Demand for Answers on Capitol Hill; Federal Reserve Meeting Today
JOHN ROBERTS, CNN ANCHOR: Hello and welcome to "ISSUE #1." I'm John Roberts. Ali Velshi and Gerri Willis are on assignment today. For the 40th time this year, the ninth time this month, there is a hearing on Capitol Hill dealing with record prices for oil and gas. But while some are blaming speculators, you might be surprised to find out you could actually be benefiting from high prices. Two states saying enough is enough and they are suing both Countrywide and its CEO, Angelo Mozilo, in the mortgage meltdown. And the Federal Reserve is meeting at this hour. Why the decision that it makes or doesn't make matters to you. From the ISSUE #1 headquarters to the cnnmoney.com newsroom, we are all over the stories that matter to you. It's a big story today, the demand for answers on Capitol Hill. The Senate is asking whether the high price of oil is just a bubble or is it a new reality for the U.S. economy? CNN's Kate Bolduan is following the hearing in Washington. She joins us now live. Good afternoon, Kate.</s>KATE BOLDUAN, CNN NATIONAL CORRESPONDENT: Hey, there, John. Well, you said it. The focus today was to answer the very big question. Are high oil and gas prices a passing economic phase or a reality that's here to stay?</s>SEN. CHARLES SCHUMER (D), CHAIRMAN, JOINT ECONOMIC COMMITTEE: I think that everyone would like to believe that high oil prices are a bubble. That you burst the bubble and the price will come down and stay down. We all hope that's the case, but it may not be so.</s>BOLDUAN: Now Senator Charles Schumer, he said at this committee, they really wanted to get to the root cause of today's energy situation. Lawmakers heard from among other experts, one of the nation's best known energy experts, Daniel Yergin. Yergin says the concern over oil speculators which is a hot topic right now is a real concern, but not the whole story.</s>DR. DANIEL YERGIN, CHAIRMAN, CAMBRIDGE ENERGY RESEARCH ASSOCIATES: We really are in an oil shock. And you've all addressed how painful it is for consumers and businesses. The specter of stagflation is once again in front of us. Low growth, high inflation. We've discussed how oil prices have gone up. In such circumstances, this tendency is to try and find a single explanation. For something this big, there is not a single explanation.</s>BOLDUAN: And as you see, Yergin says it's several factors coming together at once. Now, supply is down while world demand is up, especially in rapidly developing countries like India and China he says. At the same time, political situations with countries like Nigeria, Venezuela and Iraq have resulted in them pumping out less oil. Yergin says the weak dollar is also at play here. And while it's really unclear what conclusions the committee is going to reach or draw from today's hearing, Daniel Yergin makes one thing very clear. What he calls the either or energy debate that's gone on in Congress, he says isn't working. He argues it's not a choice of more drilling or more alternative energies that were all for relief, he says it should be a combination of new supplies, renewable, and greater efficiency -- John?</s>ROBERTS: A question that will put the New Jersey governor, John Corzine, a little bit later on in this hour. Kate, there's been a lot of congressional hearings recently on this topic. Yesterday, one panelist, an energy analyst said that he thought that the price could go down dramatically within 30 days if Congress were to adopt new legislation regarding speculators. What can you tell us about that?</s>BOLDUAN: Yes. That is getting a lot of attention. This came out in a hearing as you mentioned earlier this week. Some say that if lawmakers would pass legislation as they've talked about curbing oil speculation, then within 30 days of the president signing it, we'd see oil prices drop by half and gas prices would then reflect that. But on the flipside, some analysts say that this idea would do much more harm than good. They say oil trading could then just simply shift unregulated overseas markets and then oil prices would go even higher. So as often as the case, John, there are both sides of the story.</s>ROBERTS: Yes, and a lot of people still not sold on the idea that speculation has a lot to do with the high price of oil.</s>BOLDUAN: Right.</s>ROBERTS: Kate Bolduan for us following the hearings on Capitol Hill today. Kate, thanks very much.</s>BOLDUAN: Thanks, John.</s>ROBERTS: Well, some people are blaming speculators. There's a bit of a twist here. You might be surprised to find out that you could actually be benefiting from these high prices. CNN's senior correspondent Allan Chernoff is here to explain how you might be benefiting. So, how?</s>ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Well, John, I think this term speculator is being a bit overused here, frankly, because it's not just classical speculators who are moving the price of oil but it's so many investors. And, believe it or not, that could include you and me and all of us. Let's have a look at some of the speculators -- so-called speculators in the market. Yes, you have your traditional high rollers. People with big bucks who like to gamble -- and I mean gamble. And you also have Hedge Funds. Remember, a few years ago, Hedge Funds were not such a big deal. Now, Hedge Funds have been putting billions and billions into the energy markets. Keep in mind, the stock market has generally not been a great place to be over the past year. So a lot of people, they're putting their bucks into the commodity markets. Keep in mind, this is not just happening in oil, it's happening in plenty of commodities. But oil is the big focus right now. But then, let's have a look again at our graphic and you'll see we're also talking here about pension funds, endowment funds. Yes, universities putting billions at work in those markets. Pension funds, huge companies, and a lot of employees all have their money pooled. And yes, the managers of those funds are putting money into oil. And you have commodity funds as well. There are so many different types these days. Index funds. There are also exchange-traded funds. All these newfangled ways, John, for people to put money to work in the oil market and most of that money is on the buy side. So that inherently creates a lot of upward pressure on the price of oil. That's one reason it's trading at over $130 a barrel. The supply-demand fundamentals do not dictate $130 oil.</s>ROBERTS: All right. So supply and demand, part of it, though, investors also seem to be playing a role here. Is there any way to determine exactly how much of a role that they're playing?</s>CHERNOFF: It's very tough. And that's a great question. Part of the reason is that so much of the trading these days in commodities happen electronically. It's not all at the New York Mercantile Exchange, which is regulated by the Commodity Futures Trading Commission. A lot of it is happening on a market called the EIS, which is based in Atlanta. That's an electronic trading vehicle. Also, trading is done in London, Dubai, so it's all over the world. A lot of people getting on the action. Some of the talk in Congress is about at least getting a reign on those alternative ways to trade.</s>ROBERTS: And these are what are called these dark markets out there.</s>CHERNOFF: Yes. You could certainly call them dark.</s>ROBERTS: All right, Allan Chernoff this afternoon. Allan, thanks very much. This show is all about you and it's time for you to get involved and weigh in on our "Quick Vote." Poppy Harlow from cnnmoney.com is here with today's question. What are we asking today, Poppy?</s>POPPY HARLOW, CNNMONEY.COM CORRESPONDENT: Hi, there, John. Well, as you well know, the race for the White House is on and the two men at the forefront of that race are very different when it comes to their views on business and on the economy. So here's our question for you today. Who would make a better business partner? Senator McCain, Senator Obama, or neither? Weigh in on cnnmoney.com. We'll bring you those results a little later in the show -- John?</s>ROBERTS: Poppy, thanks so much. Looking forward to that. Business and politics, the topic of our next segment. Why Senator McCain's policies toward business in America could become a big boost in November. And the Federal Reserve meeting at this hour. Why their decisions make such a big difference to your bottom line. And we're going to check in with Roland Martin. He's live right now on CNN radio and Cnn.com live. We are all over ISSUE #1, right here on CNN.