[Brian Nelson, Cnn Anchor:] What's really going on with gas prices? And why did they go up? Who can we blame? Well, to help with answers, let's go to Los Angeles and to Christopher Palmeri. He covered the energy industry for "Forbes" magazine and is now senior correspondent for "Businessweek." Thank you for joining us. You have just done a major look at this problem. Who, in your view, is to blame? Is it refineries? Is it OPEC? Is it consumers? Is it government?
[Christopher Palmeri, "businessweek":] Well, the irony in this, Brian, is that everybody is looking for somebody to blame, and the reality is that we're all to blame a little bit. If you look what happened to the price of gasoline in the last year and half, it sort of a low at around February of last year of about $1 a gallon, and of course nobody was complaining back then. Now it's around $1.66 average nationally. And if you break down that increase, about 48 cents came directly from the price of oil, which has skyrocketed in the last year and half, and then the rest of the part of that equation is myriad of smaller influences. One of them is the new reformulated gasoline, the cleaner-burning gasoline, which was introduced on June 1 throughout much of the country, and clearly, the EPA, I believe, could have executed that rollout better. Then there were some pipeline problems in the Midwest, which led to much higher prices there. That's sort of the oil company's fault. And the part that people don't really want to talk about, certainly politicians and oil companies, but is really a major factor here is that consumers have been using a lot more gasoline. We've all enjoyed low prices for 15 years, and we're all now driving these gas- guzzling trucks, more of them, further, and using public transportation less. And so, to a large degree, we're all paying the price of that increase which the supply gasoline has not kept up with.
[Nelson:] There are any number of politicians who have been charging collusion or price fixing among the oil companies. In your investigation, did you find anything like that?
[Palmeri:] There's actually ample evidence, if you study the state of California, which introduced it's own reformulated gasoline program in March of '96, and almost from the day that happened, prices spiked. And since that day, they've continued to spike higher than the national average more frequently. And so when you study California, and the same scenario happened over the last few years there, prices would go, consumer would get angry, politicians would schedule hearings. And studies have been done, at least four major ones. And the conclusion is always the same, that there hasn't been a major refinery built in California in 30 years, so supply is tight, and the introduction of reformulated gasoline, a special fuel exclusively for Californians, has an effect of reducing the supply of that gasoline during crunch times, and so the price takes off. And I am pretty sure that when the Midwest situation is studied in depth, as it is being right now, that the conclusions will be much the same. There isn't any sort of grand scheme on the part of oil companies.
[Randall:] Quickly, Mr. Palmeri, is the solution in the short run for state governments to reduce their taxes?
[Palmeri:] There are number of short run things you can do. That's one of them. They might, from time to time, wave the reformulated gasoline requirement. They also, you know, might just consider sort of releasing more oil from the Strategic Petroleum Reserve that sort of releases pressure on prices. Those are all short-term things. The reality is that we're going to have to sort of, at least until more refineries are built, we're going to have to deal with these price spikes.
[Nelson:] And what about looking for alternative fuels and putting more emphasis on conservation? Is that something that we have to address in the long term?
[Palmeri:] I think it is. We had great success in the '80s of reducing consumption of gasoline and other fuels, and I think that that's probably something that a lot of people should consider right now.
[Nelson:] OK, Christopher Palmeri, from "Businessweek," thank you for joining us. We appreciate it.
[Palmeri:] Thank you.