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CNN Sunday Morning

Pump Prices Jump 27 Percent in Past Three Months

Aired April 21, 2002 - 07:50   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: Well, if you drive, you're paying more for gasoline. I'm sure you can already see that. The government says pump prices have jumped 27 percent in the past three months. And they're still climbing. It comes at a time when Venezuela is clamping down and OPEC is being stingy.

Joining me to talk about the oil crunch is Roben Farzad, a writer for "Smart Money" magazine.

Hi, Robin.

ROBEN FARZAD, SMART MONEY MAGAZINE: Good morning, Kyra.

PHILLIPS: All right, let's talk about Venezuela and why it's so important to gas prices here?

FARZAD: Yes, a lot of people typically make the mistake of thinking that oil prices are strictly a function of what Arab countries dictate in OPEC, but Venezuela's actually the fourth largest oil producer in the world, and from the U.S. perspective, the third most important exporter to the U.S. So to the extent that political stability there is in question, that's certainly going to take its toll at the gas pump.

PHILLIPS: Well, why do you think OPEC is being so stingy also, in addition to the whole political situation with Hugo Chavez?

FARZAD: Well, OPEC is in a tough position right now in that the world economy is still rather lackluster. And in addition to the supply-side, they have to worry about demand falling off. So you can't have slack capacity at a time when people are trying to cut down on energy expenses. And you know, SUVs might not be as in vogue as they were two, three years ago.

So it's a rather controversial position, but OPEC is in that unusual position of having to keep supply and demand in a certain equilibrium, which unfortunately, oftentimes, I mean, six months ago, you had gas at -- for a lot of people, at a buck a gallon and oil prices of $19 a barrel. And now you have $1.50 gas and $26 oil prices. So that's just an illustration of how volatile the market is. So OPEC has to try to stay on top of that.

PHILLIPS: Well, let's talk about Hugo Chavez. He was out. He's back in. Is the U.S. worried now with Hugo Chavez back in power? What kind of effect will his leadership have now on this oil situation and gas prices, etcetera?

FARZAD: Sure. You have to be worried. He has tremendous popular support in his country. He has a populist appeal, but countries overwhelmingly poor. But I think what worries the U.S. more than anything is how close he's been with Fidel Castro of Cuba. He's made overtures to Iraq, to Moammar Ghadaffi of Libya. And to have that kind of character run that kind of oil supply is obviously unsettling.

And what happened in the coup was you had a very pro-business, pro, you know, oil expansion guy come in for all of 24 hours until the people rose up and brought Chavez back to power. So it's troubling. I mean, what he tried to do that really caused this was install his own people and board of directors at the state owned oil company. So to the extent that he's trying to take over a lot of control at PDV, which is the Venezuelan oil company, that's got to be unsettling for Washington.

PHILLIPS: Do you think Hugo Chavez learned a lesson this time, not to mess with oil industry folks too much in the future?

FARZAD: Yes, optimists certainly hope so. You have to be chastened if you're Chavez, realizing that you know, your popularity can only take you so far, especially if you're going to mess with the oil industry, which is Venezuela's life line.

And that industry really needs foreign investment, which he's been very anathema to. So that's the struggle we're monitoring right now is, is Chavez finally going to open Venezuela to American investment? Is he going to be willing to invest in the rusty infrastructure there? Capacity's actually falling in Venezuela. And Washington's obviously monitoring this as well.

You know, it obviously wishes for a more stable hand at the helm. But you know, you have to deal with what they -- what the people bring you.

PHILLIPS: Isn't that the truth. All right, Roben Farzad, "Smart Money" magazine. Thank you so much.

FARZAD: Thank you, Kyra. Thank you for having me.

PHILLIPS: All right.

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