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CNN Live Sunday

Energy Crisis: Simple Supply and Demand

Aired May 13, 2001 - 16:14   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.
DONNA KELLEY, CNN ANCHOR: While the Fed wrestles with a slumping economy, much of the country is struggling with energy problems. California has been hit hardest, and Governor Gray Davis is scrambling for relief. For details we're joined in Washington by CNN's White House correspondent, Kelly Wallace.

Hi, Kelly.

KELLY WALLACE, CNN CORRESPONDENT: Well, hi there, Donna. California's Governor Gray Davis is asking President Bush to do something that White House aides say he simply will not do. And as our viewers know, the president arrived back here at the White House just a short time ago.

Governor Davis is asking for caps to be placed on the energy prices in California. Well, President Bush, according to aides, believes that caps on energy prices would not relieve California from power shortages or from rolling blackouts. In fact, the message from the White House is that caps would be more harm than good and that they would discourage supply at a time of increased demand.

Still, Governor Davis says he will keep calling a President Bush to go ahead and place these caps. The governor appeared on some Sunday talk shows, and he basically said that Mr. Bush is dropping the ball and not protecting Californians from what he says are outrageous prices being charged by energy companies in the president's home state of Texas and other parts of the southwest.

(BEGIN VIDEO CLIP)

GOV. GRAY DAVIS (D), CALIFORNIA: We have been obscenely gouged by out-of-state energy companies. Just the other day we had pay $1,900 for a megawatt hour, which a year ago would have cost us $30.

(END VIDEO CLIP)

WALLACE: But energy companies say part of the reason for those higher prices is that suppliers are concerned that California's utilities will not be able to pay their bills. And most Republicans in the Congress believe with the Bush administration, saying it is simply Economics 101, that at a time of high demand and low supply, you simply do not put a cap on the price of energy.

(BEGIN VIDEO CLIP) REP. DENNIS HASTERN (R-IL), HOUSE SPEAKER: Even a freshman in college who's studying economics knows if you cap the cost of being able to recoup your investment, that people who want to invest aren't going to do it. I think that's a bad remedy for a very, very severe problem.

(END VIDEO CLIP)

WALLACE: But some Democrats in the Congress are calling on the president to have the Federal Trade Commission and the Justice Department investigate these rising prices and what some lawmakers call record profits by the oil industry during the first month of the year.

The White House says that the president has directed federal agencies to be vigilant, to make sure there is no price gouging going on. But Mr. Bush keeps saying that there is no short term fix when it comes to these rising gas price and power shortages in parts of the country. The president says the only answer is a long-term one, a combination of conservation and production.

And, Donna, he hits the road later this week to start selling his plan. Donna back to you.

KELLEY: Kelly Wallace at the White House, thank you.

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