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CNN Sunday Morning

Interview With Charli Coon, Tyson Slocum

Aired March 09, 2003 - 17:20   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.


ANDERSON COOPER, CNN ANCHOR: Sticker shock at the gas pump, oh yes, here's a look at the price breakdown of unleaded in various cities -- Chicago $1.75, San Francisco $2.09, elsewhere in California earlier this morning, which are over $3.00. Those prices are roughly 54 cents higher per gallon than one year ago.
The question is; what's fueling the price rise? Some people think it's price gauging; others say, no, the possibility of war, the rising price of crude oil, the petroleum workers action in Venezuela. Analysts say prices will only shoot higher.

Who's at fault? What's the future? Two different views this morning -- Charli Coon is a senior policy analyst of energy and environment at the Heritage Foundation, and Tyson Slocum is the research director for the energy and environment program at Public Citizen.

Gentleman, thanks for being -- thank you both for being with us this morning, Ms. Coon and Mr. Slocum, appreciate it. Let me ask you -- Ms. Coon, let me start off with you -- what a -- what is behind this a -- this rise in prices? Some people say it's price gouging; others say, no, just market forces at work.

CHARLI COON, HERITAGE FOUNDATION: Well, I think when you began your program, you summarized it very well. There were three events that are totally out of our control. We had a colder winter than usual, we had a strike in Venezuela by the oil workers, and also the uncertainty of the market, because of, because of Iraq -- not to mention that you also include the low inventories, and that's just a recipe for higher crude prices, which means that we're going to have higher gasoline prices as well.

COOPER: Mr. Slocum, is it as simple as that?

TYSON SLOCUM, PUBLIC CITIZEN: No, it's a lot more complex than that. The main factor here is that we do not have adequate competition in our oil markets. We've allowed so many mergers over the last couple of years. We've allowed Exxon and Mobil to get together, Chevron and Texaco, Conoco and Phillips, and several others. That's really crushed the ability of competition and free markets to work in the United States.

As a result, the top five oil companies control a significant chunk of the domestic production, they control over half of the oil refinery capacity, and over two-thirds of the retail market. In addition, they also have a substantial hold over the speculation market. So, although we've been talking about war in Iraq for a year, not a single drop of Iraqi crude has been interrupted in coming to the United States. Iraq is the sixth largest importer of oil to the United States.

COOPER: So, you're saying, in effect, price gouging.

(CROSSTALK)

SLOCUM: Absolutely. The same unregulated futures trading market that allowed Enron to do what it did in California is allowing ExxonMobil and these other oil giants to do to the crude oil futures market. We have allowed giant unaccountable corporations...

(CROSSTALK)

SLOCUM: ...to hijack the American economy.

COON: Look at historically when the crude oil prices go up, so do the gasoline prices. The crude oil prices are the primary clots (ph) in gasoline. Now, in some states they have higher taxes, and other taxes say in California -- so, you're going to see higher taxes in California, because crude oil prices are higher, you're going to have higher state taxes, and you also -- they've gone into their summer blend, which requires a different...

COOPER: Ms. Coon, let me ask you -- why is it though, when you know, I've got two gas stations in my neighborhood and when one of them raises their prices, you know, 10 cents overnight, all of a sudden the one right next door suddenly jumps up as well. Why is that, if it's not price gouging?

COON: Well, I wouldn't call that price gouging. Price gouging is taking advantage of and charging more for a product than it's worth, and right now we've seen crude oil prices totally increase. In fact, the oil and gas industry, for the fourth quarter, for the fourth quarter last year, had only .5 percent profit margin, as compared to the pharmaceuticals that had about 20 percent, real estate 5 percent, and the media market, 3.8 percent.

So, I don't see how you could possible say that .5 percent price margin is price gouging.

COOPER: All right, Tyson Slocum, your thoughts.

SLOCUM: Well, ExxonMobil had after tax profits in the fourth quarter of over $4 billion. That's why it's one of the strongest buys right now on Wall Street, because people of Wall Street know that ExxonMobil's a great buy, and the reason it's a great buy, because it, and a handful of other oil companies dominate the market, and that's not good for American consumers, and it's not good for the American economy when you have too few corporations controlling such a critical commodity like crude oil.

Now, you have to remember that the top five oil companies, not only did they have significant oil production in the United States and abroad, but also they control over half of the oil refinery capacity, and the two-thirds of the retail gas market. That's full vertical integration in the hands of just a couple of top corporate players.

COON: Let me just say that I would not want you doing my investments for me, because I would much rather invest in pharmaceuticals, or real estate, or the media at higher price -- higher profit margins, excuse me -- than .5 percent, plus these events that have caused this increase in gasoline are beyond our control. The three issues are the fact that crude oil prices are up, the uncertainty of the war, the weather, and you also have the strike in Venezuela -- those are the reasons.

COOPER: I got a question -- Ms. Coon, let me ask you, Virginia's attorney general says he's investigating if prices are, you know, if there is price gouging -- do you think that's just politics, and do you think we're going to be seeing more of that as people get more upset about...

COON: I'm sure you're going to see more of that, but in the past, whenever they've had investigations -- in fact, in the year 2000, because it was an election year, we had an investigation in the Midwest about the oil prices, and the FTC was involved in it, the Federal Trade Commission, you also had committees on the Hill that looked into this and investigated it. Guess what -- they all came out and said, there was no collusion, there was no price gouging...

COOPER: ... all right...

COON: ... the reason was, there was an interruption in delivery, and one of the reasons for that interruption -- not the interruption -- the delivery interruption was because of a fire, and because of all the (UNINTELLIGIBLE) fuels, that the -- that the zealots, the environmental zealots have requested, you can't get gasoline and share gasoline from one area to the other.

COOPER: All right -- only...

COON: That was the reason for that price increase.

COOPER: Only have about 10 seconds left, Tyson Slocum, your final thought.

SLOCUM: The Federal Trade Commission in its 2000 report actually found that several large companies intentionally withheld gasoline from the marketplace, for the sole intention of driving prices up. That's clear evidence that we do not have adequate competition, and if that happened back in 2000, we'd have even more mergers since then, and that's even less competition...

COOPER: All right.

SLOCUM: Less access to free markets for America's...

COOPER: We're going to have to leave at that. I don't know that we solved anything, but we certainly got some difference of opinion. Appreciate it, Charli Coon, Tyson Slocum, appreciate you joining us this morning. Thanks very much.

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 March 9, 2003 - 17:20   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDERSON COOPER, CNN ANCHOR: Sticker shock at the gas pump, oh yes, here's a look at the price breakdown of unleaded in various cities -- Chicago $1.75, San Francisco $2.09, elsewhere in California earlier this morning, which are over $3.00. Those prices are roughly 54 cents higher per gallon than one year ago.
The question is; what's fueling the price rise? Some people think it's price gauging; others say, no, the possibility of war, the rising price of crude oil, the petroleum workers action in Venezuela. Analysts say prices will only shoot higher.

Who's at fault? What's the future? Two different views this morning -- Charli Coon is a senior policy analyst of energy and environment at the Heritage Foundation, and Tyson Slocum is the research director for the energy and environment program at Public Citizen.

Gentleman, thanks for being -- thank you both for being with us this morning, Ms. Coon and Mr. Slocum, appreciate it. Let me ask you -- Ms. Coon, let me start off with you -- what a -- what is behind this a -- this rise in prices? Some people say it's price gouging; others say, no, just market forces at work.

CHARLI COON, HERITAGE FOUNDATION: Well, I think when you began your program, you summarized it very well. There were three events that are totally out of our control. We had a colder winter than usual, we had a strike in Venezuela by the oil workers, and also the uncertainty of the market, because of, because of Iraq -- not to mention that you also include the low inventories, and that's just a recipe for higher crude prices, which means that we're going to have higher gasoline prices as well.

COOPER: Mr. Slocum, is it as simple as that?

TYSON SLOCUM, PUBLIC CITIZEN: No, it's a lot more complex than that. The main factor here is that we do not have adequate competition in our oil markets. We've allowed so many mergers over the last couple of years. We've allowed Exxon and Mobil to get together, Chevron and Texaco, Conoco and Phillips, and several others. That's really crushed the ability of competition and free markets to work in the United States.

As a result, the top five oil companies control a significant chunk of the domestic production, they control over half of the oil refinery capacity, and over two-thirds of the retail market. In addition, they also have a substantial hold over the speculation market. So, although we've been talking about war in Iraq for a year, not a single drop of Iraqi crude has been interrupted in coming to the United States. Iraq is the sixth largest importer of oil to the United States.

COOPER: So, you're saying, in effect, price gouging.

(CROSSTALK)

SLOCUM: Absolutely. The same unregulated futures trading market that allowed Enron to do what it did in California is allowing ExxonMobil and these other oil giants to do to the crude oil futures market. We have allowed giant unaccountable corporations...

(CROSSTALK)

SLOCUM: ...to hijack the American economy.

COON: Look at historically when the crude oil prices go up, so do the gasoline prices. The crude oil prices are the primary clots (ph) in gasoline. Now, in some states they have higher taxes, and other taxes say in California -- so, you're going to see higher taxes in California, because crude oil prices are higher, you're going to have higher state taxes, and you also -- they've gone into their summer blend, which requires a different...

COOPER: Ms. Coon, let me ask you -- why is it though, when you know, I've got two gas stations in my neighborhood and when one of them raises their prices, you know, 10 cents overnight, all of a sudden the one right next door suddenly jumps up as well. Why is that, if it's not price gouging?

COON: Well, I wouldn't call that price gouging. Price gouging is taking advantage of and charging more for a product than it's worth, and right now we've seen crude oil prices totally increase. In fact, the oil and gas industry, for the fourth quarter, for the fourth quarter last year, had only .5 percent profit margin, as compared to the pharmaceuticals that had about 20 percent, real estate 5 percent, and the media market, 3.8 percent.

So, I don't see how you could possible say that .5 percent price margin is price gouging.

COOPER: All right, Tyson Slocum, your thoughts.

SLOCUM: Well, ExxonMobil had after tax profits in the fourth quarter of over $4 billion. That's why it's one of the strongest buys right now on Wall Street, because people of Wall Street know that ExxonMobil's a great buy, and the reason it's a great buy, because it, and a handful of other oil companies dominate the market, and that's not good for American consumers, and it's not good for the American economy when you have too few corporations controlling such a critical commodity like crude oil.

Now, you have to remember that the top five oil companies, not only did they have significant oil production in the United States and abroad, but also they control over half of the oil refinery capacity, and the two-thirds of the retail gas market. That's full vertical integration in the hands of just a couple of top corporate players.

COON: Let me just say that I would not want you doing my investments for me, because I would much rather invest in pharmaceuticals, or real estate, or the media at higher price -- higher profit margins, excuse me -- than .5 percent, plus these events that have caused this increase in gasoline are beyond our control. The three issues are the fact that crude oil prices are up, the uncertainty of the war, the weather, and you also have the strike in Venezuela -- those are the reasons.

COOPER: I got a question -- Ms. Coon, let me ask you, Virginia's attorney general says he's investigating if prices are, you know, if there is price gouging -- do you think that's just politics, and do you think we're going to be seeing more of that as people get more upset about...

COON: I'm sure you're going to see more of that, but in the past, whenever they've had investigations -- in fact, in the year 2000, because it was an election year, we had an investigation in the Midwest about the oil prices, and the FTC was involved in it, the Federal Trade Commission, you also had committees on the Hill that looked into this and investigated it. Guess what -- they all came out and said, there was no collusion, there was no price gouging...

COOPER: ... all right...

COON: ... the reason was, there was an interruption in delivery, and one of the reasons for that interruption -- not the interruption -- the delivery interruption was because of a fire, and because of all the (UNINTELLIGIBLE) fuels, that the -- that the zealots, the environmental zealots have requested, you can't get gasoline and share gasoline from one area to the other.

COOPER: All right -- only...

COON: That was the reason for that price increase.

COOPER: Only have about 10 seconds left, Tyson Slocum, your final thought.

SLOCUM: The Federal Trade Commission in its 2000 report actually found that several large companies intentionally withheld gasoline from the marketplace, for the sole intention of driving prices up. That's clear evidence that we do not have adequate competition, and if that happened back in 2000, we'd have even more mergers since then, and that's even less competition...

COOPER: All right.

SLOCUM: Less access to free markets for America's...

COOPER: We're going to have to leave at that. I don't know that we solved anything, but we certainly got some difference of opinion. Appreciate it, Charli Coon, Tyson Slocum, appreciate you joining us this morning. Thanks very much.

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