Wednesday, February 02, 2011 Will Chaos in Egypt Mean Pain at the Pump? | Glenn

Wednesday, February 02, 2011 Will Chaos in Egypt Mean Pain at the Pump? | Glenn Beck With: Eric Bolling Special Guests | John Hofmeister, Steve Moore This is a rush transcript from "Glenn Beck," February 2, 2011. This copy may not be in its final form and may be updated. ERIC BOLLING, GUEST HOST: From Fox News reporters on the ground, the rounds are going over the heads of protesters, but they are in the direct line of fire. Here at home, how important is Egypt to U.S. oil interest? Take a look at this map of oil choke points. Within a mere few hundred miles, one-third of all the oil on the planet is produced. It travels through. There is the Suez Canal -- you can see that, either the canal or the pipeline. Here's the big one. On the other side of Saudi Arabia, the Persian Gulf, the Strait of Hormuz handles 20 million barrels of oil a day. Very important point. Are you scared? I'm scared. Disrupting one barrel of oil flow and prices at the pump, the grocery store, the mall and your home will skyrocket. With me now, John Hofmeister -- he's the former head of Shell Oil. And Steve Moore is a senior economic writer at The Wall Street Journal. Hofmeister, I'm going to start with you, my friend. You've been -- you've been the CEO of Shell. You know how important that Middle East and those choke points, the Suez Canal and the Strait of Hormuz. You tell us -- tell our viewers how important that area is. And, by the way, how important keeping flow of oil through the areas? JOHN HOFMEISTER, FORMER PRESIDENT OF SHELL OIL: We've known for decades how vulnerable we are, Eric, to these choke points. And there have been all kinds of scenarios and games played out in terms of what might happen. We use as a world, 85 million barrels a day. The United States uses 20 million barrels a day -- every day -- 10,000 gallons a second. And we're shutting down drilling in our own Gulf of Mexico? This is absurd. It is absurd that a nation that has so much demand -- BOLLING: Hey, John, what if we were to choke off one of those points, the Persian Gulf, the Strait of Hormuz, if that -- by the way, on the other side of Saudi Arabia, on that choke point, lies Iran. If Iran were to get a crazy idea and to close that port -- close that shipping lane, what would happen to the price of oil and gas? HOFMEISTER: It would only take a matter of hours before we would see significant movement. Days before we could see the price of oil go up 50 percent or even double because the amount of oil coming out -- BOLLING: So, you're saying $200 a barrel? You're saying $200 a barrel? HOFMEISTER: It could easily get to $200 a barrel if after several days, there's no sign of a let up in the crunch point. BOLLING: OK. Steve, if you have Steve Moore. I hope -- there we go. Steve -- OK, since the -- you saw the pictures in Egypt. You see the protestors in the street. Since we started seeing those last Thursday or Friday when it escalated, the price of gasoline, not at the pump, not the AAA number that everyone reads, the price of gasoline in the wholesale level has jumped 13 cents a gallon. What does that mean to American consumers? STEVEN MOORE, WALL STREET JOURNAL: Well, Eric, first of all, that's not -- I mean, 13 cents is a lot, but if these projections are right that John is talking about, we're looking at, you know, the price of gasoline -- I just filled up yesterday. I think I paid something around $3.59 a gallon, which is a lot. But we could see the price of gasoline if we moved to $150 to $200 a barrel of oil, we could be looking at $5 a gallon to fill up. So, that would be a huge increase. And that is really dependent on whether or not we can get this oil out of the Persian Gulf. BOLLING: Right. We talk, we can talk oil ad nauseam. But here's what matters, here's what matters -- when the price of oil goes up, Steve, what happens to the price of food, what happens to the price of corn, what happens to the price of wheat, a box of cereal? How about cotton, the jeans we wear, the shorts we wear? What happens those prices? MOORE: They all go up, Eric. That's one of the lessons we learned back -- remember, we had the big spike in oil prices back a few years ago, and those of us who are old enough to remember the 1970s remember that as the oil price spiked up, we saw price increases for everything, from copper to wheat to Wheaties on the grocery store shelf. So, this a potentially inflationary effect and I think John makes a very important point -- why is it that we are not developing our own oil and natural gas resources? I mean, this is another one of those times to wonder, how it's in our economic or national security not be developing our own oil? BOLLING: So, John, let me throw this at you. July 14th of 2008, the highest price of oil ever traded, $147.25. Two days later, President Bush removed the moratorium on offshore drilling. That was tough. Within six months, oil went to $33 a barrel. Not that we were grabbing that much oil out of the ground immediately, but the thought of being able to drill more, what would it do to the price of oil? Would it matter if people were fist-pumping in the street in Cairo? HOFMEISTER: Oil is a psychological price, as well as a material price. And it's the expectation of the future which drives the price. If the U.S. said we're going back to 10 million barrels a day in production where we were in the 1970s, all the oil markets would be calmed down immediately overnight. Now, we wouldn't get 10 million barrels for a number of years. But it's just the psychology of knowing that the U.S. will start taking better care of its own demand so it doesn't put so much pressure on global demand. BOLLING: Hey, Steve. HOFMEISTER: A lot of countries don't have oil and they need for the U.S. to be producing its own oil. BOLLING: Steve, there's a great case study in this. Every business school teacher has said this before. Every business school professor in America, I should say, the case for drilling is this -- since the protests in the streets, since you saw the Molotov cocktails, the bombs, the rocks being thrown, the price of gas has shut up, skyrocketing, the gasoline is skyrocketing. But natural gas has gone down. Now, there's a reason for that, Steve. Why is that? MOORE: Well, first of all, this should be a wake-up call, Eric. I mean, I'm so glad we're talking about this, because, as I said, this is such an important national security issue. Now, here is the point about natural gas, which is really I think the silver lining in all of this, Eric -- it turns out the United States is becoming the Saudi Arabia of natural gas. Every time we turn around, we're finding new procedures to get natural gas and new sources of natural gas in the continental United States. But, Eric, what is happening right now, as we speak, is the Environmental Protection Agency and the Interior Department are preventing the mining and exploration and excavation of that natural gas, which could keep prices extremely low for American consumers and mean that the price of pumping gas for your car or heating your home would be going down significantly. BOLLING: So, Hofmeister, my point was, didn't matter if there's protesting in the street, if -- it affects the gas and oil if there is. It didn't matter to natural gas with the protest because we produce the natural gas that we use right here in America. Isn't that a case for drilling our own oil? Not natural gas, but oil. HOFMEISTER: Both. Natural gags, absolutely, because that will lower the price of electricity, to the economy that depends on electricity. But don't forget -- the high price of crude oil will completely melt down any economic recovery. The disposable income that is loss to higher gas prices goes away -- it takes away the consumer power to buy whatever else they need. And the whole economy could sink with the kind of crude oil spike that we could be looking at. BOLLING: And Steve Moore, in the 13 cents or 14 cents the gasoline has run up on the wholesale level last few days since the rioting has been going on, that's like to a tax to the American consumer. But the problem is, it's not a tax collected by the government to build a road or a bridge or something. It's a tax collected in the end by a foreign government that frankly wants to kill us. MOORE: Eric, I like that description. I use that description myself. Any time the price of oil or natural gas or the price of heating your home goes up, this is like a tax on American consumers. And what it means is that our living standards go down and our ability to buy other things is basically squeezed out by these high energy prices. That's what we learned in the 1970s when we had the oil crisis back then. And I go back to this point -- that we the capability here in the United States to become less dependent on these unstable places in the middle east where we get so much of the oil and yet we're taking no steps. In fact, this administration is taking steps to prevent us from capturing our own resources. BOLLING: And, Hofmeister, I thought everything was going to be OK if we just rolled out an electric car? (CROSSTALK) HOFMEISTER: You got 250 million cars on the road that only use gas -- a million electric cars by 2015, if it's possible. So what? How about the 250 million that only use gasoline or diesel? We have some awful leadership of what is - of the energy sector right now. And we're not doing what is good for the country. (CROSSTALK) BOLLING: Go ahead. Go ahead. MOORE: Let me just add one point on this, that look, even if we go to electric cars, and who knows what the future holds? But we're going to need electric power to generate the battery power. BOLLING: Right. Right. MOORE: And you are not going to generate - you're not going to have cars running on windmills and solar panel. We are going to need natural gas even if we go to those electric cars. BOLLING: We're going to have to leave there. Steve Moore and John Hofmeister, I appreciate you guy's time. Thank you very much. Content and Programming Copyright 2011 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2011 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. 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