Cost of Running for President Going Up
FREDRICKA WHITFIELD, CNN CORRESPONDENT: Diplomats are exchanging notes as a standoff between Britain and Iran moves into its second week. Fifteen British sailors and marines are still being held in Iran. They are accused of illegally crossing into Iranian waters. Britain says they were in Iraq's territory. Both sides have exchanged diplomatic notes. Their contents have not been disclosed, however. President Bush blasting the Democratic-controlled Congress over Iraq war funding bills. Both measures have troop withdrawal time lines attached. In his weekly radio address Mr. Bush says he will veto any measure that has a withdrawal date attached. Another worry for pet owners, more products are now on the pet food recall list. Hills is recalling its prescription diet M/D Feline Dry Food. It's the first dry food added to the list and Purina is pulling its Alpo Prime Cuts in Gravy, wet dog food. The recalls follow reports of dogs and cats dying from kidney failure after eating the food. In Montgomery, Alabama, a deadly collision between a Greyhound bus and a car. The driver of the car was killed and 20 other people on the bus were injured in this morning's accident on Interstate 85. Police say the car was headed the wrong way on the interstate. The bus, carrying 49 passengers, was on its way to Georgia. Police in Highland County, Florida, face questions over their arrest of this little girl, six years old. Reports say the kindergartner was handcuffed and taken to jail after allegedly hitting her teacher. The girl's mother says she is shocked over her child's treatment, and she's considering legal action. The girl is facing one felony count and two misdemeanors. An update of the top stories at the bottom of the hour, now time for</s>IN THE MONEY. TOM FOREMAN, CNN CORRESPONDENT, IN THE MONEY: Welcome to IN THE MONEY. I'm Tom Foreman sitting in Ali Velshi. Coming up on today's program, why the Iran mess isn't the only reason you're paying more for a tank of gas. Plus the cost of running for the president just keeps going up and up and up, and a boss who gets it. Imagine that. Customer service really does count. Joining me today Jennifer Westhoven and Polly LaBarre, great to have you all here. Are you upset about gas prices because I am?</s>POLLY LABARRE, CNN CORRESPONDENT: I'm not upset about them. I'm upset about how little people actually are seeming to notice it. There's a striking study from U.C. Davis that took a look at two five year comparable periods 1975 to 1980, prices went up 20 percent consumption went down 6 percent. The last five years prices have gone up 20 percent and consumption has only gone down 1 percent. People are saying now I'm not going to worry until it gets to $10 a gallon.</s>FOREMAN: Why do you think that is, we just that wealthy?</s>JENNIFER WESTHOVEN, "HEADLINE NEWS" CORRESPONDENT: I take the subway so I'm so lucky; I do not have to suffer.</s>FOREMAN: You New Yorkers with mass transit. The rest of us have to drive.</s>WESTHOVEN: I read and San Francisco they are looking at prices that could crack record numbers this weekend possibly. That's really outrageous. That's much faster, I mean we usually have a run up around this time of year but that's much faster than normal and it's the kind of thing where I think that people could get really upset if we start breaking records this fast through the rest of the country.</s>FOREMAN: This is a time bomb for the elections out there. I think that these candidates are walking around saying what ever happens to gas prices can make a huge difference to them. Look at California, 55 electoral votes sitting out there and those people are paying a lot and getting unhappy. Our first guest says the sky-high oil prices have left us right for a recession. The candidates don't want to hear that. Joining us now is Peter Beutel, president of Cameron, Hanover an energy risk management firm. Thanks for being with us. Let's start with the recession threat. Why do you say that?</s>PETER BEUTEL, PRESIDENT, CAMERON HANOVER: We've had a little bit of trouble here recently, a lot of worry about the Fed raising interest rates. It recently said that doesn't appear immediately likely, but a lot of companies that have seen all kinds of costs increase, heat, transportation, electricity, these companies now that they see energy prices jumping again are likely to say these prices are here forever. Let's go ahead and raise our prices or we're going to go out of business.</s>WESTHOVEN: Peter things are pretty tough right now in San Francisco for gas. That may be something temporary just for them, but do you think that we're likely to see, you know, is $3 gas the new normal?</s>BEUTEL: I don't think there's such a thing as normal in the oil markets. We have cycles and we have trends. I believe that once this is over we will see prices head lower, longer term, and say in four to eight years. It's just that right now prices are extremely high, but if we do have a recession, prices will come down and the good news is once we come out of that recession, at least historically, gasoline prices have not followed for a number of years.</s>LABARRE: Peter I'm actually interested in the demand side. It's really interesting to me that the prices are going up and people sort of have this ho-hum reaction to it. So the only thing individuals can really do is affect the demand. What do you think individuals should be doing and how we should we thinking about our own habits and behaviors as consumers?</s>BEUTEL: If we could each cut out one out of 10 trips, I'm not talking about commuting but the discretionary trips that you take during the week. If we could ask a neighbor, you know, are you going to the store on Friday, I'm going on Tuesday, can I pick you up something fresh on the day I go. If we did a little bit of car pooling, if we just were to switch cars so the person in the family goes the farthest drives the most fuel-efficient vehicle we could save and cut into demand, and that would definitely lower prices.</s>FOREMAN: Peter, I don't like my neighbors that much so that's not going to happen. Let me ask you this, I'm about to buy a car. Should I get a hybrid car, and the reason I ask this is because I keep looking at the fuel difference, and it's not that great for a huge limitation on what I have to choose from and they are not cheap.</s>BEUTEL: Well, you know, this is the thing. It may not make sense to you individually, but I think as a society we certainly have to start buying a lot more hybrid cars. I don't know if it works for you, but it works for us.</s>WESTHOVEN: Aside from hybrid cars, are there any other big policy initiatives that you think, you know, from where you're sitting, have the best chance of being effective, of really doing something. We have some out there that a lot of people say that's just lip service. What do you think would really work?</s>BEUTEL: Well, I think a lot of the things we're looking at like ethanol and bio-fuels, certainly an increase in wind power and solar, every little bit helps. I tend to be a political moderate who wants to take the best ideas from both sides of the aisle, and I kind of wish they would stop seeing things in red and blue and started seeing things a little bit more clearly.</s>LABARRE: Don't we all.</s>FOREMAN: Let me ask you something about this. What is really making this happen? I always hear people talking about supply and demand, and I understand supply and demand, but nobody ever goes to buy a barrel of oil and it's not there. This is the perception of supply and demand because the demand has always been met, so what's really making this happen?</s>BEUTEL: Well, it's a combination of factors this year. First of all in January and February normally we see gasoline demand just drop right off the cliff after New Year's Eve. This year that didn't happen, and it only stays steady in 20 percent of the years so a very, very strong record January/February demand. Normally we see refineries take down units for maintenance during January, February, and March. This year we also had unscheduled down time which is a polite way of saying fires, explosions, power outages, so these factors have already made this market susceptible to the upside when this Iran event occurred, prices just started screaming.</s>FOREMAN: You made a prediction in January on this show about the free market, that the cost of a barrel could drop to $20 a barrel. First of all, do you still stand by that, and if you do, does that mean that my price at the pump could drop to $1 a gallon?</s>BEUTEL: Well, it depends what state you live in. If you live in Texas or New Jersey, the answer is yes, you could pay $1 a gallon, if you live elsewhere, it could be $1.25, $1.35.</s>FOREMAN: You're serious about this?</s>BEUTEL: Yeah, yeah. This has happened so many times in the past, you know, that I expect it will happen again. The cycle goes up it discourages demand; it often gives us a recession. It encourages supplies. Right now there are hundreds of projects being worked on right now that will develop oil, natural gas, ethanol, biomass, solar, wind. At these prices you could probably find oil in your backyard if you drilled, if you drilled deep enough.</s>FOREMAN: Well Peter Beutel, if my gas drops to $1 a gallon you come back and I'll buy you a tank on me because I don't think it's going to happen. Peter Beutel, president of Cameron Hanover an energy risk management firm. Thanks for being with us. When we come back, why the price for running for the White House keeps going up like the cost of running to the grocery store. Stick with us.