn. This is a lawn made out of plastic, recycled materials. It's plastic grass that looks every bit as good, feels great. You can roll around on it, relax on it.

You got to cook your food too. How are you going to cook it? If you're smart, you get yourself a solar oven. Look at this. This thing is a wonderful solar oven. You want to make rice, beans, soup or just boil water, this is the way to go.

(END VIDEO CLIP)

KING: Ed Begley Jr. joins us from Studio City. You're unbelievable, Ed, you really are. You're unbelievable. You drive a hybrid. They're becoming more popular. Is the hybrid car the future?

BEGLEY: That's -- there's many tools in the toolbox. That's one of them. I drive the hybrid, I just did, for long trips. I drove my friend Greg Glass to Vegas, the two of us together, for 23 dollars each way to Vegas. That's 11.50 a piece to get to Vegas. You can't get a Gray Hound ticket to Vegas for 11.50. That's for long trips.

But that's way down on my transportation hierarchy. You see the Phoenix Motor Cars truck here. That's a pure electric that a drive around the LA area. But that's fourth on my list. Number one is walking. Number two is riding my bike. Number three is public transportation. Then four would be pure electric and five hybrid.

KING: You've been green for years. Do you see an energy crisis coming?

BEGLEY: I saw it many years ago and many other people did. You know, T. Boone Pickens -- I'll quote a radical environmentalist T. Boone Pickens, who knows we can't get all of our needs met by fossil fuels. T. Boone Pickens, a geologist and an oil man, put up billions of dollars of his own money into four gigawatts of wind. He's investing in wind big time. So he believes that it's real. This is a guy who I think is a visionary in many ways, T. Boone Pickens, an oil man with a great vision of the future.

There's many people who feel that way, and I'm one of them. Everything that I did for the environment, starting in 1970, Larry, I did it to be green, but I learned right away that first year -- I was shocked that it happened -- I started saving money. I didn't have a lot of money in 1970. So I picked the low hanging fruit first. I did the stuff that was cheap and easy. I couldn't afford solar electric for 20 years. I couldn't afford solar hot water for 15 years. I couldn't afford a hybrid for many years.

But I bought cheap and easy stuff right away and saved some money. That's what people can do today. They can do lots of stuff today that will save a lot of money in the short run.

KING: We only have less than 30 seconds. Do you worry about offshore drilling?

BEGLEY: That is something that I would want to put off. We can revisit that later. But the most immediate solution to this is efficiency. I'm not talking about everybody running out and getting solar. You can't afford it. Compact fluorescent bulbs, energy saving thermostat, good insulation, weather stripping, all these things. Do that stuff and you'll some dough.

KING: Ed Begley Jr., as always, thank you. Extraordinary guy. Go to our website, CNN.com/LarryKing, and answer our quick vote question right now; have gas prices changed your summer travel plans? While you're there, download our latest podcast, Jerry Seinfeld and Bill Maher remembering George Carlin in our all star tribute. Among upcoming guests -- you want to send them e-mails? You can. Or I Ask questions? It's all at CNN.com/LarryKing.

Now Anderson Cooper and "AC 360." Anderson?