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Country in Crisis: McCain Returns to D.C. to Work on Bailout; Exposed: The End of Oil
Aired September 24, 2008 - 19:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GLENN BECK, HOST (voice-over): Hello, America. Today is a very big day. If you watch this program even occasionally, you`d probably think of me as, "Oh, there he is, Mr. Sky-is-Falling again." Because I`ve been telling you for the last two years that we are headed towards another Great Depression. A lot of people thought I was a lunatic. But here we are, gang, on the brink.
So tonight let`s try to be a step ahead again. Why? Because we have Congress that should have seen this coming. We have administration and Congress and everybody else. They saw these things coming. Frankly, I helped -- I believe they helped create these problems.
And today, in what could be a genuine call to leadership, or simply election-year politics -- I don`t know which -- because I don`t trust any of these people anymore, and I don`t think you do either, John McCain has suspended his presidential campaign and has called for Friday`s debate to be postponed. He says he wants to go and fix this problem and work in Washington.
Now, I hope that he is trying to put country first, because the news out of Washington is that Warren Buffett today has called this an economic Pearl Harbor. A guy that I happen to know that is inside on all of this stuff said that this is 9/11. We are in real trouble, gang.
The news on the $700 billion bailout is facing too much opposition in Washington to pass. And let`s be frank: there isn`t a good answer on this one. If we don`t bail these people out, our economy collapses. If we do bail them out, I believe our economy collapses, just at a slower rate that allows some people to prepare. I hope you have been preparing for quite some time.
Stephen Moore, "Wall Street Journal" economics editorial writer, is with us.
Stephen, even the candidates now, we`ve been talking about this, and we`ve been joking, and everybody`s like, "Glenn, please, we`re not headed for the Great Depression." Even Barack Obama said the Great Depression. Warren Buffett called it Pearl Harbor. Listen to the rhetoric. Something wicked this way comes.
STEPHEN MOORE, "WALL STREET JOURNAL": You`re not kidding about that, Glenn. And in fact, you put your finger on the problem. Government really created this problem. It`s something you and I have been warning about for many, many years, that the excessive government spending -- you just did a whole special last week on government debt and deficit spending. And the chickens have come home to roost.
And you know, today and yesterday on Capitol Hill, Secretary Paulson made this case to the members of Congress: if we don`t do this, we`re going to face a financial crisis. But I talked to the House Republicans today, and a lot of them agree with you: even if we do this, we may have the same crisis that Secretary Paulson is talking about. Calls right now, Glenn, on Capitol Hill, 30 to 41 against the bailout.
BECK: We have also last night in the middle of the night, we -- the Fed lent money to foreign banks. There`s not enough -- there`s not enough actual cash in the world for the dollar. They`re printing more -- we are - - you know, you and I talked about it a while ago. Death spiral of the dollar. Are we close to that now?
MOORE: I think we are. I mean, the question everyone asks is, where`s the money going to come from if we approve this $500 and $700 billion bailout.
I have to say by the way, Glenn, I`m really undecided about it. I hate big government.
BECK: Me, too.
MOORE: But I do -- you know, I do think we are at the precipice of a crisis. But where is the money going to come from? You and I know where it`s going to come from. The government is going to print the money.
MOORE: And that is going to de-base the value of the currency. And Glenn, that`s what started the crisis in the first place.
BECK: I know. I know. We`re doing exactly the same thing. There`s no win on this one, is there? You can`t...
MOORE: No happy ending.
BECK: You can`t vote for it or vote against it. I mean, even if you voted for it before you were against it, it doesn`t work. There`s no winner here.
MOORE: You know, here`s where I think conservatives should be in Congress. I advised them of this today. OK, if you have to pass this thing because you`ve got a gun at your head, do it.
But how about some of those reforms we`ve been talking about for ages? Get the debt under control. How about a leash on government spending? Let`s have a flat tax. Let`s do something about getting the capital gains tax down. Things that are pro-free market that will actually make this economy grow. Because if the economy doesn`t grow, it doesn`t matter what Congress does tomorrow.
BECK: All right. Stephen, thank you very much. That`s just an update on the economy. I -- you know, gang, we are in deep, deep, deep, deep trouble. And all that really needs to happen is for government to get out of the way and stop shackling you. Stop getting -- just get out of the way of people that can make a difference. We can solve the problem. It seems to me they keep creating the problem.
They can`t -- where is the person that saw this one coming? Where is the leadership? I`m a recovering alcoholic. I saw it coming. Where is the leadership that can look over the horizon and see this coming?
Well, tonight we`re going to do that. We`re going to look over the horizon, because I think -- I`ve been telling you for awhile, it`s a perfect storm. Another gigantic crisis is coming right on the heels of the financial crisis. And that`s energy. The problem is exactly the same: inaction by both the Republicans and the Democrats. They have brought us here to this same stupid place, and they`re only making matters worse.
Tonight we are live for our continuing series, "Exposed: The End of Oil."
Another thing you know about me if you watch the show all the time, I have a hard time shutting my pie hole. But I want you to ask the questions tonight. We`re live, because I want you to talk to a guy who knows all about this stuff.
I met the former -- the former president of Shell Oil, John Hofmeister, I don`t know, about six, eight months ago, John. And I don`t know, he`s a little iffy on me. But I like him, because he will tell you the truth. He is a guy who is now out of it. So he`s got only your cards to play. He`s just another citizen like you and me.
I want you to call and get involved. You can ask the question. The number is 877-SAY-BECK, 877-729-2325. Before we go to a phone call, quickly, this -- there was an oil bill that passed today in Congress.
JOHN HOFMEISTER, FORMER PRESIDENT, SHELL OIL: It looks like they took the ban off. But that doesn`t immediately mean we can rush out and make things happen.
HOFMEISTER: It takes time. It takes -- the companies need to have plans. But we don`t know what they`re going to do next year...
HOFMEISTER: ... that might restrict the access that they just granted this year.
BECK: Right. This is the same problem that we went through with the original Great Depression. Business doesn`t trust government. So they...
HOFMEISTER: If we were serious about this, I mean, the president waited 7 1/2 years into his term...
HOFMEISTER: ... to lift the presidential moratorium.
HOFMEISTER: Congress has just now allowed it to expire.
BECK: Allowed it to expire.
HOFMEISTER: But that doesn`t mean that we`re free, that the companies out there are free to go research and produce oil. It`s too iffy, and people aren`t going to put money into it yet.
BECK: Let`s go to Mark in Pennsylvania.
CALLER: Hi, Glenn. I love your show.
BECK: Thank you.
CALLER: I just want to tell you I`ve been trying to recruit people to watch the show real quickly. I always watch it.
BECK: That`s a job most Americans won`t do. Thank you very much. Your question?
CALLER: My question is this. I know there`s a lot of people out there that think that the big oil execs sit around in their rooms, smoking their cigars, wearing the boots and the hat. And they decide what the oil or the gas prices are going to be on a daily basis. I know that`s not the truth. I was just wondering if he can explain on the disconnect between the oil companies and gas prices and pretty much an alcoholic rodeo clown explanation.
HOFMEISTER: Well, let`s start with the crude price. The crude price is really set based upon global supply and demand. There`s nothing that anybody in the big oil companies can really do, because their total production on a daily basis is less than 15 percent of total world production. So it`s really the national oil companies, and OPEC which have more to say about the global oil price.
When it comes down to the retail price, what you`ve seen is an anomaly that`s happening right now, where the crude oil price has been dropping, but the retail price has been going up.
HOFMEISTER: That`s because 20 percent of the nation`s refining capacity is offline because of Gustav and Ike.
BECK: We don`t have enough refineries, because, again, Congress won`t let us build more.
HOFMEISTER: There`s been -- you know, I mean, there have been some recent decisions by some of the companies to expand refineries. It will be three years until they`re online.
BECK: Is it true that the refineries never really stop building, because if they stop building, then that`s finished, so they can constantly expand if they are building? Is that true?
HOFMEISTER: Well, most of the companies were expanding their production capacity. And if you go to the American Petroleum Institute, they will tell you that, over the course of the last ten years, the equivalent of a new refinery every year was built based upon productivity improvements in existing refineries.
BECK: Let`s go to Jim in Missouri.
CALLER: Hello, Glenn. Thanks for taking my call.
CALLER: I`ll get right to it. During World War II, Germany produced petroleum from coal, and I understand South Africa does that right now. My question to your guest there is, why can`t the oil companies get together with the coal companies and begin to try to produce that now?
HOFMEISTER: Some of them are, actually. It`s called coal-to-liquids. You can take biofuels and make gasoline out of it. You can take coal and make diesel out of it. You can do a lot from -- making liquids from all of these carbon products. Because what it is, is carbon, and we know a lot about the chemistry of carbon now. Or hydrocarbon, I should say.
And so there are efforts now under way to various companies taking different approaches to try to do exactly that.
The issue that we still have to face, though, is what about the carbon dioxide? Coal-to-liquids is releasing a lot of carbon dioxide into the atmosphere. We have to figure out what we`re going to do about that.
BECK: Can I tell you something? I think the hippies are going to be chased into the mountains, when the economy collapses and we have no energy, hippies, look out, man, because you`re going to be chased into the mountains. Because people are going to say you are responsible for this. You and Congress blocked our way every step of the way.
And when people are frightened, when they are hungry, and they have no energy, they`re going to say, "Enough of this, `Oh, gee, it`s a half a degree rise in the temperature. Oh, I`m so hot.` I want some energy to heat my house."
HOFMEISTER: Part of the problem is this whole myth of the free market. There has not been a free oil market, really, for the last 30, 40 years. Since OPEC came along and started restricting production, since the U.S. government came along and said for 30 years no offshore drilling. That`s not a free market.
BECK: True or false, we are now -- the Air Force is taking coal and turning it into fuel?
HOFMEISTER: They`re -- on an experimental basis, they`re looking at that, yes.
BECK: The weekend. Not you, little people, you don`t need it.
We`re going to take a quick break. More with your phone calls when we come back.
(BEGIN VIDEO CLIP)
MOORE: I think the energy crisis is critically related to our economic problems, and we can solve this problem if we let American industry and American oil companies go out and find the oil that we have right now. Right now they are prohibited by law from doing that.
If we want an economic recovery, let`s look at areas where we can create jobs and create new energy sources. We have so much oil in this country that the left liberals, the environmentalists have basically put a wall up against any new oil discoveries and any new oil drilling. I think it`s really a disgrace.
(END VIDEO CLIP)
BECK: In the last couple of weeks alone, your dollar has fallen, has lost about 6 cents in value. That, to me, is stunning. It is a hidden -- you`re just paying $6 in hidden tax because of the do-nothing Congress. And quite honestly, both sides of the aisle are responsible for this. That directly affects you. We`re talking about the economy, and the next shoe to fall is energy.
John Hofmeister, he is the former Shell executive. By the way, the phone number is 877-SAY-BECK, 877-729-2325.
John, explain, when the dollar falls like it has the two weeks, by 6 cents in value, what does that do to the price of oil? I don`t think people understand the connection here.
HOFMEISTER: Well, it takes the price of oil back from the $92 or $93 that we got to back over to $100. Because the -- it needs -- you need more dollars to buy that same barrel of oil because of the devaluation of the dollar.
BECK: Right. And that`s because OPEC, we`re pegged to the dollar, because we wanted them pegged to the dollar -- pegged to the dollar. And they said, "Look, you trash your currency, that`s fine. But we ain`t taking a hit for it," right?
HOFMEISTER: That`s right. Part of the strengthening of the dollar in July and August was actually a positive thing that was happening.
HOFMEISTER: Until this crisis, the economic crisis, the housing crisis hit us hard. The dollar`s now weaker. The oil price goes back...
BECK: Where do you think the oil is going to be three, four, five, six months from now?
HOFMEISTER: Well, I still -- I said in Congress in May, I thought it should be $65. I think that`s a fair value for the price of oil. I think that the economic problems that we`re having is reducing demand dramatically.
HOFMEISTER: We`re spiking shortly because of the hurricanes. But that will pass in another couple of weeks in terms of retail price. But I think the -- if the dollar continues to weaken, the oil price isn`t going to fall that low.
BECK: OK. Let`s go to Patricia in Utah.
Hello, Patricia. Patricia, are you there?
All right. Let`s go to Mason in Virginia.
CALLER: Hello. I`m a student at a college with a big green program. I wanted to know, are oil companies like BP meaningfully transitioning to and investing in alternative? Would they even want to anytime soon? And is Kurtslow (ph) right about solar taking off in about five years?
HOFMEISTER: Well, let`s start with solar. I think the silicon-based solar photovoltaic technology is getting outdated. And the universities that I`ve visited, the nanotechnology opportunities for solar are terrific. So I think over the next five to ten years we`re going to see great advances in solar.
I think oil companies that are committed to alternative energy are indeed serious. We`re not going to ever run out of oil. But we may use less of it if we use more alternatives in time.
BECK: Could you -- could you do me a favor? Because people -- everybody is just like, "Oh, jack and your magic beans are here." We`re never going to be able to get off it. But people -- please explain this. People don`t understand, oil changed the world.
BECK: We would -- it`s what took us from "Little House on the Prairie" to here. So there`s no possibility of ever truly being free of oil.
HOFMEISTER: I don`t think we would ever want to be free of oil, because it is such a concentrated energy source. Biofuel doesn`t come close to the concentrated BTU, which is British thermal units of energy, within oil. Oil will be necessary for jet engines...
BECK: Among other things, it`s more efficient.
HOFMEISTER: It`s more efficient. You get tremendous advantages from it versus many alternatives. So I don`t think we`ll ever stop using oil. But there will be new and different technologies that people will like better than, let`s say, the internal combustion engine.
And I think that`s where the market -- hopefully, the market will help choose what will those new technologies be. I`ve driven a hydrogen fuel cell car.
BECK: So have I. They`re amazing.
HOFMEISTER: It`s too expensive for commercial proposition right now. But I`ll tell you, I would love a hydrogen fuel cell car, because the electric wheels, the electric motors on the wheels give you such get up and go.
BECK: They`re fantastic. I drove one. Did you drive -- you guys were in bed with evil GM, weren`t you? You guys partnered...
HOFMEISTER: Yes. But I`ve driven GM, Chrysler and Ford.
BECK: I`ve driven the new GM, and it`s supposed to be out, I think, in 2013. And it is absolutely fantastic. And it`s like a hair dryer at the back. There`s no exhaust. It`s like humid air.
HOFMEISTER: But it won`t happen if we don`t build the hydrogen infrastructure where you can buy it at your local retail station.
BECK: You know what, gang? It ain`t going to happen anyway. Because you know what`s going to happen? There`s going to be somebody saying, "Oh, you`re using to much water." Now it`s -- now there`s the poor fish. That`s what`s going to happen, mark my words. Jack, beat it, hippie -- I`m telling you.
Jack in Pennsylvania.
CALLER: Hello, how are you?
CALLER: I have no magic beans. But I have a question.
BECK: Yes. Go ahead.
CALLER: Within a few miles from where I live, there are four federally-owned dams. They`ve all been built since the Arab oil embargo, and not so much as a water wheel. Whatever happened to hydroelectric power?
HOFMEISTER: I think we ought to use more of it. We`ve got a lot of riverways in this country that could be used for electricity production. I come from Pennsylvania. And the Susquehanna have some great 1930s, 1940s- style dams. The Safe Harbor and Conowingo. They produce a lot of electricity. And it`s clean. I think it`s a great idea.
BECK: May I say this? This is what happened to them. "You can`t -- well, the little furry bunnies. You`re going to -- you can`t damn that up. What, are you crazy?" That`s what happened, Beat it, hippie.
Kevin in Oklahoma.
CALLER: Hey, how are you?
BECK: Good, how are you?
CALLER: I`m doing fine. I just want to say, Glenn, I listen to you every morning and I watch you every night.
BECK: Thank you, sir.
CALLER: My first question is, what should we do as consumers when Russia is now grabbing all the energy that they can get their greedy hands on? And second is, also whenever Israel decides to strike Iran, does gas go through the roof?
BECK: Hold on just a second. You know what? Hold on. I have to take a network break here. We`ll come back with your answer on that, because that`s pretty weighty. Russia and Iran and the role they play. You`ll hear that in just a second.
Back in just a moment. Stand by.
BECK: Continuing tonight "Exposed: The End of Oil," with former Shell Oil executive John Hofmeister. You can get in on the conversation. The number is 877-SAY-BECK.
John, we -- before we went into the break, we had a caller and he said, you know, what about Russia? How are we going to be able to deal with Russia? Because they`re shooting capsules with their flags down at the bottom of the Arctic shelf at the North Pole to claim that oil and those reserves.
What happens with Iran, and God forbid somebody strikes Iran? What happens to oil?
HOFMEISTER: Well, the price goes way up.
BECK: Like what`s way up?
HOFMEISTER: Way up could be $200 a barrel. Iran is playing dirty tricks on the whole energy atmosphere. They are because they can. The position of the United States is not in a good place right now to really do something about people that want to make trouble.
There is every incentive on the part of Iran or Russia, or let`s say Venezuela, to keep the oil price high.
HOFMEISTER: They have us literally over the barrel.
HOFMEISTER: We`ve waited so long to produce our own energy, they have us over their barrels, not our barrels.
BECK: Why wasn`t -- why wasn`t there a movement right after 9/11 that said -- and I think I know the answer to this -- we must be out of foreign oil? Why did we continue -- why wasn`t there that outcry from anybody in Washington?
HOFMEISTER: The price was so low. The oil price back in those days was around $20 something a barrel. Ten years ago next month, or I guess in December, ten years ago, we were paying $8.50 for a barrel of oil.
BECK: I mean, you in the oil industries, you saw -- when you saw those planes fly into the buildings, didn`t you say, OK, the Middle East, not really a good place for us to be?
HOFMEISTER: That`s been -- the position of the American oil companies has been, "Let`s open up America for development" for years and years. But it fell on deaf ears in Congress.
BECK: OK. Let`s go to Lee in Florida.
CALLER: Hey, how you doing, Glenn?
CALLER: Hey, I`m a longtime listener. I enjoy listening to you.
BECK: Thank you.
CALLER: My question is, if the government allows us to drill for oil, one of the ramifications if they don`t address the environmental groups` issues, is the ability is tie everything up in lawsuits where nothing gets done anyway.
HOFMEISTER: That`s another problem. If you go to my Web site, CitizensForAffordableEnergy.org, you`ll see that tackling this whole issue of infrastructure, and plaintiffs` attorneys troll for business, looking for opportunities, not because they want the projects. They want the revenue of shutting down projects. They get into court proceedings. They know the oil companies will fight them back.
And so, you know, there`s all kinds of issues up in Alaska, and anywhere you go that plaintiffs` attorneys are trolling for business, and native communities, to try to shut down investment opportunities. And we as the people of America, we pay the price for that.
Conrad in Arizona, quickly. We`ve got to get to the break. Go ahead.
CALLER: Yes, thank you, Glenn. I love your show.
BECK: Thank you.
CALLER: And love what you`re doing here on the board of immigration.
BECK: Thank you.
CALLER: My question is, why can every enemy of the United States drill off the Florida coast but not us? I mean, you`ve got China now drilling there, trying to tap into what some people are saying is, you know, one of the world`s largest, you know, spots there for oil. And these guys don`t have that much experience in deep sea drilling.
HOFMEISTER: I`ll give you one quick line. It`s the politics, the partisan paralysis. We can`t do things in this country for partisan reasons.
BECK: Gang, this is why we are facing the economic crisis that we are. And I`m telling you, you`re going to have a hard time pulling out of it without energy. More calls, your questions, when we come back in just a bit.
(BEGIN VIDEO CLIP)
TOM FRIEDMAN, AUTHOR, "HOT, FLAT AND CROWDED": We will become increasingly dependent on foreign sources of oil that will become increasingly more expensive and we will lose out on the next global industry which is renewable power which I call energy technology, the E.T. Revolution.
It will definitely slow down our growth if we`re dependent on ever increasingly expensive sources of foreign oil. But much more importantly, we miss the leadership of the E.T. Revolution, the energy technology revolution. Our standard of living, our kids` chance of having the standard of living our generation head will be zero.
(END VIDEO CLIP)
BECK: Let me bring you up speed on where we are today. Welcome to a live broadcast tonight from New York.
Pearl Harbor, this has been described as Pearl Harbor for the economy today by Warren Buffett.
Obama said in his response to John McCain that we may be headed towards the Great Depression. John McCain suspended his campaign, and said I`m going back to Washington to work on this deal to try to figure out what we do about what could be the Great Depression. Things are really, really bad.
But not the Great Depression. Because of these things, in the Great Depression we had -- we were on the gold standard so our money meant something. We had no huge debt at the time. We had energy. And we had industry.
Well, this financial crisis is going to teach us this. We`re going to need to retool this country. We don`t make things anymore, and that`s got to change. We must have industry.
But innovation, retooling requires energy. We don`t have energy either. And we`re going to need a butt load of it, gang.
All week we`ve taken a look at the big picture in our series, "Exposed: The End of Oil." And tonight you get to ask your questions to the ultimate insider.
Former Shell Oil Executive John Hofmeister is with us. You can get in on the conversation. Call us right now. The number is 877-saybeck. 877- 729-2325.
John, let`s take another phone call from Justin in Colorado.
ON THE PHONE, JUSTIN, COLORADO: Hey, Glenn, how are you?
JUSTIN: I am an American citizen. I`m just feeling supremely powerless right now. And you can only call your state senator so many times. What can I do to make some headway into this situation? What can I do to help fix this problem as an American citizen?
JOHN HOFMEISTER, FOUNDER, CITIZENS FOR AFFORDABLE ENERGY: Join citizens for affordable energy, Justin. That`s what we`re trying to do. In my post-oil company career, I`m out of the oil business; I`ve set up a not-for-profit company for the purpose of bringing millions of Americans together.
Just like AARP does for old age issues, senior citizen issues, citizens for affordable energy is set up to bring the millions of voices of Americans, Republicans and Democrats, to say to the Congress, and to say to the White House, who`s in charge.
Who`s in charge is the American people; this is a Democracy. Join this organization. And join many other people.
BECK: John, tell me -- let me give you a little test here. Tell me one thing that the government has right about oil companies. Tell me one thing bad about oil companies.
HOFMEISTER: Well, the hundreds of thousands of men and women who work for oil companies are everyday Americans. And they do tremendous good for this country.
HOFMEISTER: And they`re vilified by elected officials who attack the companies and, therefore, attack their own citizens. I think that`s wrong. What Congress has done, which is good, is they have recognized over -- in 2005, 2006, 2007, there were energy bills. There`s nothing -- I mean, we needed those energy bills.
The problem is it wasn`t coherent. It wasn`t comprehensive. It didn`t deal with short, medium and long-term together.
BECK: I`m trying to show, because I`ve heard you -- I mean you`ve done it with me, you have said, you know what, big oil isn`t going to like this, but this is the truth.
What I`m saying is, to show people that you are not a big oil -- you`re just an American.
BECK: Tell me one thing that you think big oil does that just pisses you off, say, come on, guys, don`t do that?
HOFMEISTER: They sit in their bunkers and they don`t talk to their customers. I mean most of the oil companies today don`t even own their own gas stations. So they don`t really care or don`t really think about what`s happening at the consumer level.
If they`re out of gas, that`s the station`s problem, they didn`t order soon enough. If the prices keep going up and down, that`s not the company`s problem, they blame what`s going on at the retail level.
So and I think the kinds of things that oil companies could do a much better job of is explain how they work. Explain what they do.
Last year at this time, Glenn, Gallup came out with a poll, of the favorability of industries. The oil industry was number 20 out of 20 industries. Number 19 was the U.S. government.
HOFMEISTER: The oil industry was thought worse of by Americans than the U.S. government.
BECK: Can I tell you something? The government never -- they take on your profits. You have, what, 8.5 as an industry, 8.5 percent profits?
BECK: So it`s somewhere like that? No higher than 10 percent, no lower than 7 percent which is the average profit margin. These hedge funds are the ones who have helped cause this collapse in collusion with the weasels in Washington. They have 85 percent to 93 percent profit margin, yet no one says a word.
HOFMEISTER: No. And they`re the ones that can spin risk. They can put people`s dollars at risk. And they make a lot of money doing it.
Stacey in Georgia, hello, Stacey.
ON THE PHONE, STACIE, GEORGIA: Hi, Glenn. How are you?
BECK: Very good.
My question is, I live in Atlanta, Georgia. And we have lines around the corner, people getting up early in the morning trying to get gas and late at night. My question is, how realistically are we close enough as far as having our cars powered by battery cells? And is the oil companies doing anything to push that ahead?
HOFMEISTER: Well, Stacey, that`s a good question. And you know, if you go to the "Washington Times," I said a week ago Monday that we should do odd-even purchasing in the southeast part of this country, because we`re going to be driving the consumers nuts, because of the outages of Gustav and Ike.
And so everybody pooh-poohed it, so we don`t need rationing. Well, there you are in Atlanta, you would be much better off if you had odd-even purchasing. When it comes to batteries, we`re years away. In the next couple of years --
BECK: What`s the problem with the hydrogen car -- it`s hardly right, they can`t get the fuel cell right, they can`t hold enough.
HOFMEISTER: And they can`t hold enough hydrogen.
HOFMEISTER: And the batteries only give you about 40 miles. So you need an engine to recharge the battery as you go. And here`s something else nobody talks about with the battery cars. What happens when the car is obsolete, what happens to the battery? The environmental issues from the battery degradation --
BECK: Don`t start with me. I swear, don`t start. Because there`s some problem with everything. Anything -- there`s always a down side to everything. America either has to get over that, and understand there`s no perfect magic bean. There`s always going to be a problem.
HOFMEISTER: But people pump it like it`s the best thing since sliced bread. It`s not.
BECK: Where are you getting the electricity to put into your car? Hey, hippie, where are you getting the electricity? They`re making it someplace.
Valerie in Indiana, hello Valerie.
ON THE PHONE, VALERIE, INDIANA: Hi, how are you guys? There`s been - -
BECK: I`m scaring John. All right go ahead.
VALERIE: We`ve been hearing a rumor for years that all of the oil coming out of the Alaska pipeline cannot be refined in the United States and has to be sold to Japan because they`re the only ones who can refine it. Is any of that true?
HOFMEISTER: No. No, most of that oil comes right down the West Coast. And it goes into refineries in California or the state of Washington. Probably there`s not enough coming. And that`s because companies have not been allowed to explore for more and produce more, and lawsuits are shutting them down. So Alaska is slipping in production.
BECK: I don`t want to get you into politics at all and naming names. But have you spent any time with Sarah Palin up in -- have you had a brush with Sarah Palin at all?
HOFMEISTER: I actually had an hour with Sarah back in -- Governor Palin back in February.
BECK: What do you think of her?
HOFMEISTER: Well, she`s the real deal when it comes to being who she is.
BECK: She took you guys on.
HOFMEISTER: Absolutely. She told me, no question, who`s the boss in Alaska, and it`s not the oil companies. She was very clear on that point.
BECK: Right, but she doesn`t hate you guys.
HOFMEISTER: No, no. She knows -- and she was very helpful in pointing out how to work more effectively on the North Slope and how the state could actually work in partnership with the companies. But not where the companies tell the state what`s going to happen, it`s where the state tells the companies what`s going to happen.
BECK: For me, at least, that`s what I want in a politician. I want you to take on the corrupt companies, or the corrupt individuals. I would like you to take on Freddie and Fannie a long time ago. Take those guys on, and get the corrupt guys out.
But that doesn`t make business evil, that doesn`t make big oil evil; it makes some people in your industry and everybody else`s industry evil.
HOFMEISTER: Right, I mean nobody`s going to roll her. I mean she knows what she`s doing.
BECK: All right, let`s go to Rick in Pennsylvania. Hello, Rick.
ON THE PHONE, RICK, PENNSYLVANIA: Hi, Glenn. My question is, why do the corn growers seem to have such a lock on ethanol when there are other forms of -- to get ethanol out that are much more -- gee, what am I looking for here --
RICK: Efficient, yes. Like locust trees and sugar.
HOFMEISTER: Right, now that`s a good point. And I think in time, the cellulosic ethanol coming from biomass will displace a lot of corn. But corn was first, we`ve known how to make alcohol from corn for a long time and that`s what ethanol is.
BECK: There`s still the other part of that story. Again, it`s government.
HOFMEISTER: It`s government, which set up incentives for corn-based ethanol.
BECK: And is stopping the import of enough sugar to be able to -- right?
HOFMEISTER: That`s correct.
HOFMEISTER: So there`s $1.05 difference between if -- what is it, 54- cent tax on imported, and a 51-cent subsidy to make domestic corn alcohol - - corn ethanol. The other thing about cellulosic --
BECK: I think we`re going to be doomed.
HOFMEISTER: It`s going to take awhile to scale up to make the kind of quantities of cellulosic. So it`s years away.
BECK: Yes, all right, let`s go to Ron in Florida. Hello, Ron.
ON THE PHONE, RON, FLORIDA: Hey, Glenn, how are you doing?
BECK: Very good.
RON: Thanks for taking my call, I appreciate it. My question has to do with our buddy Chavez in Venezuela. I`m not a fan, I know you`re not a fan, the reduction in his production, how is that going to affect us?
HOFMEISTER: Well, it`s hurting the whole world, really because the world -- it`s a global trading system. And ever since they nationalized PEDEVESA, you`ve seen a drop every year in oil production. And because the deals for many companies in Venezuela are so bad, nobody wants to really go down and spend a lot of money.
BECK: But that`s also the reason -- I mean that`s why you got to watch what`s happening in Russia, with the Russian economy collapsing, where there -- their stock market collapsing, and now closed for the week, it`s because oil fell, right?
HOFMEISTER: That`s right. Yes, they were predicating everything --
BECK: They we`re opposite of us.
HOFMEISTER: So they`re going to make trouble. So that the geo- politics raises the tensions which raises the oil price.
BECK: Well, it`s another sunshine in lollipop`s day. What you`ve grown to expect on the Glenn Beck program.
Back in a second.
BECK: We`re back with former Shell oil president John Hofmeister. We`ve been having a conversation tonight, and your phone call is next, the number is 877-sayBeck it`s 877-29-2325.
We`ve been having a conversation today. Everybody is talking about the economy and how bad the economy is. I don`t think people really understand the Great Depression is a possibility now.
We`ve been telling you for awhile now, America, that this is coming, for two years we`ve been saying this.
We`re trying to be ahead of the curve again, and tell you, that`s one problem. Another problem that is going to quickly come is the end of oil and the end of energy. And we`ve been talking about that.
When you compound -- if you had, you know, even if it was not the Great Depression, but the worst since the Great Depression, and then you have no energy, how do you get out of that hole?
HOFMEISTER: Talk to the people in Houston right now. I mean still, 30 percent of the Houston population is without power. If you don`t have energy, there`s not much you can do. You`re basically reduced to camping. And camping in modern civilization is not a good place to be, especially in the sub-tropics of Houston, Texas.
The reality is there is no shortage of energy.
HOFMEISTER: There`s more energy than we can ever use on this earth. We`re not allowed to develop energy because of public policy.
HOFMEISTER: It`s all man-made issues that take us to this very expensive energy. It`s still way too expensive at $104 a barrel. I think that`s what the price is today.
HOFMEISTER: That`s a ridiculous price. And I`ve been saying that for months.
BECK: All right, let`s go to Rob in New York. Rob? You`re on the Glenn Beck program.
ON THE PHONE, ROB, NEW YORK: Thank you for taking my call.
Sir, I`d like to ask you, how long will it take for the oil rigs that has just been passed in the House and hopefully in the senate and signed by the president, how long will it take for those to be up, operational and actually for us to see the oil in our hands, so to speak?
HOFMEISTER: Well, if the bill was shaped differently than what it is, I could say to you that we could be producing oil in a matter of months. But we can`t.
There`s a ban on the first 50 miles offshore. A lot of the hydrocarbons are within the first 50 miles. The states have lost in this bill the royalty that they otherwise would have received to build the infrastructure and to take care of their local state needs by agreeing to the 50 to 100-mile area where there may be hydrocarbons.
So if we can`t do the 50 miles, and the states don`t agree to the next 50 miles, then the energy industry has to move to 100 miles out. Frankly, nobody knows what`s out there, because we`ve not been allowed for years to map what might be out there.
So the answer to your question is, I really don`t know. I don`t think there`s much prospect of much oil anytime soon.
BECK: We spoke earlier and you said there won`t be any oil that we can produce out of this in any reasonable time period.
HOFMEISTER: No and I think this is a shame on Congress that they would not speak honestly with the American people about the fact that, if you block out the first 50 miles, what`s the point? When the Gulf of Mexico was opened up, it was the first 50 miles that produced billions and billions of barrels of oil in the western Gulf of Mexico. It`s still producing, 20 years later.
But if you have to go to 100 miles out and you don`t know what`s out there, then the companies will have to shoot size and have to analyze it, and build infrastructure --
BECK: We are 10 years away from -- any reasonable person would say at least ten years away from that.
HOFMEISTER: Sure. But if you`re within the first -- let`s say 50 miles, in the coast of California there`s infrastructure already. You could start drilling later this year, early next year.
BECK: There is actually one well that has a lot of oil and that is capped. We could just go open or we could be producing oil off the coast of California within a couple of months.
HOFMEISTER: Right or off Dustin, Florida.
HOFMEISTER: Where the big Dustin dome exits and we can`t get to that within the first 50 miles.
BECK: Mia in Connecticut, go ahead.
ON THE PHONE, MIA, CONNECTICUT: Hi Glenn, thanks for taking my call.
MIA: Mr. Hofmeister, I have a question on how the pricing structure works in gas at the station. My kids go to school in Fresher, Connecticut. And on Route 10 there`s two Citgo stations about two miles from each other that have different prices.
And it doesn`t make sense to me how that could be. And I see it all over the place, with all of the companies. There will be a Mobil over here and two miles away there`s another Mobil that has a different price. And they`re close. Can you explain that?
HOFMEISTER: Well, it`s -- the best way to explain it is every retail station basically can set its own price. And what goes into the pricing is what did they just pay for a wholesale delivery? Because they`ve got to make that back. What are they expecting to pay for the next wholesale delivery, where they have to have enough cash on hand to be able to buy the next load of gas?
So it depends upon when did they get a delivery, because almost every delivery is probably a different price, especially in the post-hurricane period. So you`ll have neighborhood variances based upon what the retailer expects to have to pay for his next load. That`s mostly what drives the local retail price.
Also, it depends how many stations nearby are competing.
So on the different corners of the street, people will be at a different level and so you`ll see stations ratcheting a penny or two pennies, whatever it may be. It`s actually very competitive on the street marketplace.
BECK: More phone calls here in just a second. Right after this.
BECK: The president, evil guy in chief at one of the big oil subsidiaries here, Shell, and the president, CEO, former of Shell Oil, it`s John Hofmeister.
You have always been a straight shooter with us and we really, really appreciate it. Thanks for taking the phone calls today.
We want to go to -- is it Brandon in Minnesota? Hi, Brandon.
ON THE PHONE, BRANDON IN MINNESOTA: Yes, that`s correct. Good evening, and is Mr. Hofmeister, you said it`s become really evident that we need something like a Manhattan style project to help build enough infrastructure to get us out of this lurch.
I`m wondering if World War II-style war bonds could be turned into, say, an energy bond program for today. To help give people something that they might think they could do to help out and would that kind of funding help accelerate energy development?
HOFMEISTER: Well, there`s actually a lot of private equity, private capital out there looking for a place to invest. If we had better plans, if we had some direction, some leadership, we know where to put the money.
BECK: It`s not really -- we don`t need --
HOFMEISTER: We don`t need to sell bonds. There`s plenty of money there.
BECK: All we need is government to get out of the way, right?
BECK: So let me ask you this. The big news today is the economy. And I really truly believe and have been saying this for a while. Prepare. We could hit another Great Depression.
If that happens, which I believe Congress caused and then made worse by doing nothing, then we`re hit by this oil. This energy crisis is coming of biblical portions, not anything like we have seen before. How long before it really hits?
HOFMEISTER: I think it`s hitting now, as we speak. The fact that we had these two hurricanes, Gustav and Ike, the fact that down in the southeast, you can`t buy gas, you can`t find it. You`re running around in the middle of the night trying to find a gas station that`s open. I asked the politicians, would you please consider odd-even purchasing, just to get us through this crisis. Nobody is willing to make a tough decision.
But the real issue is we are right at the edge of our own natural resources. We`re declining faster than we`re growing when it comes to hydrocarbons. We have some great ideas out there; T. Boone Pickens has some good ideas -- other good ideas, but we have political paralysis in Washington. We have partisan paralysis in Washington.
BECK: What a surprise. It`s the politicians.
HOFMEISTER: And who is in charge of Washington? We are.
BECK: Quickly give me the Website that people can go to.
BECK: John, it`s always been a pleasure, sir. Thank you very much for all the hard work you`re doing. John Hofmeister.
We will see you tomorrow night. From New York, good night, America.