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American Morning
Nation Squeezed by Energy Crunch
Aired May 08, 2001 - 09:01 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.
DARYN KAGAN, CNN ANCHOR: We're going to start with a nation squeezed in an energy crunch. Nothing funny about that. I saw those prices in Southern California -- the gas prices.
Across the U.S., consumers are caught in the grip of soaring gasoline prices and electricity shortages. For the fifth time this year, in fact, California has been hit with rolling blackouts. More than a hundred thousand customers endured hour-long power outages yesterday, and the state is likely facing even more dark days.
Let's check in now with Rusty Dornin.
(BEGIN VIDEOTAPE)
RUSTY DORNIN, CNN CORRESPONDENT (voice-over): Five years into deregulation, when it comes to California power, the only thing consumers can be sure about is, eventually, the lights will go out.
Following the first blackout in January, there were threats of more. There were. Threats the utilities would go bankrupt. One did. And threats things would get worse. They did.
Then there were the promises.
GOV. GRAY DAVIS (D), CALIFORNIA: Extraordinary efforts at conservation, extraordinary efforts at generation -- both are moving at warp speed. Together, we will get through this summer without major disruptions.
DORNIN: Now predictions of at least 40 days worth of disruptions, 40 days and 40 nights where millions of Californians can expect to be left in the dark.
UNIDENTIFIED CALIFORNIAN: I can't imagine that they would allow businesses to be turned off in the middle of the day.
DORNIN: The history: No new power plants built in 10 years. California's economy boomed, skyrocketing the demand for power. Prices for natural gas used to generate electricity went through the roof, too. Utilities were forced to buy power on the spot market, a market that behaves like any other commodity.
SEVERIN BORENSTEIN, UNIVERSITY OF CALIFORNIA ENERGY INSTITUTE: When the demand in the state is high enough, a producer knows that you can't meet all that demand without him. He can ask for any price he wants.
DORNIN: Not quite. Finally, after California begged the federal government to cap prices, the Federal Energy Regulatory Commission says it will impose a partial cap when power reserves fall below 7-1/2 percent of Stage 1 alert.
Everyday those who run the state's power grid search for sources. Some providers, like states in the Pacific Northwest, say no more. The states there, suffering from a drought, barely have enough water to generate their own hydroelectric power.
Conservation continues to be the buzz word in California, and new power plants are now given the fast track for approval. Still, no end in sight. More rolling blackouts mean Californians will be forced to roll with the punches.
Rusty Dornin, CNN, San Francisco.
(END VIDEOTAPE)
LEON HARRIS, CNN ANCHOR: Well, drivers in California and elsewhere are feeling powerless against high gasoline and diesel prices. In parts of the West and the Midwest, prices have shot past the $2-a-gallon mark, and now there's talk of gasoline reaching as high as $3 a gallon.
While one industry analyst is playing down that possibility, truck drivers are vocal about the soaring price of diesel fuel they're being hit with.
CNN national correspondent Eileen O'Connor at truck stop in Jessup, Maryland, this morning. Let's check in with her -- morning.
EILEEN O'CONNOR, CNN NATIONAL CORRESPONDENT: Good morning, Leon.
This is a popular truck stop along I-95 runs north and south along the East Coast of the United States. And with me is Jim Thomas who is one of the truckers who stops along this route.
Jim, tell me about your company and what these fuel prices are doing to you.
JIM THOMAS, TRUCKER: Well, I'm leased to Trans National Transportation (ph). We're a 48-state carrier. And the fuel prices now -- I'm spending about $1,500 a week just on fuel. I carry 300 gallons. So that's a little over $400 at current rates to fill up every time I stop in to get fuel. So it's cut into our profit margin terribly.
O'CONNOR: And what is your profit margin? Right now, fuel is $1.55 a gallon here, and it was as low as $1.39 just a couple of months ago. So that's 15 cents a gallon in the last couple of months. What has that done to your profit margin? I mean, how much are you making on the dollar?
THOMAS: Well, we're only making five cents. So, every time the fuel goes up five cents, as with the current mileage that we get, we're cutting into like a penny -- a penny every time into the profit. So, you know, at times, we're down to 2- or 3-cents-a-mile profit.
O'CONNOR: And when you -- you say that you've only got like -- you only can drive about hundred thousand miles a year. So that means your profit's is only what?
THOMAS: Twenty or thirty thousand a year at the most right now with -- because the prices of everything has gone up. Tires have gone up. You know, every -- everything goes -- that's related to the oil industry -- you know rubber costs and everything -- have gone up drastically over the last year. So it's hurting.
O'CONNOR: What happens to someone like you when -- when -- with -- the prices rise even further? They -- I heard there was 3,700 bankruptcies last year of the bigger companies and they're saying tens of thousands of the smaller.
THOMAS: Yeah. With -- I have lower operating overhead I can cut some, but if things don't happen over the next year, I'll be out of business just like they are at the end of the year.
O'CONNOR: And that is what some of the people in the trucking industry are predicting, Leon, that many of these small truckers could go bankrupt -- Leon.
HARRIS: All right. Thanks much. Eileen O'Connor. We'll be hearing that story quite often in the coming days no doubt. Coming months even. Thanks.
Well, the White House says that President Bush has no magic wand to make these soaring gas prices disappear. Spokesman Ari Fleischer says it's unlikely the president will support a repeal of the federal gas tax. Fleischer says that there are no easy answers here.
(BEGIN VIDEO CLIP)
ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: People too often move from one quick fix, one short-term non-solution, to the next short-term non-solution, without focusing people's attention on the big matters that really count, and in the case of energy, that's a focus on how to conserve energy, conserve fuel, develop more resources, have better infrastructure so that electricity can move across transmission grids and natural gas can move across pipelines in a manner that gets the product to the market, in a manner that lowers cost on a full-time basis for the consumer.
(END VIDEO CLIP)
HARRIS: Fleischer also says that the president does not believe that Americans should have to make major lifestyle changes to cope with the energy crunch.
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