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COPYRIGHT 2008 Voxant, Inc.
Original Source: CNN LIVE EVENT/SPECIAL
RICK SANCHEZ, CNN ANCHOR: Now, four bucks for a gallon of gas. How did we get here? Where is it going? And what's it going to do to us.
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UNIDENTIFIED FEMALE: If I could ride my bike to work, I would. Or you know, do anything to conserve on gas. I would definitely do that.
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SANCHEZ: Laugh out loud? No. Cry? Maybe. Scream? Definitely. Considering that already some Americans are having to choose between food and fuel.
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UNIDENTIFIED MALE: I'm going to stay home and save my pennies.
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SANCHEZ: When a gallon of gas costs four bucks, what's next? This is America's fuel nightmare.
Hello, again, everybody. I'm Rick Sanchez. As we begin this hour, let me pose a question that no doubt many of you have thought about yourself. Is it possible that somebody is playing games with the price of oil? As in price manipulation.
Federal regulators are now saying that they are actively investigating and have been for sometime -- that price manipulation. Is that why prices are so high? Also this hour, how you can save not pennies but dollars at the pump. We're going to tell you. And we're also going to be telling you about a new reserve of oil. It said to be huge that's just been discovered. We'll tell you where.
Of course, it's also hurricane season this weekend. What would another major storm do and what's being done to protect the rigs out of the Gulf Coast.
All right. Let's start with the big news, though. Federal regulators, again, looking at price manipulation. What does it mean? What could it mean for all of us? And what's been going on?
Ali Velshi is in New York. He's been looking into this for quite sometime now.
Ali, who and what are they looking at?
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Good question, Rick. Good to see you. Here's the news. The speculation, the thing that many people say drives the price of oil higher might be behind the price of oil that we're paying right now over $125 a barrel.
A federal agency announced that it is six months into an investigation of possible manipulation and abuse in the oil futures trading market. Now this agency is the Commodities Futures Trading Commission, CFTC. It says it doesn't even normally disclose that it's got investigations under way. It only did so because of the unusual price increases that we've seen in oil. One former agency official that I spoke to says political pressure has been building on this agency to act.
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MICHAEL GREENBERGER, FORMER DIRECTOR COMMODITIES FUTURES TRADING COMMISSION: For two years they have been telling Congress this is a supply-demand problem. We are watching these markets. They have nothing wrong. Yesterday they say we've got an investigation. And now there's all this data we don't have that we have to get from the exchanges that are not regulated.
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VELSHI: That's Michael Greenberger. He says that a lot of oil is traded on exchanges. He said those exchanges that are not regulated. Exchanges with loose rules. Rules that could encourage excessive speculation. And at these prices, Congress wants answers.
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GREENBERGER: On top of that, there's now a bipartisan outrage. You've got conservative Republican members of Congress who are very angry with the CFTC for having sat on this problem while oil went from 50 to 75, and now, yesterday, even before the announcement touched $135.
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VELSHI: Now, Rick, Michael Greenberger was the former head of trading and markets for the CFTC -- the Commodities Futures Trading Commission. The CFTC is not disclosing. What it's investigating or who is being investigated. But the agency said it is publicizing this now because of today's unprecedented market conditions.
Rick?
SANCHEZ: What are the possibilities? Could it be somebody on the political side? Is it somebody on the distribution side? Perhaps, somebody overseas or are they all still fair game?
VELSHI: They are all options. The oil market is huge. It's not like even a particular stock market. It is traded all around the world. The issue is though that some of it is regulated here in the United States and some of it isn't. But that oil all looks the same. So if there is trading going on that is not aboveground, it's not clear, not aboveboard, it's not clear that any agency would track it.
So now they are looking at patterns or looking at whether people made big trades in oil before, some kind of a price spike. But this is going to be like looking for a needle in a haystack, Rick.
SANCHEZ: A lot of times you get your answers by looking at the agency that's actually doing the investigating. In this case they are called Federal regulators. Who are these people? What have they been mandated to do, and why have they been doing this investigation apparently since December without anybody even knowing about it.
VELSHI: Unbelievable. And by the way, in December, oil was 96 bucks or 97 bucks a barrel. Where were they as the gentleman that I just referred to said, where were they when all it was 35 and 50 and going to 75 and 80. Why did they choose December to be the place?
Shouldn't these agencies be protecting us all the time? Like the Securities and Exchange Commission, like the various agencies that are supposed to oversee the things that we do, the places where our money is traded. So it is very, very good. A lot of questions -- more questions than answers right now about why they haven't done this until now.
But what is interesting is the CFTC, this agency, the head of that agency just recently said he doesn't even think there's any speculation in the oil market. So at least we're going to get to the bottom of the fact that this can't just be supply and demand. There has got to be something to it.
(BEGIN VIDEOTAPE)
VELSHI (voice-over): Record gas prices for three weeks straight, mostly because of oil. In fact, about three-quarters of the price of a gallon of gas is determined by the price of oil, which according to at least one economist is headed higher.
JEFF RUBIN, CHIEF ECONOMIST, CIBC MARKETS: I see oil prices averaging $150 within two years. And by 2012, probably averaging well over $200. We have a forecast of about $225 a barrel, which would translate roughly into around $7 a gallon gasoline.
VELSHI: In a recent CNN Opinion Research Corporation Poll, 78 percent of Americans expect gas to hit five bucks this year, and that's forcing some changes. Ford says truck and SUV sales have stalled. It's cutting production and staff to make fewer trucks and more fuel efficient cars.
General Motors might shift workers from truck factories to car plants. Chrysler is guaranteeing gas at $2.99 if you buy certain models. And Honda is revving up production of its popular civic to meet increase demand.
Rubin says high gas prices affect more than just what people drive.
RUBIN: For example, where people live. Because people aren't going to be able to commute 50 miles to work every day, because the cost of filling your tank is going to make that prohibitively expensive. So property values in the suburbs will start to fall. Property values in the cities will start to rise.
VELSHI: Author and economist Stephen Leeb says this puts suburbanites in a position to lead the change.
STEPHEN LEEB, AUTHOR, THE OIL AUTHOR: There's no doubt that people living in suburbia are suffering more. But those are the people that will say, we've got to do something about this. The auto companies have to retool. They have to supply us with plug-in hybrids and things like this. I mean, we can do this, that's the whole point.
VELSHI: Leeb says attitudes are already shifting but only because oil prices are so high.
LEEB: But I feel the first correction in oil down to 100, 110, people will say -- oh, gasoline came down to $3.80. We don't have to worry anymore. Well, you really do. And this is a long-term...
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