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American Morning

Price of Oil Shooting Up; Iraq, Brand New Government Still Powder Keg

Aired June 02, 2004 - 07:00   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.


BILL HEMMER, CNN ANCHOR: Good morning. The price of oil shooting up. It's biggest one-day jump in more than a decade. How much money are you paying for fear?
Iraq and its brand new government still a powder keg, though. Another explosion in Baghdad today.

And from Florida the firefighters there battling the blazes and waiting for rain. Hoping it will come on this AMERICAN MORNING.

ANNOUNCER: From the CNN Broadcast Center in New York, this is AMERICAN MORNING with Bill Hemmer and Soledad O'Brien.

HEMMER: All right, welcome to Wednesday everybody. Good morning here with the birthday girl on the day after. How was it last night?

HEIDI COLLINS, CNN ANCHOR: It was great.

HEMMER: Did you have a big fat steak here in New York City?

COLLINS: Steak and lobster. Three pounds. I'm still recovering.

HEMMER: Bring any of that home?

COLLINS: Yes.

HEMMER: Oh, you did? Nice. Lunch is served later here on AMERICAN MORNING.

Morning everybody. Heidi Collins working for Soledad again today. A lot of news to talk about today.

Saudi Arabia making news, reportedly promising to support an increase in OPEC production after the oil price shot up another $2.45 a barrel yesterday.

Andy is standing by; has more on that; tell us what's driving up the prices and how long it will take for you to feel the pain at the pump. We'll get to that in a moment.

COLLINS: We will. And also still a lot of questions today about the new Iraqi government and the U.S. occupation forces. We're going to find out how this relationship is expected to work when we're joined by the senior adviser to the coalition, Dan Senor. HEMMER: Also the defense will get a chance today in opening statements today in the Scott Peterson matter -- dramatic day yesterday. If you listened to some of the testimony that was offered there, the photos that were shown in court -- Jeff Toobin stops by to tell us how things are going on day one there in California.

COLLINS: A difficult day for both families, I think.

Jack Cafferty joining us now.

JACK CAFFERTY, CNN ANCHOR: Morning. Peterson is toast.

COLLINS: You think?

CAFFERTY: Just a thought.

Speaking of toast, Ken Lay, are you listening? The Enron employees -- and -- CBS News has tapes of this -- gloating over the skyrocketing prices of energy at a time that California was going through its worst energy crisis ever.

There are tapes of this, and Ken Lay and Jeff Skilling and all the lads are implicated. It's pretty ugly stuff. We'll take a look at it.

HEMMER: Thank you, Jack.

COLLINS: All right, Jack. Thanks so much.

Oil prices as we are talking about this morning, hit an all-time record high with crude oil now topping $42 a barrel.

The rising prices and latest pain at the pump comes as energy consumption has climbed steadily in the last four decades.

Gasoline is the single largest energy product consumed in the U.S. Consumption has been rising since the 1950s, and today the U.S. imports 60 percent of its oil.

Is there any relief in sight?

That is the question everyone wants to know the answer to, so Andy Serwer is here. What's the answer?

ANDY SERWER, "FORTUNE" MAGAZINE: Well, we really don't know right now, but let's sort of take a step back and talk about why the price of oil has gone up so much. Improving economy, that's right, here in the U.S. Also, increased demand from places like China.

Number two, low inventories, and number three, is terrorism, Heidi, and that's the real problem and that's sort of the intangible.

Right now analysts think the price of oil is probably five to $12 a barrel higher because of fear of terrorism disrupting supplies, particularly in Saudi Arabia. What does that translate to at the pump? Maybe as much as 36 cents a gallon of your $2 and say 15 cents a gallon you are paying is because of terrorism.

So going forward, you know this fear factor is what's really holding the price up. Tomorrow OPEC ministers meeting in Beirut. They're going to try to increase supply but because they've been pumping at near capacity they probably don't have enough room. What will keep the price down, or what will get it down, ultimately, is the dissipation of this fear factor and that is what is so difficult because of course that's such an intangible.

COLLINS: Yes, it absolutely is, and you were saying actually earlier when we were talking, that it translates overall to your wallet per week by how much?

SERWER: Well, seven to ten dollars is what people are suggesting. That's taking seven to ten dollars out of the average Americans pocket and putting it right in your gas pump, and you know that of course is like a giant tax on the American economy. It really is.

I mean, I filled up my Ford Explorer over the weekend, paid $2.17 a gallon. $35 to drive around Memorial Day and that's just a lot more than we're used to paying.

COLLINS: All right, Andy. Got to quit driving around, I guess.

SERWER: Yes, start hitchhiking.

COLLINS: All right, Andy thanks so much for that.

SERWER: You're welcome.

COLLINS: The FBI has put on a nationwide alert now for two propane tanker trucks stolen in Texas. The tankers loaded with volatile propane vanished from a San Antonio gas company over the weekend.

The FBI says propane is one of the elements that terrorists have trained on, but the San Antonio Police Department does not suspect terrorism.

They say propane thefts often happen in South Texas because it's close to northern Mexico where residents commonly use that kind of fuel.

HEMMER: About five minutes past the hour.

With the issue of Iraq now front and center, where some reports from the scene say a car bomb explosion today killed at least two and injured more than a dozen others.

Police say it happened in a Sunni Muslim district that had strongly supported Saddam Hussein's regime. That blast came as Iraqis were being urged to embrace that newly announced interim government. That happened yesterday and then more toward the national elections maybe in January of next year.

Dan Senor is senior adviser to Coalition Provisional Authority live from Baghdad to talk about a number of issues today, and welcome back here to AMERICAN MORNING. Good to have you with us.

DAN SENOR, SENIOR ADVISER TO COALITION PROVISIONAL AUTHORITY: Good to be with you, Bill.

HEMMER: Listen, the government has been introduced, the Council has ended its work -- is the handover effectively over? Is it over now?

SENOR: No, the handover, the formal handover, Bill, is on June 30.

What is happening now is interim period. I'd say its analogous to the period between, in our country in the United States when a president is elected and when he's sworn into office.

During those -- during that interim period, the president is putting together his administration, building up his government, and preparing an agenda for the post-inauguration day period.

That's what's going on now. The prime minister is building up his government, preparing his agenda, talking to Iraqis, talking to advisers, and assuming more and more authority, but the formal hand off will be on the 30th of June.

HEMMER: So you would dismiss those who say the next month is just ceremonial?

SENOR: Oh, absolutely. It is not ceremonial at all. The prime minister today had a meeting with American military commanders beginning to address his number one priority as he articulated yesterday in his address: security. And he certainly wants Iraqis to play a more prominent role in the security situation on the ground here, as do we.

He had a -- he has his first cabinet meeting going on at 8 a.m. your time this morning, 4:00 for us. So he's fast at work.

HEMMER: I want to get to the issue of security and the U.S. military and its role in a moment here, but there was a sense yesterday at the White House listening to the president -- many reporters there felt that the president looked and felt somewhat relieved.

What was the attitude in Baghdad with the action yesterday?

SENOR: Very positive. You know, Bill, we have said for some time we are going to have some really bad days here, but we are also going to have some good days and the good days in this part of the world are really when we talk about good days are really unprecedented.

When you have a government formed as diverse as the government that was stood up yesterday with for instance six women, a higher percentage of women in the cabinet than probably most governments in the world, and a government that is committed to the ideals and principles enshrined in Iraq's interim constitution, individual liberties, certain protections for minority rights, principles like federalism, civilian control of the military.

When you stand up a government that's committed to those things and is committed to winning the war on terrorism here in Iraq, it's a really good day, so we were -- we were quite positive based on yesterday's events and are looking forward to the prime minister asserting his leadership in the weeks ahead.

HEMMER: On this side of the world, here in the city of New York, the U.N. resolution now being introduced by the U.S. and the Brits that will essentially give the Iraqis more control over its own security and do that much sooner than a lot of people probably thought in the first place. If that's the case, what's the role for the U.S. military?

SENOR: You know, I don't want to prejudge the outcome of those discussions in New York. I point to what the prime minister said yesterday.

On the one hand, he said that he wants Iraqis to have a significant role, but he also made a recognition that there is a major terrorist threat in Iraq and the Iraqi security forces right now and immediately after June 30 will not be in a position to handle the threat on their own, and they need the continued support of the U.S. and the multinational force.

It's quite logical. Bill, we have relationships all over the world where U.S. forces are stationed in a foreign country. In some cases, those relationships have gone on some 50 years whether it be in Korea or Germany.

And we form partnerships -- American security forces form partnerships. We'll form a partnership with the Iraqi security forces because we have a common interest here, which is defeating the terrorists that are trying to wreak havoc in Iraq.

HEMMER: Here's what I want to understand, though. Is it the U.S. military's role now to take better care of these people who are introduced to the Iraqi people yesterday -- is it the U.S. military's role to go after insurgents in places like Kufa and Najaf or is the U.S. military's role both of these areas still -- still their responsibility and their duties going forward?

SENOR: Let me put it this way: America has a national security interest in ensuring that the new democratic government of Iraq makes it, survives, is able to lead.

American national security has an interest in defeating terrorists in Iraq. And the good news is the new interim Iraqi government has those same interests. Their own ability to lead, their own ability to get the job done, their own ability to take over day to day management operations of the country and to defeat the terrorists here. So we will be working side by side with the Iraqis in this mission going forward.

HEMMER: Dan Senor, thanks, live in Baghdad. We'll talk again. Appreciate your time today.

SENOR: Good to be with you, Bill.

HEMMER: Heidi.

COLLINS: Opening statements began yesterday in the Scott Peterson trial. Prosecutors charged Peterson repeatedly lied and behaved suspiciously after reporting his pregnant wife Lacey missing on Christmas Eve of 2002.

The defense weighs in with its opening statement today. What can we expect?

CNN's senior legal analyst Jeffrey Toobin is here with us this morning to talk about that.

As we said, yesterday we heard from the prosecution and obviously they were trying to cast some doubt on the alibi that Scott Peterson offers.

First he said he was fishing, then golfing. What's up with that? How do you think that's going?

JEFFREY TOOBIN, CNN SR. LEGAL ANALYST: What's interesting about the opening statement was how much it did concentrate on Peterson's story as opposed to other circumstantial evidence pointing at him. I mean, remember: the key fact in this case -- can't lose track of that -- is that Lacey Peterson's body is discovered 75 miles from where they live and it happens to be the exact place where Scott Peterson is fishing on the day that she disappears.

That remains the most incriminating fact in the case. However, what the prosecutor focused on yesterday so much was his story. How it shifted over time.

And what's interesting about that is it really depends on what attitude you take toward Scott Peterson, how incriminating that is.

Because if he is a liar, an adulterer, a psychopath who would kill his wife, well sure, of course his story changes. But if he's a grieving husband, if he's someone who's upset, who's discomforted by this whole horrible experience that's taken place, well maybe his story would change then, too.

Who could account for their whereabouts perfectly in that kind of emotional agitation?

COLLINS: Right. So that will be interesting. They're all talking -- or did talk about -- the cell phone records. He said he was gone by about 9:30, I believe, on Christmas Eve, but the cell phone records say he was still home. So how important does that timeline really become?

TOOBIN: Again, it's very relevant, depending on what your overall attitude toward Scott Peterson is.

You know, it's difficult for normal people to keep track of where they are at any given time to remember, and if you are emotionally agitated, it's even harder. But if you are trying to cover your tracks, it's also hard to keep track -- so -- again, it really depends on how the jury comes to feel about his story over all.

COLLINS: Yes, it's really tough for those families to look at the pictures yesterday I'm sure.

TOOBIN: These were the first time a lot of these pictures were shown in public, particularly pictures of -- of the clothes that were found on Lacey Peterson's body when she was found. I mean, very discomforting stuff for all concerned.

COLLINS: I'm sure.

We want to make sure we get to the Kobe Bryant case, because something pretty big happened yesterday. We've been talking about this for a while.

The judge in the case said the woman accusing Bryant of rape will not be referred to now as the victim. They're going to use her name. So what does that mean? This could really resonate with camera crews, couldn't it?

TOOBIN: Well, see, I think that's going to be the untold story of yesterday's decision. Is that basically the defense had said don't call her a victim. If you call her a victim; that assumes that a crime took place.

We don't believe that a crime took place. And the judge said we -- I agree with you, so once the jury is empanelled we will only refer to her by her name, not by victim, not alleged accuser, not any other euphemism. But I think the -- what's going to happen as a result is that the judge will probably throw out cameras in the courtroom to protect her privacy if her name is going to be used repeatedly. It's a bad decision for Court TV, perhaps for CNN, but...

COLLINS: Good decision for Kobe.

TOOBIN: But it's a helpful decision for Kobe Bryant, yes.

COLLINS: Interesting. Jeffrey Toobin thanks so much. Appreciate it -- Bill.

HEMMER: Thirteen minutes past the hour now. Strong words yesterday against Jose Padilla.

The Bush administration publicly defending the two-year imprisonment of the terror suspect.

Padilla in custody since May of 2002 but it was only yesterday when the American public learned more about why he is being held.

Kelli Arena has more this morning in Washington. (BEGIN VIDEOTAPE)

KELLI ARENA, CNN JUSTICE CORRESPONDENT: He was dubbed "The Dirty Bomber." The government said he planned to set off a radiological device in the United States.

Now, newly declassified documents allege Jose Padilla also planned to blow up apartment buildings using natural gas.

JAMES COMEY, DEPUTY ATTORNEY GENERAL: Once in the country, they located high-rise apartment buildings that had natural gas supplied to all floors. They rent two apartments in each building, seal those apartments, turn on the gas, and set timers to detonate and destroy the buildings simultaneously at a later time.

ARENA: The new documents outline Padilla's alleged relationship with al Qaeda leaders, including now-deceased al Qaeda military head Mohammed Atef, and September 11th mastermind Sheik Mohammed.

The government also sheds new light on his terror training, with an emphasis on explosives.

COMEY: On May the 8th of 2002, a soldier of our enemy, a trained, funded and equipped terrorist stepped off that plane at Chicago's O'Hare.

A highly trained al Qaeda soldier who had accepted an assignment to kill hundreds of innocent men, women and children.

ARENA: The Justice Department sites interrogations with Padilla, but his lawyer says it's a one-sided expose of the government's version of events.

DONNA NEWMAN, ATTORNEY FOR JOSE PADILLA: Since the government is simply saying, look, you're going to have to trust us; this is what he said. I don't know what the -- if that's what he said. But more importantly, there was nothing in that report that suggested any imminent danger.

ARENA: The Deputy Attorney General denies the timing of the release has anything to do with Padilla's pending Supreme Court case.

The high court will soon rule on whether the government has the authority to hold U.S. citizens indefinitely as enemy combatants.

Kelli Arena, CNN, Washington.

(END VIDEOTAPE)

HEMMER: Also next hour more on this story. I talked to one of Padilla's attorneys; Donna Newman is our guest here in the studio in New York -- Heidi.

COLLINS: It is 50 minutes past the hour now. Here's what's happening in other news this morning.

President Bush will focus on the war on terrorism during remarks today in Colorado.

The president is delivering the commencement address at the U.S. Air Force Academy. He's expected to make the point that a democratic Iraq could help unleash a democratic tide in the troubled Middle East.

Yesterday, the president welcomed an interim government in Iraq, saying it possessed the talent and resolve for the challenges ahead. Kathleen Koch has more from the White House coming up in just a bit.

Iran was reportedly told the U.S. had deciphered its secret communication codes. According to published and broadcast reports, intelligence officials say former Iraqi exile Ahmed Chalabi disclosed the information. But Chalabi and his aides deny that he passed any information related to Iran. According to the reports, the FBI is investigating who may have told Chalabi that the code had been broken.

A federal judge in San Francisco has ruled a law banning late term abortions was unconstitutional. Two other challenges in New York and Nebraska have not yet been decided. The White House says it is taking every necessary step to defend this law in the courts.

A big victory for Democrat Stephanie Herseth. Herseth now occupies South Dakota's only seat in the House of Representatives. After narrowly defeating Republican Larry Diedrich in the state's special election, Herseth filled the seat left open by Republican Bill Janklow following his manslaughter conviction. Herset will continue to campaign as she plans to run for a full term in the fall.

And in basketball, the Detroit Pistons giving their fans something to cheer about. After a disappointing first half last night, the Pistons came out on top with a Game Six win over the Indiana Pacers in the Eastern Conference Finals, of course. Final score, 69-65. The Pistons will make their first trip to the NBA finals in 14 years and play, as you know, the L.A. Lakers on Sunday.

HEMMER: Think the Lakers will win that in four straight?

Dare I say that to our viewers in Detroit?

COLLINS: That's bad.

HEMMER: Lakers are strong. But Detroit played a good game. So.

Have you been watching the stuff in Florida; that thick smoke -- 3,000-acre wildfire in the Everglades shut down parts of I-75 last night. Flames and smoke caused a temporary closure of that Alligator Alley section after reducing visibility to about zero.

Meanwhile another blaze consumed about 1300 acres in Southwest Florida, now 100 percent contained so a bit of good news and a bit of tough news still fighting the fires in Florida.

(WEATHER REPORT)

HEMMER: A story getting a lot of attention here in New York. A mother said goodbye to her twin 4-year-old daughters yesterday turning them over to their father.

Former Playboy model Bridget Marks says she will keep fighting, though, to try to get them back. Jason Carroll has that story here in New York.

(BEGIN VIDEOTAPE)

JASON CARROLL, CNN CORRESPONDENT: It was a personal moment that became a public one.

BRIDGET MARKS: Move back everybody.

CARROLL: Bridget Marks hugged her twin girls she had raised alone since birth before turning them over to their father John Aylsworth, a married casino executive who she had had an affair with.

Marks lost custody of the 4-year-olds during a bitter and, some psychologists say, unusual battle with Aylsworth.

MOLLY BENNETT AITKENS, GRANDMOTHER: This is not what a father does, for any reason. Children, if they do have to be taken away, it should be done in a gentle way.

CARROLL: A state court judge found Marks to be a fit mother, but granted custody to Aylsworth and his wife because the judge ruled she had tried to alienate the twins from their father by making up allegations he touched them in an inappropriate way.

New York family court judge Arlene Goldberg wrote, "The mother due to her anger over the father's failure to divorce his wife and marry her, coached the children to make the allegations that they did."

Marks stands by the allegations. Neither Aylsworth nor his attorney would comment on the allegations or the case. The Marks family says a caring mother is now being punished, telling what she believes is the truth.

AITKENS: What's happened is just a travesty.

CARROLL: Psychologists say in the end it's obvious who suffers the most in cases like this.

BENJAMIN SCHULTZ, PSYCHOLOGIST: The child is then caught in a struggle between -- you know -- two parents that are triangulating and tugging on the loyalties of that child in both directions.

CARROLL: A federal court judge refused to grant Marks a restraining orders that would have allowed her to keep her children. But the federal judge did agree to a new hearing to review the case on Monday.

Jason Carroll, CNN, New York.

(END VIDEOTAPE) HEMMER: Another note on this. Jason, thanks for that -- the judge ordered the father to move to New York from California in order to take custody of the twins -- Heidi.

COLLINS: Coming up -- do new audiotapes reveal criminal actions by Enron employees? Jack is going to talk about those tapes in just a moment.

HEMMER: Also part three of our week long series surviving that summer -- this morning simple tips for you on how to keep your outdoor deck safe and make sure it is that way in a moment.

COLLINS: And the new Miss Universe is crowned. You'll have to stick around to find out who it is, though. You're watching AMERICAN MORNING.

(COMMERCIAL BREAK)

HEMMER: All right, welcome back everybody. Time for Jack and the "Question of the Day." What's on your mind?

CAFFERTY: Good stuff. Thank you, Bill.

CBS Evening News released some tapes that could be very, very bad news for Enron.

The traders are heard on these tapes gloating about their role in the western power prices, apparently confirming that they deliberately drove up prices and created the problem.

Here, a trader rejoices about a forest fire that shut down a major transmission line in California:

(BEGIN AUDIOTAPE)

UNIDENTIFIED MALE: Burn, baby, burn. That's a beautiful thing!

(END AUDIOTAPE)

CAFFERTY: Others congratulate each other on cashing in on the crisis. Here's some more.

(BEGIN AUDIOTAPE)

UNIDENTIFIED MALE: They're (expletive deleted) taking all the money back from you guys? Or the money you guys stole from those poor grandmothers in California?

UNIDENTIFIED MALE: Yes, grandma really, man. Yes, now she wants her (expletive deleted) money back for her power you charged right her -- jammed right up her ass for (expletive deleted) $250 of megawatt hours.

(END AUDIOTAPE)

CAFFERTY: Aren't they lovely? They can also be heard talking about President Bush. They're sure that he would fight any limit on those high-energy prices. Listen.

(BEGIN AUDIOTAPE)

UNIDENTIFIED MALE: (Expletive deleted) yes, he won't (expletive deleted) his prices.

(END AUDIOTAPE)

CAFFERTY: The tapes also appear to link top Enron officials Ken Lay and Jeffrey Skilling to the schemes that started the whole crisis. So the question is this: how damaging are the new Enron tapes? E- mail us at am@cnn.com

HEMMER: Now if you're a trader you want those energy prices to be higher -- it's more profit for you. How much control do they have over that issue?

CAFFERTY: How much control do the traders have over that issue?

HEMMER: On these tapes...

CAFFERTY: Well, any time there was any kind -- apparently there was some schemes behind the scenes to actually get power supply facilities to shut down, to create a power shortage so that the available power left could then be priced higher the way I understand it.

And so they actually had instances where they would call a power plant and say, well, you know why don't you just shut down for a day or two and open the transmission...

HEMMER: And they would follow their request?

CAFFERTY: Yes, apparently there was some kind of a deal that allowed this to happen and the minute there was a shortage, then they just jacked the prices up some more. The real mystery is why Ken Lay is still walking around out there some place. That's the real mystery.

HEMMER: Well, as Grandma Millie -- is that what we were hearing on the tape?

COLLINS: Laughing -- and that was so bad.

CAFFERTY: Punks. You know.

HEMMER: We'll get to it. Jack thanks.

Good topic today. Also today, China's memo to Brittany Spears -- clothing is not optional in that country.

Today, "90-Second Pop," more on Brittany in Beijing.

Also, how many more tricks are up Harry Potter's sleeve?

We'll look at that and Siegfried and Roy, off the Vegas Strip into your home and ahead in a moment on AMERICAN MORNING.

(COMMERCIAL BREAK)

HEMMER: Welcome back everybody, 7:30 here in New York. Good morning again.

Heidi Collins working for Soledad. Hope Soledad is getting some rest and sleep. She deserves it.

COLLINS: She does.

HEMMER: All right, in a moment here President Bush will make comparisons with the war on terror to the Second World War later today. A commencement speech at the U.S. Air Force Academy now slated.

The second key policy speech in as many weeks and we'll get a live report on what we may hear a bit later today from the White House a bit later.

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Aired June 2, 2004 - 07:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: Good morning. The price of oil shooting up. It's biggest one-day jump in more than a decade. How much money are you paying for fear?
Iraq and its brand new government still a powder keg, though. Another explosion in Baghdad today.

And from Florida the firefighters there battling the blazes and waiting for rain. Hoping it will come on this AMERICAN MORNING.

ANNOUNCER: From the CNN Broadcast Center in New York, this is AMERICAN MORNING with Bill Hemmer and Soledad O'Brien.

HEMMER: All right, welcome to Wednesday everybody. Good morning here with the birthday girl on the day after. How was it last night?

HEIDI COLLINS, CNN ANCHOR: It was great.

HEMMER: Did you have a big fat steak here in New York City?

COLLINS: Steak and lobster. Three pounds. I'm still recovering.

HEMMER: Bring any of that home?

COLLINS: Yes.

HEMMER: Oh, you did? Nice. Lunch is served later here on AMERICAN MORNING.

Morning everybody. Heidi Collins working for Soledad again today. A lot of news to talk about today.

Saudi Arabia making news, reportedly promising to support an increase in OPEC production after the oil price shot up another $2.45 a barrel yesterday.

Andy is standing by; has more on that; tell us what's driving up the prices and how long it will take for you to feel the pain at the pump. We'll get to that in a moment.

COLLINS: We will. And also still a lot of questions today about the new Iraqi government and the U.S. occupation forces. We're going to find out how this relationship is expected to work when we're joined by the senior adviser to the coalition, Dan Senor. HEMMER: Also the defense will get a chance today in opening statements today in the Scott Peterson matter -- dramatic day yesterday. If you listened to some of the testimony that was offered there, the photos that were shown in court -- Jeff Toobin stops by to tell us how things are going on day one there in California.

COLLINS: A difficult day for both families, I think.

Jack Cafferty joining us now.

JACK CAFFERTY, CNN ANCHOR: Morning. Peterson is toast.

COLLINS: You think?

CAFFERTY: Just a thought.

Speaking of toast, Ken Lay, are you listening? The Enron employees -- and -- CBS News has tapes of this -- gloating over the skyrocketing prices of energy at a time that California was going through its worst energy crisis ever.

There are tapes of this, and Ken Lay and Jeff Skilling and all the lads are implicated. It's pretty ugly stuff. We'll take a look at it.

HEMMER: Thank you, Jack.

COLLINS: All right, Jack. Thanks so much.

Oil prices as we are talking about this morning, hit an all-time record high with crude oil now topping $42 a barrel.

The rising prices and latest pain at the pump comes as energy consumption has climbed steadily in the last four decades.

Gasoline is the single largest energy product consumed in the U.S. Consumption has been rising since the 1950s, and today the U.S. imports 60 percent of its oil.

Is there any relief in sight?

That is the question everyone wants to know the answer to, so Andy Serwer is here. What's the answer?

ANDY SERWER, "FORTUNE" MAGAZINE: Well, we really don't know right now, but let's sort of take a step back and talk about why the price of oil has gone up so much. Improving economy, that's right, here in the U.S. Also, increased demand from places like China.

Number two, low inventories, and number three, is terrorism, Heidi, and that's the real problem and that's sort of the intangible.

Right now analysts think the price of oil is probably five to $12 a barrel higher because of fear of terrorism disrupting supplies, particularly in Saudi Arabia. What does that translate to at the pump? Maybe as much as 36 cents a gallon of your $2 and say 15 cents a gallon you are paying is because of terrorism.

So going forward, you know this fear factor is what's really holding the price up. Tomorrow OPEC ministers meeting in Beirut. They're going to try to increase supply but because they've been pumping at near capacity they probably don't have enough room. What will keep the price down, or what will get it down, ultimately, is the dissipation of this fear factor and that is what is so difficult because of course that's such an intangible.

COLLINS: Yes, it absolutely is, and you were saying actually earlier when we were talking, that it translates overall to your wallet per week by how much?

SERWER: Well, seven to ten dollars is what people are suggesting. That's taking seven to ten dollars out of the average Americans pocket and putting it right in your gas pump, and you know that of course is like a giant tax on the American economy. It really is.

I mean, I filled up my Ford Explorer over the weekend, paid $2.17 a gallon. $35 to drive around Memorial Day and that's just a lot more than we're used to paying.

COLLINS: All right, Andy. Got to quit driving around, I guess.

SERWER: Yes, start hitchhiking.

COLLINS: All right, Andy thanks so much for that.

SERWER: You're welcome.

COLLINS: The FBI has put on a nationwide alert now for two propane tanker trucks stolen in Texas. The tankers loaded with volatile propane vanished from a San Antonio gas company over the weekend.

The FBI says propane is one of the elements that terrorists have trained on, but the San Antonio Police Department does not suspect terrorism.

They say propane thefts often happen in South Texas because it's close to northern Mexico where residents commonly use that kind of fuel.

HEMMER: About five minutes past the hour.

With the issue of Iraq now front and center, where some reports from the scene say a car bomb explosion today killed at least two and injured more than a dozen others.

Police say it happened in a Sunni Muslim district that had strongly supported Saddam Hussein's regime. That blast came as Iraqis were being urged to embrace that newly announced interim government. That happened yesterday and then more toward the national elections maybe in January of next year.

Dan Senor is senior adviser to Coalition Provisional Authority live from Baghdad to talk about a number of issues today, and welcome back here to AMERICAN MORNING. Good to have you with us.

DAN SENOR, SENIOR ADVISER TO COALITION PROVISIONAL AUTHORITY: Good to be with you, Bill.

HEMMER: Listen, the government has been introduced, the Council has ended its work -- is the handover effectively over? Is it over now?

SENOR: No, the handover, the formal handover, Bill, is on June 30.

What is happening now is interim period. I'd say its analogous to the period between, in our country in the United States when a president is elected and when he's sworn into office.

During those -- during that interim period, the president is putting together his administration, building up his government, and preparing an agenda for the post-inauguration day period.

That's what's going on now. The prime minister is building up his government, preparing his agenda, talking to Iraqis, talking to advisers, and assuming more and more authority, but the formal hand off will be on the 30th of June.

HEMMER: So you would dismiss those who say the next month is just ceremonial?

SENOR: Oh, absolutely. It is not ceremonial at all. The prime minister today had a meeting with American military commanders beginning to address his number one priority as he articulated yesterday in his address: security. And he certainly wants Iraqis to play a more prominent role in the security situation on the ground here, as do we.

He had a -- he has his first cabinet meeting going on at 8 a.m. your time this morning, 4:00 for us. So he's fast at work.

HEMMER: I want to get to the issue of security and the U.S. military and its role in a moment here, but there was a sense yesterday at the White House listening to the president -- many reporters there felt that the president looked and felt somewhat relieved.

What was the attitude in Baghdad with the action yesterday?

SENOR: Very positive. You know, Bill, we have said for some time we are going to have some really bad days here, but we are also going to have some good days and the good days in this part of the world are really when we talk about good days are really unprecedented.

When you have a government formed as diverse as the government that was stood up yesterday with for instance six women, a higher percentage of women in the cabinet than probably most governments in the world, and a government that is committed to the ideals and principles enshrined in Iraq's interim constitution, individual liberties, certain protections for minority rights, principles like federalism, civilian control of the military.

When you stand up a government that's committed to those things and is committed to winning the war on terrorism here in Iraq, it's a really good day, so we were -- we were quite positive based on yesterday's events and are looking forward to the prime minister asserting his leadership in the weeks ahead.

HEMMER: On this side of the world, here in the city of New York, the U.N. resolution now being introduced by the U.S. and the Brits that will essentially give the Iraqis more control over its own security and do that much sooner than a lot of people probably thought in the first place. If that's the case, what's the role for the U.S. military?

SENOR: You know, I don't want to prejudge the outcome of those discussions in New York. I point to what the prime minister said yesterday.

On the one hand, he said that he wants Iraqis to have a significant role, but he also made a recognition that there is a major terrorist threat in Iraq and the Iraqi security forces right now and immediately after June 30 will not be in a position to handle the threat on their own, and they need the continued support of the U.S. and the multinational force.

It's quite logical. Bill, we have relationships all over the world where U.S. forces are stationed in a foreign country. In some cases, those relationships have gone on some 50 years whether it be in Korea or Germany.

And we form partnerships -- American security forces form partnerships. We'll form a partnership with the Iraqi security forces because we have a common interest here, which is defeating the terrorists that are trying to wreak havoc in Iraq.

HEMMER: Here's what I want to understand, though. Is it the U.S. military's role now to take better care of these people who are introduced to the Iraqi people yesterday -- is it the U.S. military's role to go after insurgents in places like Kufa and Najaf or is the U.S. military's role both of these areas still -- still their responsibility and their duties going forward?

SENOR: Let me put it this way: America has a national security interest in ensuring that the new democratic government of Iraq makes it, survives, is able to lead.

American national security has an interest in defeating terrorists in Iraq. And the good news is the new interim Iraqi government has those same interests. Their own ability to lead, their own ability to get the job done, their own ability to take over day to day management operations of the country and to defeat the terrorists here. So we will be working side by side with the Iraqis in this mission going forward.

HEMMER: Dan Senor, thanks, live in Baghdad. We'll talk again. Appreciate your time today.

SENOR: Good to be with you, Bill.

HEMMER: Heidi.

COLLINS: Opening statements began yesterday in the Scott Peterson trial. Prosecutors charged Peterson repeatedly lied and behaved suspiciously after reporting his pregnant wife Lacey missing on Christmas Eve of 2002.

The defense weighs in with its opening statement today. What can we expect?

CNN's senior legal analyst Jeffrey Toobin is here with us this morning to talk about that.

As we said, yesterday we heard from the prosecution and obviously they were trying to cast some doubt on the alibi that Scott Peterson offers.

First he said he was fishing, then golfing. What's up with that? How do you think that's going?

JEFFREY TOOBIN, CNN SR. LEGAL ANALYST: What's interesting about the opening statement was how much it did concentrate on Peterson's story as opposed to other circumstantial evidence pointing at him. I mean, remember: the key fact in this case -- can't lose track of that -- is that Lacey Peterson's body is discovered 75 miles from where they live and it happens to be the exact place where Scott Peterson is fishing on the day that she disappears.

That remains the most incriminating fact in the case. However, what the prosecutor focused on yesterday so much was his story. How it shifted over time.

And what's interesting about that is it really depends on what attitude you take toward Scott Peterson, how incriminating that is.

Because if he is a liar, an adulterer, a psychopath who would kill his wife, well sure, of course his story changes. But if he's a grieving husband, if he's someone who's upset, who's discomforted by this whole horrible experience that's taken place, well maybe his story would change then, too.

Who could account for their whereabouts perfectly in that kind of emotional agitation?

COLLINS: Right. So that will be interesting. They're all talking -- or did talk about -- the cell phone records. He said he was gone by about 9:30, I believe, on Christmas Eve, but the cell phone records say he was still home. So how important does that timeline really become?

TOOBIN: Again, it's very relevant, depending on what your overall attitude toward Scott Peterson is.

You know, it's difficult for normal people to keep track of where they are at any given time to remember, and if you are emotionally agitated, it's even harder. But if you are trying to cover your tracks, it's also hard to keep track -- so -- again, it really depends on how the jury comes to feel about his story over all.

COLLINS: Yes, it's really tough for those families to look at the pictures yesterday I'm sure.

TOOBIN: These were the first time a lot of these pictures were shown in public, particularly pictures of -- of the clothes that were found on Lacey Peterson's body when she was found. I mean, very discomforting stuff for all concerned.

COLLINS: I'm sure.

We want to make sure we get to the Kobe Bryant case, because something pretty big happened yesterday. We've been talking about this for a while.

The judge in the case said the woman accusing Bryant of rape will not be referred to now as the victim. They're going to use her name. So what does that mean? This could really resonate with camera crews, couldn't it?

TOOBIN: Well, see, I think that's going to be the untold story of yesterday's decision. Is that basically the defense had said don't call her a victim. If you call her a victim; that assumes that a crime took place.

We don't believe that a crime took place. And the judge said we -- I agree with you, so once the jury is empanelled we will only refer to her by her name, not by victim, not alleged accuser, not any other euphemism. But I think the -- what's going to happen as a result is that the judge will probably throw out cameras in the courtroom to protect her privacy if her name is going to be used repeatedly. It's a bad decision for Court TV, perhaps for CNN, but...

COLLINS: Good decision for Kobe.

TOOBIN: But it's a helpful decision for Kobe Bryant, yes.

COLLINS: Interesting. Jeffrey Toobin thanks so much. Appreciate it -- Bill.

HEMMER: Thirteen minutes past the hour now. Strong words yesterday against Jose Padilla.

The Bush administration publicly defending the two-year imprisonment of the terror suspect.

Padilla in custody since May of 2002 but it was only yesterday when the American public learned more about why he is being held.

Kelli Arena has more this morning in Washington. (BEGIN VIDEOTAPE)

KELLI ARENA, CNN JUSTICE CORRESPONDENT: He was dubbed "The Dirty Bomber." The government said he planned to set off a radiological device in the United States.

Now, newly declassified documents allege Jose Padilla also planned to blow up apartment buildings using natural gas.

JAMES COMEY, DEPUTY ATTORNEY GENERAL: Once in the country, they located high-rise apartment buildings that had natural gas supplied to all floors. They rent two apartments in each building, seal those apartments, turn on the gas, and set timers to detonate and destroy the buildings simultaneously at a later time.

ARENA: The new documents outline Padilla's alleged relationship with al Qaeda leaders, including now-deceased al Qaeda military head Mohammed Atef, and September 11th mastermind Sheik Mohammed.

The government also sheds new light on his terror training, with an emphasis on explosives.

COMEY: On May the 8th of 2002, a soldier of our enemy, a trained, funded and equipped terrorist stepped off that plane at Chicago's O'Hare.

A highly trained al Qaeda soldier who had accepted an assignment to kill hundreds of innocent men, women and children.

ARENA: The Justice Department sites interrogations with Padilla, but his lawyer says it's a one-sided expose of the government's version of events.

DONNA NEWMAN, ATTORNEY FOR JOSE PADILLA: Since the government is simply saying, look, you're going to have to trust us; this is what he said. I don't know what the -- if that's what he said. But more importantly, there was nothing in that report that suggested any imminent danger.

ARENA: The Deputy Attorney General denies the timing of the release has anything to do with Padilla's pending Supreme Court case.

The high court will soon rule on whether the government has the authority to hold U.S. citizens indefinitely as enemy combatants.

Kelli Arena, CNN, Washington.

(END VIDEOTAPE)

HEMMER: Also next hour more on this story. I talked to one of Padilla's attorneys; Donna Newman is our guest here in the studio in New York -- Heidi.

COLLINS: It is 50 minutes past the hour now. Here's what's happening in other news this morning.

President Bush will focus on the war on terrorism during remarks today in Colorado.

The president is delivering the commencement address at the U.S. Air Force Academy. He's expected to make the point that a democratic Iraq could help unleash a democratic tide in the troubled Middle East.

Yesterday, the president welcomed an interim government in Iraq, saying it possessed the talent and resolve for the challenges ahead. Kathleen Koch has more from the White House coming up in just a bit.

Iran was reportedly told the U.S. had deciphered its secret communication codes. According to published and broadcast reports, intelligence officials say former Iraqi exile Ahmed Chalabi disclosed the information. But Chalabi and his aides deny that he passed any information related to Iran. According to the reports, the FBI is investigating who may have told Chalabi that the code had been broken.

A federal judge in San Francisco has ruled a law banning late term abortions was unconstitutional. Two other challenges in New York and Nebraska have not yet been decided. The White House says it is taking every necessary step to defend this law in the courts.

A big victory for Democrat Stephanie Herseth. Herseth now occupies South Dakota's only seat in the House of Representatives. After narrowly defeating Republican Larry Diedrich in the state's special election, Herseth filled the seat left open by Republican Bill Janklow following his manslaughter conviction. Herset will continue to campaign as she plans to run for a full term in the fall.

And in basketball, the Detroit Pistons giving their fans something to cheer about. After a disappointing first half last night, the Pistons came out on top with a Game Six win over the Indiana Pacers in the Eastern Conference Finals, of course. Final score, 69-65. The Pistons will make their first trip to the NBA finals in 14 years and play, as you know, the L.A. Lakers on Sunday.

HEMMER: Think the Lakers will win that in four straight?

Dare I say that to our viewers in Detroit?

COLLINS: That's bad.

HEMMER: Lakers are strong. But Detroit played a good game. So.

Have you been watching the stuff in Florida; that thick smoke -- 3,000-acre wildfire in the Everglades shut down parts of I-75 last night. Flames and smoke caused a temporary closure of that Alligator Alley section after reducing visibility to about zero.

Meanwhile another blaze consumed about 1300 acres in Southwest Florida, now 100 percent contained so a bit of good news and a bit of tough news still fighting the fires in Florida.

(WEATHER REPORT)

HEMMER: A story getting a lot of attention here in New York. A mother said goodbye to her twin 4-year-old daughters yesterday turning them over to their father.

Former Playboy model Bridget Marks says she will keep fighting, though, to try to get them back. Jason Carroll has that story here in New York.

(BEGIN VIDEOTAPE)

JASON CARROLL, CNN CORRESPONDENT: It was a personal moment that became a public one.

BRIDGET MARKS: Move back everybody.

CARROLL: Bridget Marks hugged her twin girls she had raised alone since birth before turning them over to their father John Aylsworth, a married casino executive who she had had an affair with.

Marks lost custody of the 4-year-olds during a bitter and, some psychologists say, unusual battle with Aylsworth.

MOLLY BENNETT AITKENS, GRANDMOTHER: This is not what a father does, for any reason. Children, if they do have to be taken away, it should be done in a gentle way.

CARROLL: A state court judge found Marks to be a fit mother, but granted custody to Aylsworth and his wife because the judge ruled she had tried to alienate the twins from their father by making up allegations he touched them in an inappropriate way.

New York family court judge Arlene Goldberg wrote, "The mother due to her anger over the father's failure to divorce his wife and marry her, coached the children to make the allegations that they did."

Marks stands by the allegations. Neither Aylsworth nor his attorney would comment on the allegations or the case. The Marks family says a caring mother is now being punished, telling what she believes is the truth.

AITKENS: What's happened is just a travesty.

CARROLL: Psychologists say in the end it's obvious who suffers the most in cases like this.

BENJAMIN SCHULTZ, PSYCHOLOGIST: The child is then caught in a struggle between -- you know -- two parents that are triangulating and tugging on the loyalties of that child in both directions.

CARROLL: A federal court judge refused to grant Marks a restraining orders that would have allowed her to keep her children. But the federal judge did agree to a new hearing to review the case on Monday.

Jason Carroll, CNN, New York.

(END VIDEOTAPE) HEMMER: Another note on this. Jason, thanks for that -- the judge ordered the father to move to New York from California in order to take custody of the twins -- Heidi.

COLLINS: Coming up -- do new audiotapes reveal criminal actions by Enron employees? Jack is going to talk about those tapes in just a moment.

HEMMER: Also part three of our week long series surviving that summer -- this morning simple tips for you on how to keep your outdoor deck safe and make sure it is that way in a moment.

COLLINS: And the new Miss Universe is crowned. You'll have to stick around to find out who it is, though. You're watching AMERICAN MORNING.

(COMMERCIAL BREAK)

HEMMER: All right, welcome back everybody. Time for Jack and the "Question of the Day." What's on your mind?

CAFFERTY: Good stuff. Thank you, Bill.

CBS Evening News released some tapes that could be very, very bad news for Enron.

The traders are heard on these tapes gloating about their role in the western power prices, apparently confirming that they deliberately drove up prices and created the problem.

Here, a trader rejoices about a forest fire that shut down a major transmission line in California:

(BEGIN AUDIOTAPE)

UNIDENTIFIED MALE: Burn, baby, burn. That's a beautiful thing!

(END AUDIOTAPE)

CAFFERTY: Others congratulate each other on cashing in on the crisis. Here's some more.

(BEGIN AUDIOTAPE)

UNIDENTIFIED MALE: They're (expletive deleted) taking all the money back from you guys? Or the money you guys stole from those poor grandmothers in California?

UNIDENTIFIED MALE: Yes, grandma really, man. Yes, now she wants her (expletive deleted) money back for her power you charged right her -- jammed right up her ass for (expletive deleted) $250 of megawatt hours.

(END AUDIOTAPE)

CAFFERTY: Aren't they lovely? They can also be heard talking about President Bush. They're sure that he would fight any limit on those high-energy prices. Listen.

(BEGIN AUDIOTAPE)

UNIDENTIFIED MALE: (Expletive deleted) yes, he won't (expletive deleted) his prices.

(END AUDIOTAPE)

CAFFERTY: The tapes also appear to link top Enron officials Ken Lay and Jeffrey Skilling to the schemes that started the whole crisis. So the question is this: how damaging are the new Enron tapes? E- mail us at am@cnn.com

HEMMER: Now if you're a trader you want those energy prices to be higher -- it's more profit for you. How much control do they have over that issue?

CAFFERTY: How much control do the traders have over that issue?

HEMMER: On these tapes...

CAFFERTY: Well, any time there was any kind -- apparently there was some schemes behind the scenes to actually get power supply facilities to shut down, to create a power shortage so that the available power left could then be priced higher the way I understand it.

And so they actually had instances where they would call a power plant and say, well, you know why don't you just shut down for a day or two and open the transmission...

HEMMER: And they would follow their request?

CAFFERTY: Yes, apparently there was some kind of a deal that allowed this to happen and the minute there was a shortage, then they just jacked the prices up some more. The real mystery is why Ken Lay is still walking around out there some place. That's the real mystery.

HEMMER: Well, as Grandma Millie -- is that what we were hearing on the tape?

COLLINS: Laughing -- and that was so bad.

CAFFERTY: Punks. You know.

HEMMER: We'll get to it. Jack thanks.

Good topic today. Also today, China's memo to Brittany Spears -- clothing is not optional in that country.

Today, "90-Second Pop," more on Brittany in Beijing.

Also, how many more tricks are up Harry Potter's sleeve?

We'll look at that and Siegfried and Roy, off the Vegas Strip into your home and ahead in a moment on AMERICAN MORNING.

(COMMERCIAL BREAK)

HEMMER: Welcome back everybody, 7:30 here in New York. Good morning again.

Heidi Collins working for Soledad. Hope Soledad is getting some rest and sleep. She deserves it.

COLLINS: She does.

HEMMER: All right, in a moment here President Bush will make comparisons with the war on terror to the Second World War later today. A commencement speech at the U.S. Air Force Academy now slated.

The second key policy speech in as many weeks and we'll get a live report on what we may hear a bit later today from the White House a bit later.

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