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American Morning

No Relief in Sight For Gas Prices

Aired May 07, 2001 - 10:11   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.
KYRA PHILLIPS, CNN ANCHOR: That's where we're going to begin this hour: at your corner gas station, where the headlines are being made and you are paying the price.

U.S. gas prices have reached an all-time high, and in some areas, surged past the $2 mark. San Franciscans are paying $2.09 a gallon for regular. And the AAA survey shows Chicago clinging just below that mark at $1.97. Motorists in Philadelphia are shelling out $1.65. And Atlanta, where the lowest price is being reported, gas is ringing up $1.46 a gallon.

Now, for a closer look, we're joined on the telephone by Geoff Sundstrom, a spokesman for the AAA, the American Automobile Association.

Geoff, thanks for being with us.

GEOFF SUNDSTROM, AAA SPOKESMAN: Glad to be you.

PHILLIPS: All right, what the heck is going on? Can you give us some type of explanation?

SUNDSTROM: Well, we're having a replay of what we saw last year, except it's happening earlier. Yesterday, our calculation of fuel prices show that we've hit a new record all-time price for self-serve regular. And motorists across the country are feeling pain. Certainly, the highest prices are on the West Coast and in Chicago. But even in areas like the Southeast, we're setting records here.

PHILLIPS: And why are we facing such a problem?

SUNDSTROM: Well, we really believe that most of the problem has to do with the lack of refining ability in the United States for gasoline and also the imposition of cleaner burning fuel regulations in various places around the nation. There are about 14 different types of gasoline that need to be blended and distributed under these rules. And it's created all sorts of bottlenecks and problems for getting gasoline to market.

PHILLIPS: So are you recommending anything? Are you asking anything from the White House or -- what's your suggestion?

SUNDSTROM: Well, certainly we want to see the administration's national energy strategy. And we'd like Congress to pick that up immediately as urgent business. We're also asking that motorists and businesses adopt voluntary conservation measures this summer.

Quite frankly, when prices get this high -- we've had forecasts they may move significantly higher -- we're essentially facing a fuel shortage, so we need to conserve to the degree that we can. And...

PHILLIPS: Now, what -- I'm sorry go ahead.

SUNDSTROM: And one last thing we really want the White House to look at is whether the nation ought to move back to a single fuel standard and get rid of all of these micromanaging regulations at the local level.

PHILLIPS: Well, what about reformulated gasoline? Aren't there some requirements for that? Because that's supposed to limit pollution. And is that a problem here at all?

SUNDSTROM: Well, yes. These rules were put in place to clean the air, which is something we fully support and we don't want to see a retreat from. But the way that these rules have been put in -- and it's kind of an ad hoc, patchwork fashion -- have just created havoc in the gasoline industry. And we really need to find a way out of this mess.

PHILLIPS: Do you think it can get any worse? I mean, is there a point where prices just can't go any higher?

SUNDSTROM: Well, yes.

Unfortunately, it can get worse because we have such a restrained refining infrastructure. If we have severe maintenance problems or fires at critical refineries this summer, the potential does exist for gasoline shortages. And that's why we've asked the White House to declare that they will temporarily lift these regulations if it appears the gas shortage is inevitable in some areas.

PHILLIPS: All right, Geoff Sundstrom with AAA, thanks so much -- Leon.

LEON HARRIS, CNN ANCHOR: All right, well, let's go to the White House right now. Our Major Garrett is standing by there. We talked with him last hour about a totally different topic.

But as I understand it, Major, you've just spoken with Ari Fleischer there at the White House about gas prices?

MAJOR GARRETT, CNN CORRESPONDENT: That's right, Leon, in his morning talk -- chat off camera with reporters, Ari Fleischer was peppered with questions about this very topic -- soaring gasoline prices and what the White House can do, if anything, to address them. And the word from the White House is: not much relief in sight.

Ari Fleischer said, unless someone can show the president a magic wand to deal with price increases, there's really not much he can do. He said the energy crisis in this country is one of supply, but also one, as our guest just mentioned, of infrastructure -- Ari Fleischer pointing out that a new refinery to refine oil -- to turn it into gasoline -- hasn't been built in the United States in 25 years. He said the refining capacity is stretched almost to its limits, so even if the United States were to find new supplies it would be very hard to get them to consumers.

And as far as price controls -- to set a federal limit on how much a gallon of gasoline could cost -- Ari Fleischer said the White House simply will not go down that policy road. He said this White House believes that, in the 1970s, when the Carter White House did that, that caused problems to get much worse. Because consumers were shielded from higher prices, they consumed more; oil companies couldn't profit as much. Therefore, supplies were shrunk even more. Gas lines resulted. He said this White House simply will not put up with that kind of policy.

So a national energy policy, yes: one that will alleviate high gas prices this summer: no -- Leon.

HARRIS: All right, let's get back to the other topic we talked about earlier -- this meeting that Treasury Secretary Paul O'Neill is having this morning with small business leaders from around the country. What have you heard about what's going on with that?

GARRETT: Well, it's slightly interrelated a little bit, Leon. One thing the White House says: If, in fact energy prices go up, Americans are going to need tax relief to deal with it -- tax relief soon.

Now, part of that $1.35 trillion tax cut Congress has agreed to is some retroactive tax relief. But another big issue is how much to cut the highest income tax rate in this country. What is it now: 39.6 percent. What would the president like: 33 percent.

Now, a lot of Democrats have said, "Well that's all about giving a tax break to the wealthy." The White House and its economic advisers counter that many of those small businesses in the country pay that top rate. They don't pay a corporate income tax rate. They pay a high income tax rate -- almost 40 percent. Lowering that rate will allow small businesses to save more, profit more, hire more workers, which could alleviate some of the slowing of the economy in some crucial economic sectors.

So it's Small Business Week here in Washington. Small business leaders from around the country will be here -- the treasury secretary meets with them today. The president tomorrow will cast another light on this by awarding an award -- or giving an award, rather, to the small business leader of the year -- Leon.

HARRIS: All right, thanks much, Major Garrett reporting live from the White House this morning.

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