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CNN Live Sunday

Are Energy Crisis Fears Overblown?

Aired June 17, 2001 - 17:17   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.
STEPHEN FRAZIER, CNN ANCHOR: In spite of all the warnings we heard earlier this year, California's energy crisis hasn't been quite living up to its expectations. It's been several weeks now since Californians have had to deal with any rolling blackouts of power. That's a far cry from some of the predictions that were made last spring by energy analysts.

Californians, however, are getting still squeezed at the pump. According to the most recent Lundberg survey of gasoline prices, drivers in San Francisco were paying more than $2 a gallon for self- served regular gasoline.

Joining us now with a closer look at this California power crunch and its implications nationally is Dante Chinni, who is a writer for "The Christian Science Monitor." Mr. Chinni, good to see you again. Thanks for coming back.

DANTE CHINNI, "THE CHRISTIAN SCIENCE MONITOR": It's good to be here, Stephen.

FRAZIER: We said that prices are high in San Francisco, but overall, they are trending downward now, even in California.

CHINNI: Yes, they're starting to come down a little bit, and this was -- people knew this was going to happen. What has really happened with it, with gasoline particularly, it wasn't supply so much as getting the refining through and different municipalities, different metropolitan areas required different types of blends of gasoline, and once -- the problem is there is enough refining capacity to get all of this out there. Now it's starting to catch up and as it does catch up and there's more out there, the prices are going to come down.

FRAZIER: From where you sit, though, are the prices high enough to generate any new refining capacity? Would any investors go out and build a new refinery at these prices?

CHINNI: Well, I think that -- I think so. I think so, if for no other reason there's a lot of talk about needing new refineries. We haven't built one since -- I guess the mid-'70s or something like that. It's time to get something like this, time to get one up and going and there's probably a lot of interest now. I know there's a lot more interest in exploration. I think there's probably a lot more interest in getting into refineries as well. FRAZIER: Is there any interest in understanding America's place in the world and what consumers here are getting as a bargain in fuel and power compared to other nations?

CHINNI: We have a little bit of a problem with this in this country. We tend to think of gasoline as a -- low-priced gasoline as some kind of a birth right, and the truth of the matter is prices are high now, but compared to where they were, adjusted for inflation, in the early '80s, they're actually lower right now and compared to, as you say, other industrialized nations, our prices are quite a bit lower, actually.

FRAZIER: Now, we talk about the boom and bust cycle of the energy industries. You were just out in Tulsa a while ago and it doesn't really seem that people are living high on the hog as a result of these prices; it hasn't filtered down yet to people's driveways or their swimming pools.

CHINNI: Yes, that's right, and Tulsa is an interesting case because you talk to people there, when the last collapse hit, when the price fell, Tulsa really took a hard knock and a lot of people actually just got out of petroleum because they didn't want to be involved in it, it's too up and down, too shaky.

And I think now, they're starting, when you talk to people there -- I talked to one guy who's doing drilling exploration. It used to take him four months to generate the money he needed to go out and do the exploring he wanted to do for new oil; this year it took him two weeks. So, it's starting to work its way through, but they're not exactly living high on the hog yet, there in Tulsa.

FRAZIER: And as I read your article, I got the sense that there were far fewer people like him, that a lot of people have just bailed out the industry.

CHINNI: Yes, a couple of things happened. I think the industry has consolidated, everybody says. It's moved down, a lot of it has moved down to Texas into Houston, and there are a lot of small independents in Tulsa doing work, and in that area outside of Houston, like Midland, Tulsa, a lot of these independents going in. And I think what happens is they got out of it and now that there's interest again and the prices are up -- I mean, we're back up around $28, $29 a barrel right now for oil, people are going to jump back in it and they'll probably get more people going back into petroleum down there.

FRAZIER: What about young people? Was there any sense there for a young, smart person that this was a place where he could make a difference?

CHINNI: Yes, actually, talking to a couple of people, it was very interesting that people had gotten out of this for quite some time, and one woman said she'd speak to classes about who is going to be petroleum engineer, and the kids would -- you know, no hands would go up and in the last couple months, she's been going in and a lot more hands have been shooting up and I think parents are starting to recognized, hey, petroleum, it may be boom and bust, but it's booming right now and they're starting to think this may be a good time to jump in.

FRAZIER: So, moving beyond Tulsa now to sort of the macroeconomic scene or the national scene anyway, are we in a crisis, as the terminology was used earlier, or is this just more of just a cyclical adjustment?

CHINNI: Well, this is what happens -- look, in some ways, this is capitalism at work. This is supply and demand, and right now, like you said, we haven't had any refineries for 20-some odd years, and the price came down so far a lot of people weren't interested. The price is high again. My guess year is probably a year or so, a lot more people are going to be in the market and then we'll get the refining capacity up. In maybe two, three years things will even out a little bit again.

FRAZIER: Well, we'll be talking to you all through that period, and we're grateful that you talked to us today. Dante Chinni, of "The Christian Science Monitor," thanks very much.

CHINNI: Thanks, Stephen.

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