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CNN Paula Zahn Now - Transcript

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HEADLINE: Government Issues Terrorism Warning; Was United States Duped Into War?

GUESTS: Robert Baer, Ben Venzke, Jessica Stern, John Timoney, Greg Mitchell, Karen Brown Dunlap, Don Shepperd, Frank Pallone, Joe Barton, Fadel Ghett

BYLINE: Paula Zahn, Jamie McIntyre, Chris Huntington

The government warns that an al Qaeda attack could happen on U.S. soil as early as this summer. Disturbing questions remain about a former U.S. friend, Ahmad Chalabi, and his Iranian connections.

ZAHN: We're going discuss this now with two members of the House Energy and Commerce Committee. Texas Republican Joe Barton is in Dallas tonight. New Jersey Democrat Frank Pallone Jr. is with me here in New York. Also here with us in the studio tonight, oil and gas analyst Fadel Ghett. Good to see all of you gentlemen.

Congressman Barton, you just heard your colleague, Senator Schumer, say it is time to tap the reserves. Do you support that idea?

REP. JOE BARTON, ® TEXAS: Well, it would be breaking the law. The law says you're supposed to use it in a severe supply interruption, or disruption. We don't have that. We have plenty of oil. It is just very expensive. About 40 to $41 a barrel. So the president is absolutely right to not use the SPR to manipulate prices. That's not what it was intended for.

ZAHN: There are consumer groups out there Congressman Pallone that say $41 a gallon-excuse me, $41 a barrel of gasoline does constitute a crisis.

REP. FRANK PALLONE, JR. (D) NEW JERSEY: Not only that, I think it is not true to say you're breaking the law. The law says that economic hardship is a reason to use this (UNINTELLIGIBLE). And the bottom line is that the high gas prices are a threat to the American economy. So, I think it makes sense to do that.

And all we're saying is that we should do basically what President Clinton did, which is 1 million barrels per day over 30 days, which is essentially what Clinton did. And it drove down prices about 14 cents a gallon at the time in 2000.

ZAHN: And Congressman Barton, you don't deny that work do you?

BARTON: I oppose what President Clinton did. I did a little investigation of what President Clinton did. So it would be hypocritical of me to now tell President Bush that he ought to do what I opposed President Clinton to do.

ZAHN: But it did bring gas prices down at the pump, didn't it?

BARTON: When all the dust had settled I think it made a difference of about one cent a gallon in the fuel oil prices. Which is what President Clinton was trying to accomplish.

PALLONE: Gas prices went down about 14 cents. And the bottom line is, this is causing harm to the American economy. We estimate that when gas prices go up one cent it means about a billion dollars less in consumer spending. If this continues, it is not only going to hurt the person who can't afford to buy the gas at the pump, it is going to hurt the economy overall. I think that's the problem.

ZAHN: what do you think is the answer here?

FADEL GHETT, OIL AND GAS ANALYST: This is a knee jerk reaction. This country has no energy policy or energy plan. Unfortunately, we always find a solution after the damage is already done. I mean, preventive measures should have avoided $40 oil to start with. Oil prices are at the current level, not because of lack of supply, it is because of fear of potential supply disruption.

ZAHN: Well, you have that supply disruption when you had Venezuela on strike. Congressman Barton, would that have been a time you would have supported tapping into the reserves? A lot of people think we should have done it then.

BARTON: We don't have the Arab oil embargo like we had in the mid '70s with when the OPEC cartel refused to ship to the United States. That's when we created the strategic petroleum reserve. I agree that energy prices are very high.

I would point out we passed an energy bill in the house. It is waiting in the Senate since around Thanksgiving of last year. I would also point out that if we would allow drilling up in Alaska, most experts think that there are a million to-a million and a half barrels a day that would come out of that one field which would lower pump prices significantly.

ZAHN: But people are look for relief this summer. Are they going to get it?

PALLONE: I don't see how they're going to get it unless the Bush administration does something immediately. You know, the president said when he was running four years ago he would force and pressure OPEC to lower prices. He hasn't done anything as far as OPEC is concerned from what I can see.

ZAHN: What do you think could be done, do you think Fadel, to bring down the price of gas?

GHETT: One side is saying we should drill in Alaska. That's not going to change oil prices today or tomorrow or next year. On the other hand, we should have a balanced approach. It goes on the supply and the demand side.

What happened to conservation. What happened to energy credit, what happened to infrastructure in this country. There are no refineries built in 30 years. But people want to drive SUVs and complain about higher oil prices.

So we all are part of the problem. It is the president and the Congress and the consumers. So let's accept higher oil prices and let's live with it if we don't have better solution. Let's just accept it.

ZAHN: Congressman Pallone do you have a final thought.

PALLONE: He's right about the refineries. President Bush under his watch, basically the number of refineries has been reduced. There has been basically mergers, which he's approved. And now market concentration, which I think makes it easier for the oil companies to manipulate prices.

And I would like to see an actual investigation of what is happening with the prices, because we know that back in 2000 there was a lot manipulation of the market. I think that's happening now. It should be investigated. It's not happening

ZAHN: You've got a bunch of attorney generals around the country looking into that. Congressman Barton, you get last word. Will we see the prices go down between now and the election?

BARTON: Let me point out the problem is that there is not enough supply in the world. We have-we're using about 80 million barrels of oil a day worldwide. And we're consuming about 80 million barrels of oil worldwide. I would also point out, that in spite of these high gas prices, demand for gas in the United States is up 5 percent, up 5 percent. And when the automobile manufacturers do consumer surveys to see what one of 20 things people want in the new automobile, fuel efficiency lasts-ranks dead last.

ZAHN: I guess...

BARTON: The problem is us. We're using more gasoline and we're complaining about the price. The price is too high. But what we need is a balanced energy policy that lets the market operate.

ZAHN: So, I guess we're all in agreement that we are energy pigs. Not a nice way of saying, but that's what we are.

GHETT: And pigs get slaughtered at the end of the day.

ZAHN: I guess that's what is happening at the pump. Fadel Ghett, Congerssman Joe Barton and Congressman Frank Pallone. Thank you very much. We'll be right back.


ZAHN: And that wraps it up for all of us here this evening. Thanks so much for being with us tonight.

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