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CNN Live At Daybreak

Battle Over John Bolton; 'Business Buzz'; Why is Gas so High?

Aired April 12, 2005 - 06:32   ET

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

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


CAROL COSTELLO, CNN ANCHOR: Good morning to you. From the Time Warner center in New York, I'm Carol Costello, along with Chad Myers.
It is day of what promises to be another round of contentious confirmation hearings on Capitol Hill. The president has chosen John Bolton to be the next U.S. ambassador to the United Nations. But the nomination is prompting some choice words from Democrats.

CNN's Bill Prasad live in Washington for us this morning.

Good morning - Bill.

BILL PRASAD, CNN CORRESPONDENT: Good morning, Carol.

He is a tough-talking diplomat who is certainly getting an earful here in Washington. John Bolton wants to be America's face at the U.N., but first he must face off against Democrats and others.

(BEGIN VIDEOTAPE)

PRASAD (voice over): A protester vents her wrath against the president's nominee for ambassador to the U.N. Democrats throw the next punch.

SEN. JOSEPH BIDEN (D), DELAWARE: Some have said that sending you to New York would be like sending Nixon to China. I'm concerned it will be more like sending a bull into a china shop.

PRASAD: Career diplomat John Bolton is an arms specialist known for his blunt talk. Republicans say he's the man to push for U.N. reform.

SEN. GEORGE ALLEN (R), VIRGINIA: He'll bring a credibility to the United Nations that they sorely need.

PRASAD: But Democrats on the Senate Foreign Relations Committee confronted Bolton with videotape of a 1994 speech, saying it shows his disdain for the U.N.

JOHN BOLTON, U.S. AMBASSADOR NOMINEE.: The Secretariat building in New York has 38 stories. If you lost 10 stories today, it wouldn't make a bit of difference.

PRASAD: Bolton defended himself and the statement, saying for the U.N. to be effective, the U.S. must lead.

BOLTON: My criticisms during the 1990s were in large measure because of what I thought was the lack of effective American leadership.

PRASAD: Bolton said if he's confirmed, his priorities would include spreading democracy, supporting the fight against the AIDS epidemic and the war on terrorism.

BOLTON: This effort demand decisive American leadership, broad bipartisan support and the backing of the American public.

PRASAD: But first, he has to get the backing of a very partisan committee.

(END VIDEOTAPE)

Those hearings will resume later this morning at 9:30 Eastern Time. Lawmakers are expected to vote on the nomination on Thursday. Republicans currently have a majority in this committee, 10 to 8.

Carol -- back to you.

COSTELLO: Bill Prasad live in Washington. Thank you.

Former President Clinton wants to double the number of children getting treatment for HIV and AIDS. He has announced that his foundation will donate $10 million to expand treatment for children in the developing world. The former president says that funding could help as many as 15,000 children in most rural areas.

(BEGIN VIDEO CLIP)

WILLIAM J. CLINTON, FORMER PRESIDENT OF THE UNITED STATES: We've negotiated treatment with pharmaceutical companies and diagnostic testing companies that have cut the price of AIDS drugs and tests by 50 to 90 percent. And treatment and care are now more affordable in the developing world.

(END VIDEO CLIP)

COSTELLO: Now to another health issue and a tough question. Federal experts are trying to figure out, are silicone breast implants safe enough to go back on the market after 13 years? We talked about yesterday. The FDA is making the decision, and they're getting some emotional testimony on the issue. Listen.

(BEGIN VIDEO CLIP)

BRENNA DOWD, OPPOSES IMPLANTS: I have never known a healthy mother. Mommy never told people about all the times she has been unable to walk right, sometimes crawling, many times falling. She would never tell you about the times when she gets confused or when her legs hurt her so much she has to sit in a hot bath maybe three times a day or more just to ease the pain because of the silicone breast implants.

(END VIDEO CLIP)

COSTELLO: Two companies argue that newer generations of silicone gel breast implants are less prone to break and to leak. The FDA will begin deciding tomorrow whether it will reverse its ban on the implants.

CNN's Bill Hemmer joins us now for a look at what's coming up on "AMERICAN MORNING."

Good morning.

BILL HEMMER, CNN ANCHOR: Hey, Carol, good morning to you.

Carol, a question for you. How do you think money is handed out for homeland security? Would you believe some of it was put to spend on air conditioners and garbage trucks? Some of it was used to pay for bullet-proof vests, not for the police officers, but for their dogs. We'll talk to a lawmaker who wants to change all of that, starting today in fact. So, we'll get to that.

And millions of Americans suffer from migraines. And now a doctor in Ohio says he has a new way to get rid of the headaches involving plastic surgery. We'll page the good doctor on that topic. Sanjay has it this morning for us.

See you in about 22 minutes, Carol, on "AMERICAN MORNING.

COSTELLO: We'll be here.

HEMMER: All right.

COSTELLO: Thank you, Bill.

These days, it just takes two little words to get a lot of people fired up and talking: gas prices. What's really driving them up? And how can we bring them back down? We'll have some answers for you just ahead.

But first, here's a look at what else is making news this Tuesday morning.

(COMMERCIAL BREAK)

COSTELLO: It's time now for a little "Business Buzz." We all know gas prices have been soaring lately, hurting everyone who drives. But how much are those prices helping the companies selling the gas, as in profits?

Carrie Lee joins us with a look at the numbers.

CARRIE LEE, CNN FINANCIAL NEWS CORRESPONDENT: Well, I can tell you the biggest U.S.-based oil and gas company, ChevronTexaco, ExxonMobil and ConocoPhillips all saw their profits gain over 50 percent last year compared with 2003. So, they certainly are making a lot of money.

What people might not realize, though, is this doesn't all come from profits at the pump. These companies are so big and diverse that they make money by discovering the oil, refining it and selling it to us as gasoline.

So, how do they come up with these prices? Well, according to the Department of Energy, slightly more than half the price of a gallon of gas comes from the price of crude oil. Nearly a quarter of the price comes from the taxes. And the other 25 percent comes from refining costs as well as distribution and marketing.

Now, this is where companies have some wiggle room. As the oil companies become more efficient in their refining and distribution method, they can maximize their profit. But the most important factor in determining gas prices is how much those companies are paying for crude oil.

And yesterday in New York, trading crude oil closed near $54 a barrel. So, if gas prices have you over a barrel, well, I guess you'll have more on that -- Carol. Over a barrel, Carol. Like that?

COSTELLO: I did like that. It was very poetic. I'm just trying to get over the 50 percent increase in profits.

LEE: It has gone up a lot. And it trickles right on down.

COSTELLO: They're not giving us any discounts. I mean, they're not. They could, right?

LEE: They are hard to come by. Well, you know, there is all of this talk about price gouging at the pump and price fixing. But bottom line, most of the price of a gallon of gasoline comes from the beginning from crude oil.

COSTELLO: Yes. We're going to ask our expert next, because I'm going to ask Jack Otter of "Smart Money" magazine, because you would think that the oil companies could give us a break. Now, I'm not talking about the gas station owners. I'm talking about the oil companies themselves.

LEE: Well, I guess you could argue really why should they? They have their maximizing profits...

COSTELLO: Exactly.

LEE: ... at stake, right?

COSTELLO: Yes, it's the American way. Money, money, money. Thank you, Carrie. We appreciate it.

LEE: OK.

COSTELLO: If gas prices do have you over a barrel these days, you'll find this consumption breakdown very interesting. According to howstuffworks.com, one barrel of oil yields 20 gallons of gas. And Americans consume about 18 million barrels of oil each day. Multiply that times 20 gallons per barrel, and you get something like 360 million gallons of gasoline consumed every single day in the United States. That sounds like a whole lot of liquid. But when you consider that there are about 100 million households in the United States, it's only about 3.5 gallons per household per day. The problem is there are so many households, everybody is buying gas.

So that brings us back to our initial question. Exactly why does gasoline costs so much? We're going to let an expert explain that. Carrie Lee, she's going to stick around to help, and we're going to be joined -- we actually are joined by Jack Otter, an editor with "Smart Money" magazine. So, let's sort this all out.

Are we heading for $3 a gallon by summer or even more? Let's start with you, Jack. Do you think that's true?

JACK OTTER, "SMART MONEY" MAGAZINE: Well, I wouldn't make an exact prediction. Certainly, the momentum has been up. I think that we haven't seen the top yet. Economically speaking from the textbook, gas should be going down by now. I mean, really, it shouldn't cost that much more to buy a barrel of gas than it cost to produce a barrel of gas. And right now, it costs more than twice as much to buy one as it does to produce one.

So, as we talked about earlier, someone is making a lot of money there. And generally supply and demand tend to even out a little bit. So, prices should be coming down.

COSTELLO: OK. Well, let's talk about the people making the most money...

OTTER: Sure.

COSTELLO: ... which would be the oil companies. Why can't the oil companies cut us a break? Why are they taking all of those profits for themselves?

OTTER: Well, I suspect that if an oil company was losing money and they said, yes, we're losing money, we'd like everybody just to give us a little bit, I don't think that would happen.

Now, I will say -- and this is, I think, very good news for consumers -- oil companies think that the price is coming down. And a great proof of that is they are actually going into the futures market and they are buying the right to sell you a barrel of gas two years from now at 50 bucks. If they thought it was going to cost $70 two years from now, they wouldn't be doing that. They think it's going down. So, they're trying to lock in this price right now.

So, clearly, the people who know probably better than anyone else think the price of oil is coming down.

COSTELLO: Yes. But isn't part of the reason for the high price of gas, from the oil company perspective, speculation about what the price of a barrel of oil will be?

LEE: Well, that would actually be my question to Jack. How much of this is speculation? How much of this is built in? OTTER: That's a very important point.

LEE: Because we've seen prices come down over the past week, but really soaring before that. A lot of people are betting on the futures.

OTTER: Absolutely. And this has nothing to do with the oil companies. I think it's mainly hedged funds and big institutional money. It's not your broker who is doing this. But the big hedge funds have put huge bets on the oil futures market. And that's why it's been moving so rapidly.

I mean, obviously, motorized Stephen (ph), if you're driving a Navigator, you're not going to spike the oil market that much. But when the hedge funds dump big bucks in there, that sends it up. And, of course, that speculation can plummet just as quickly as it can rise.

COSTELLO: Well, you know, they might hurt themselves in the end, because on CNN.com, there's a story about the Prius, the hybrid car. People are actually selling -- and this is interesting. They're actually selling their used Prius for more than they bought them for to people who want to conserve energy. And that's really the only way that, you know, you and I can combat high gas prices is to control our consumption.

OTTER: Well, absolutely. And if everyone switched to a Prius or, heck, if everyone switched to a sedan from an SUV, the price of gasoline would plummet. I mean, it would just absolutely dive. That's where it comes down to is, we're driving a lot. We're filling up these big vehicles with a whole of gasoline. And it's supply and demand. We're sending the price up.

COSTELLO: Yes, but aren't SUV sales down now?

LEE: SUV sales are starting to take a hit, big truck sales. We heard from Ford talking about just that yesterday. I guess my quick question is, how much of it really has to do with U.S. driving habits? And how much of it has to do with demand for oil from countries like China? I would think driving habits of U.S. consumers is really a drop in the bucket compared to the latter.

OTTER: Well, actually psychologically, the China factor is bigger. But for all of the talk of China, do you know the economy of China is about the same size of Italy's? And we're not worried much about Italy's demand for commodities or something. So, I think China -- the fear of China certainly sends prices up. But American demand is way, way higher than China's.

But also, it is kind of -- forgive the cliche -- it's a perfect storm. I mean, we know the countries that sit on top of the oil, there's a lot of political turmoil. You've got the hedge funds. You've got China demand. You've got American SUVs. You've got a fear among some people that we might actually be reaching the point where the world capacity to produce oil is about even with demand. And if that's true, then the whole game changes. And who knows how high the price can go until we stop using the stuff?

COSTELLO: We could talk about this forever. Jack Otter, thank you very much. Carrie Lee, thanks as always.

LEE: Sure.

COSTELLO: We appreciate it.

A suspect on the run. Now police warn about what a wanted man could do next. They need your help this morning. We'll have more on that story when DAYBREAK continues.

(COMMERCIAL BREAK)

COSTELLO: It's 6:51 Eastern. Here is what will be making news today.

Defense Secretary Donald Rumsfeld is in Iraq for a brief unannounced visit. He's meeting with some of the newly-elected Iraqi leaders, along with U.S. commanders and some troops on the ground.

John Negroponte, President Bush's choice for national intelligence director, gets grilled by a Senate committee today. Both sides of the aisle support Negroponte, but Democrats are likely to grill him on intelligence mistakes made before the Iraq war.

And Terri Schiavo's parents will attend a memorial service in her honor today in Jacksonville, Florida. The memorial is being sponsored by the Justice Coalition. The Schlinders hosted their own memorial for their daughter last week. Husband Michael Schiavo hasn't yet announced the date for Terri Schiavo's funeral in Pennsylvania.

A nationwide alert has been issued for a 37-year-old ex-con from South Carolina suspected of killing a woman he lived with and then shooting another man to death. Police say Stephen Stanko is considered armed and dangerous.

Mike Hughes from CNN affiliate WCSC has more on the search in Myrtle Beach, South Carolina.

(BEGIN VIDEOTAPE)

MIKE HUGHES, CNN AFFILIATE WCSC REPORTER (voice over): Cops say ex-convict Stephen Stanko may run, but they're hoping he can't hide for long.

LT. ANDY CHRISTENSON, HORRY CO. SOUTH CAROLINA POLICE: We're doing everything within our arsenal to locate this individual. We have sent a nationwide BOLO. So, it's not only been sent throughout the state of South Carolina, but it's been sent nationwide.

HUGHES: That BOLO, or "be on the lookout," is an electronic message sent to law enforcement agencies across the country detailing the suspect's description and any possible getaway vehicles he may be in. Cops say Stanko's rap sheet has grown quickly. He is accused of killing a 43-year-old woman, killing a 74-year-old man, sexually assaulting a teenager, and stealing two vehicles. The alleged crimes all carried out in a 24-mile radius between Murrells Inlet and Conway within a 24-hour period.

An alert was last sent out to people on the watch for Stanko driving in a black Mazda pickup truck, like this one, South Carolina license plate 709 PYJ. But as time passes, police say Stanko's getaway plan is likely to change.

CHRISTENSON: He may try to get another vehicle. He's obviously at some point going to run out of money and have the need for money to continue his ability to flee. So, who knows what he's capable of?

HUGHES: And until this felon is caught...

CHRISTENSON: We're asking people to just kind of heighten their threat level and be aware that this individual is out there. He's on the loose. Keep your doors locked. Keep your houses lit up at night. Be vigilant. Be cautious.

(END VIDEOTAPE)

COSTELLO: That was Mike Hughes from our Charleston, South Carolina, affiliate WCSC.

I want you take a look at this license plate number, 709 PYJ. It's a South Carolina plate. If you see a car with this license plate, please call the Horry County police at 843-248-1520 or the Georgetown County sheriff's office, 843-546-5102. Again, that license plate number, 709 PYJ.

Ironically, the suspect, Stephen Stanko, once co-wrote a book about prison life. For more on that, let's check in with CNN's Bill Hemmer for a look at what's -- actually, it's Soledad. I'm sorry, Soledad.

SOLEDAD O'BRIEN, CNN ANCHOR: You can call me Bill. That's all right. Thank you, Bill. We answer to each other's names. It's much more efficient that way.

Hey, Carol, good morning to you.

A serious story to talk about obviously that you've been discussing as well. This morning, we talk to that college professor who co-wrote that book with Stephen Stanko. They worked together while Stanko was serving time for kidnapping and assault and battery. He says that the suspect was a model prisoner, and he's stunned by these allegations. We're going to ask him what he thinks may have made Stanko snap.

Also this morning, we're talking about hundreds of thousands of American jobs getting shipped overseas. Cheap labor may not just be the main reason. A "New York Times" columnist, Thomas Freidman (ph), joins us, to tell us why India and now especially China have become such huge threats to U.S. jobs.

Those stories are ahead this morning, Carol, at the top of the hour. We'll see you then.

COSTELLO: We will. Thank you, Soledad.

This is DAYBREAK for a Tuesday morning.

(COMMERCIAL BREAK)

COSTELLO: A little Beck this morning, Chad.

MYERS: Nice sunrise there, too, of the Hudson River.

COSTELLO: It is. It's going to be a little chilly, but at least the sun will be out.

(WEATHER REPORT)

MYERS: Carol, do you what time it is?

COSTELLO: I believe it's time to give away the DAYBREAK coffee mug.

MYERS: You have it in your hand. Here it is, the questions and the answers from yesterday. The safety of what surgical device is being considered by an FDA panel? Those are the silicone breast implants. And who is the creator of "Desperate Housewives?" And that was Mark Cherry.

We had 500 or so correct answers. And the winner, Kelly Meyer, no relation. I think you've got to put an "s" on the end anyway. From St. Charles, Illinois. Kelly, congratulations. The mug is in the mail.

And now the questions for today. I hope you were with us for the very exciting almost story about all of the allergy things. What vitamin offers relief from allergy symptoms? And how many gallons of gas per day do Americans use on average? How many gallons of gas do Americans use?

DAYBREAK. Go to CNN.com/daybreak for your answers.

COSTELLO: Good luck.

MYERS: OK.

COSTELLO: From the Time Warner center, I'm Carol Costello, along with Chad Myers. "AMERICAN MORNING" starts right now.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.


Aired April 12, 2005 - 06:32   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: Good morning to you. From the Time Warner center in New York, I'm Carol Costello, along with Chad Myers.
It is day of what promises to be another round of contentious confirmation hearings on Capitol Hill. The president has chosen John Bolton to be the next U.S. ambassador to the United Nations. But the nomination is prompting some choice words from Democrats.

CNN's Bill Prasad live in Washington for us this morning.

Good morning - Bill.

BILL PRASAD, CNN CORRESPONDENT: Good morning, Carol.

He is a tough-talking diplomat who is certainly getting an earful here in Washington. John Bolton wants to be America's face at the U.N., but first he must face off against Democrats and others.

(BEGIN VIDEOTAPE)

PRASAD (voice over): A protester vents her wrath against the president's nominee for ambassador to the U.N. Democrats throw the next punch.

SEN. JOSEPH BIDEN (D), DELAWARE: Some have said that sending you to New York would be like sending Nixon to China. I'm concerned it will be more like sending a bull into a china shop.

PRASAD: Career diplomat John Bolton is an arms specialist known for his blunt talk. Republicans say he's the man to push for U.N. reform.

SEN. GEORGE ALLEN (R), VIRGINIA: He'll bring a credibility to the United Nations that they sorely need.

PRASAD: But Democrats on the Senate Foreign Relations Committee confronted Bolton with videotape of a 1994 speech, saying it shows his disdain for the U.N.

JOHN BOLTON, U.S. AMBASSADOR NOMINEE.: The Secretariat building in New York has 38 stories. If you lost 10 stories today, it wouldn't make a bit of difference.

PRASAD: Bolton defended himself and the statement, saying for the U.N. to be effective, the U.S. must lead.

BOLTON: My criticisms during the 1990s were in large measure because of what I thought was the lack of effective American leadership.

PRASAD: Bolton said if he's confirmed, his priorities would include spreading democracy, supporting the fight against the AIDS epidemic and the war on terrorism.

BOLTON: This effort demand decisive American leadership, broad bipartisan support and the backing of the American public.

PRASAD: But first, he has to get the backing of a very partisan committee.

(END VIDEOTAPE)

Those hearings will resume later this morning at 9:30 Eastern Time. Lawmakers are expected to vote on the nomination on Thursday. Republicans currently have a majority in this committee, 10 to 8.

Carol -- back to you.

COSTELLO: Bill Prasad live in Washington. Thank you.

Former President Clinton wants to double the number of children getting treatment for HIV and AIDS. He has announced that his foundation will donate $10 million to expand treatment for children in the developing world. The former president says that funding could help as many as 15,000 children in most rural areas.

(BEGIN VIDEO CLIP)

WILLIAM J. CLINTON, FORMER PRESIDENT OF THE UNITED STATES: We've negotiated treatment with pharmaceutical companies and diagnostic testing companies that have cut the price of AIDS drugs and tests by 50 to 90 percent. And treatment and care are now more affordable in the developing world.

(END VIDEO CLIP)

COSTELLO: Now to another health issue and a tough question. Federal experts are trying to figure out, are silicone breast implants safe enough to go back on the market after 13 years? We talked about yesterday. The FDA is making the decision, and they're getting some emotional testimony on the issue. Listen.

(BEGIN VIDEO CLIP)

BRENNA DOWD, OPPOSES IMPLANTS: I have never known a healthy mother. Mommy never told people about all the times she has been unable to walk right, sometimes crawling, many times falling. She would never tell you about the times when she gets confused or when her legs hurt her so much she has to sit in a hot bath maybe three times a day or more just to ease the pain because of the silicone breast implants.

(END VIDEO CLIP)

COSTELLO: Two companies argue that newer generations of silicone gel breast implants are less prone to break and to leak. The FDA will begin deciding tomorrow whether it will reverse its ban on the implants.

CNN's Bill Hemmer joins us now for a look at what's coming up on "AMERICAN MORNING."

Good morning.

BILL HEMMER, CNN ANCHOR: Hey, Carol, good morning to you.

Carol, a question for you. How do you think money is handed out for homeland security? Would you believe some of it was put to spend on air conditioners and garbage trucks? Some of it was used to pay for bullet-proof vests, not for the police officers, but for their dogs. We'll talk to a lawmaker who wants to change all of that, starting today in fact. So, we'll get to that.

And millions of Americans suffer from migraines. And now a doctor in Ohio says he has a new way to get rid of the headaches involving plastic surgery. We'll page the good doctor on that topic. Sanjay has it this morning for us.

See you in about 22 minutes, Carol, on "AMERICAN MORNING.

COSTELLO: We'll be here.

HEMMER: All right.

COSTELLO: Thank you, Bill.

These days, it just takes two little words to get a lot of people fired up and talking: gas prices. What's really driving them up? And how can we bring them back down? We'll have some answers for you just ahead.

But first, here's a look at what else is making news this Tuesday morning.

(COMMERCIAL BREAK)

COSTELLO: It's time now for a little "Business Buzz." We all know gas prices have been soaring lately, hurting everyone who drives. But how much are those prices helping the companies selling the gas, as in profits?

Carrie Lee joins us with a look at the numbers.

CARRIE LEE, CNN FINANCIAL NEWS CORRESPONDENT: Well, I can tell you the biggest U.S.-based oil and gas company, ChevronTexaco, ExxonMobil and ConocoPhillips all saw their profits gain over 50 percent last year compared with 2003. So, they certainly are making a lot of money.

What people might not realize, though, is this doesn't all come from profits at the pump. These companies are so big and diverse that they make money by discovering the oil, refining it and selling it to us as gasoline.

So, how do they come up with these prices? Well, according to the Department of Energy, slightly more than half the price of a gallon of gas comes from the price of crude oil. Nearly a quarter of the price comes from the taxes. And the other 25 percent comes from refining costs as well as distribution and marketing.

Now, this is where companies have some wiggle room. As the oil companies become more efficient in their refining and distribution method, they can maximize their profit. But the most important factor in determining gas prices is how much those companies are paying for crude oil.

And yesterday in New York, trading crude oil closed near $54 a barrel. So, if gas prices have you over a barrel, well, I guess you'll have more on that -- Carol. Over a barrel, Carol. Like that?

COSTELLO: I did like that. It was very poetic. I'm just trying to get over the 50 percent increase in profits.

LEE: It has gone up a lot. And it trickles right on down.

COSTELLO: They're not giving us any discounts. I mean, they're not. They could, right?

LEE: They are hard to come by. Well, you know, there is all of this talk about price gouging at the pump and price fixing. But bottom line, most of the price of a gallon of gasoline comes from the beginning from crude oil.

COSTELLO: Yes. We're going to ask our expert next, because I'm going to ask Jack Otter of "Smart Money" magazine, because you would think that the oil companies could give us a break. Now, I'm not talking about the gas station owners. I'm talking about the oil companies themselves.

LEE: Well, I guess you could argue really why should they? They have their maximizing profits...

COSTELLO: Exactly.

LEE: ... at stake, right?

COSTELLO: Yes, it's the American way. Money, money, money. Thank you, Carrie. We appreciate it.

LEE: OK.

COSTELLO: If gas prices do have you over a barrel these days, you'll find this consumption breakdown very interesting. According to howstuffworks.com, one barrel of oil yields 20 gallons of gas. And Americans consume about 18 million barrels of oil each day. Multiply that times 20 gallons per barrel, and you get something like 360 million gallons of gasoline consumed every single day in the United States. That sounds like a whole lot of liquid. But when you consider that there are about 100 million households in the United States, it's only about 3.5 gallons per household per day. The problem is there are so many households, everybody is buying gas.

So that brings us back to our initial question. Exactly why does gasoline costs so much? We're going to let an expert explain that. Carrie Lee, she's going to stick around to help, and we're going to be joined -- we actually are joined by Jack Otter, an editor with "Smart Money" magazine. So, let's sort this all out.

Are we heading for $3 a gallon by summer or even more? Let's start with you, Jack. Do you think that's true?

JACK OTTER, "SMART MONEY" MAGAZINE: Well, I wouldn't make an exact prediction. Certainly, the momentum has been up. I think that we haven't seen the top yet. Economically speaking from the textbook, gas should be going down by now. I mean, really, it shouldn't cost that much more to buy a barrel of gas than it cost to produce a barrel of gas. And right now, it costs more than twice as much to buy one as it does to produce one.

So, as we talked about earlier, someone is making a lot of money there. And generally supply and demand tend to even out a little bit. So, prices should be coming down.

COSTELLO: OK. Well, let's talk about the people making the most money...

OTTER: Sure.

COSTELLO: ... which would be the oil companies. Why can't the oil companies cut us a break? Why are they taking all of those profits for themselves?

OTTER: Well, I suspect that if an oil company was losing money and they said, yes, we're losing money, we'd like everybody just to give us a little bit, I don't think that would happen.

Now, I will say -- and this is, I think, very good news for consumers -- oil companies think that the price is coming down. And a great proof of that is they are actually going into the futures market and they are buying the right to sell you a barrel of gas two years from now at 50 bucks. If they thought it was going to cost $70 two years from now, they wouldn't be doing that. They think it's going down. So, they're trying to lock in this price right now.

So, clearly, the people who know probably better than anyone else think the price of oil is coming down.

COSTELLO: Yes. But isn't part of the reason for the high price of gas, from the oil company perspective, speculation about what the price of a barrel of oil will be?

LEE: Well, that would actually be my question to Jack. How much of this is speculation? How much of this is built in? OTTER: That's a very important point.

LEE: Because we've seen prices come down over the past week, but really soaring before that. A lot of people are betting on the futures.

OTTER: Absolutely. And this has nothing to do with the oil companies. I think it's mainly hedged funds and big institutional money. It's not your broker who is doing this. But the big hedge funds have put huge bets on the oil futures market. And that's why it's been moving so rapidly.

I mean, obviously, motorized Stephen (ph), if you're driving a Navigator, you're not going to spike the oil market that much. But when the hedge funds dump big bucks in there, that sends it up. And, of course, that speculation can plummet just as quickly as it can rise.

COSTELLO: Well, you know, they might hurt themselves in the end, because on CNN.com, there's a story about the Prius, the hybrid car. People are actually selling -- and this is interesting. They're actually selling their used Prius for more than they bought them for to people who want to conserve energy. And that's really the only way that, you know, you and I can combat high gas prices is to control our consumption.

OTTER: Well, absolutely. And if everyone switched to a Prius or, heck, if everyone switched to a sedan from an SUV, the price of gasoline would plummet. I mean, it would just absolutely dive. That's where it comes down to is, we're driving a lot. We're filling up these big vehicles with a whole of gasoline. And it's supply and demand. We're sending the price up.

COSTELLO: Yes, but aren't SUV sales down now?

LEE: SUV sales are starting to take a hit, big truck sales. We heard from Ford talking about just that yesterday. I guess my quick question is, how much of it really has to do with U.S. driving habits? And how much of it has to do with demand for oil from countries like China? I would think driving habits of U.S. consumers is really a drop in the bucket compared to the latter.

OTTER: Well, actually psychologically, the China factor is bigger. But for all of the talk of China, do you know the economy of China is about the same size of Italy's? And we're not worried much about Italy's demand for commodities or something. So, I think China -- the fear of China certainly sends prices up. But American demand is way, way higher than China's.

But also, it is kind of -- forgive the cliche -- it's a perfect storm. I mean, we know the countries that sit on top of the oil, there's a lot of political turmoil. You've got the hedge funds. You've got China demand. You've got American SUVs. You've got a fear among some people that we might actually be reaching the point where the world capacity to produce oil is about even with demand. And if that's true, then the whole game changes. And who knows how high the price can go until we stop using the stuff?

COSTELLO: We could talk about this forever. Jack Otter, thank you very much. Carrie Lee, thanks as always.

LEE: Sure.

COSTELLO: We appreciate it.

A suspect on the run. Now police warn about what a wanted man could do next. They need your help this morning. We'll have more on that story when DAYBREAK continues.

(COMMERCIAL BREAK)

COSTELLO: It's 6:51 Eastern. Here is what will be making news today.

Defense Secretary Donald Rumsfeld is in Iraq for a brief unannounced visit. He's meeting with some of the newly-elected Iraqi leaders, along with U.S. commanders and some troops on the ground.

John Negroponte, President Bush's choice for national intelligence director, gets grilled by a Senate committee today. Both sides of the aisle support Negroponte, but Democrats are likely to grill him on intelligence mistakes made before the Iraq war.

And Terri Schiavo's parents will attend a memorial service in her honor today in Jacksonville, Florida. The memorial is being sponsored by the Justice Coalition. The Schlinders hosted their own memorial for their daughter last week. Husband Michael Schiavo hasn't yet announced the date for Terri Schiavo's funeral in Pennsylvania.

A nationwide alert has been issued for a 37-year-old ex-con from South Carolina suspected of killing a woman he lived with and then shooting another man to death. Police say Stephen Stanko is considered armed and dangerous.

Mike Hughes from CNN affiliate WCSC has more on the search in Myrtle Beach, South Carolina.

(BEGIN VIDEOTAPE)

MIKE HUGHES, CNN AFFILIATE WCSC REPORTER (voice over): Cops say ex-convict Stephen Stanko may run, but they're hoping he can't hide for long.

LT. ANDY CHRISTENSON, HORRY CO. SOUTH CAROLINA POLICE: We're doing everything within our arsenal to locate this individual. We have sent a nationwide BOLO. So, it's not only been sent throughout the state of South Carolina, but it's been sent nationwide.

HUGHES: That BOLO, or "be on the lookout," is an electronic message sent to law enforcement agencies across the country detailing the suspect's description and any possible getaway vehicles he may be in. Cops say Stanko's rap sheet has grown quickly. He is accused of killing a 43-year-old woman, killing a 74-year-old man, sexually assaulting a teenager, and stealing two vehicles. The alleged crimes all carried out in a 24-mile radius between Murrells Inlet and Conway within a 24-hour period.

An alert was last sent out to people on the watch for Stanko driving in a black Mazda pickup truck, like this one, South Carolina license plate 709 PYJ. But as time passes, police say Stanko's getaway plan is likely to change.

CHRISTENSON: He may try to get another vehicle. He's obviously at some point going to run out of money and have the need for money to continue his ability to flee. So, who knows what he's capable of?

HUGHES: And until this felon is caught...

CHRISTENSON: We're asking people to just kind of heighten their threat level and be aware that this individual is out there. He's on the loose. Keep your doors locked. Keep your houses lit up at night. Be vigilant. Be cautious.

(END VIDEOTAPE)

COSTELLO: That was Mike Hughes from our Charleston, South Carolina, affiliate WCSC.

I want you take a look at this license plate number, 709 PYJ. It's a South Carolina plate. If you see a car with this license plate, please call the Horry County police at 843-248-1520 or the Georgetown County sheriff's office, 843-546-5102. Again, that license plate number, 709 PYJ.

Ironically, the suspect, Stephen Stanko, once co-wrote a book about prison life. For more on that, let's check in with CNN's Bill Hemmer for a look at what's -- actually, it's Soledad. I'm sorry, Soledad.

SOLEDAD O'BRIEN, CNN ANCHOR: You can call me Bill. That's all right. Thank you, Bill. We answer to each other's names. It's much more efficient that way.

Hey, Carol, good morning to you.

A serious story to talk about obviously that you've been discussing as well. This morning, we talk to that college professor who co-wrote that book with Stephen Stanko. They worked together while Stanko was serving time for kidnapping and assault and battery. He says that the suspect was a model prisoner, and he's stunned by these allegations. We're going to ask him what he thinks may have made Stanko snap.

Also this morning, we're talking about hundreds of thousands of American jobs getting shipped overseas. Cheap labor may not just be the main reason. A "New York Times" columnist, Thomas Freidman (ph), joins us, to tell us why India and now especially China have become such huge threats to U.S. jobs.

Those stories are ahead this morning, Carol, at the top of the hour. We'll see you then.

COSTELLO: We will. Thank you, Soledad.

This is DAYBREAK for a Tuesday morning.

(COMMERCIAL BREAK)

COSTELLO: A little Beck this morning, Chad.

MYERS: Nice sunrise there, too, of the Hudson River.

COSTELLO: It is. It's going to be a little chilly, but at least the sun will be out.

(WEATHER REPORT)

MYERS: Carol, do you what time it is?

COSTELLO: I believe it's time to give away the DAYBREAK coffee mug.

MYERS: You have it in your hand. Here it is, the questions and the answers from yesterday. The safety of what surgical device is being considered by an FDA panel? Those are the silicone breast implants. And who is the creator of "Desperate Housewives?" And that was Mark Cherry.

We had 500 or so correct answers. And the winner, Kelly Meyer, no relation. I think you've got to put an "s" on the end anyway. From St. Charles, Illinois. Kelly, congratulations. The mug is in the mail.

And now the questions for today. I hope you were with us for the very exciting almost story about all of the allergy things. What vitamin offers relief from allergy symptoms? And how many gallons of gas per day do Americans use on average? How many gallons of gas do Americans use?

DAYBREAK. Go to CNN.com/daybreak for your answers.

COSTELLO: Good luck.

MYERS: OK.

COSTELLO: From the Time Warner center, I'm Carol Costello, along with Chad Myers. "AMERICAN MORNING" starts right now.

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