CNBC Kudlow & Cramer - Transcript
CNBC News Transcripts
SHOW: Kudlow & Cramer (5:00 PM ET) - CNBC
HEADLINE: Senators Susan Collins and Carl Levin discuss the oil supply situation in the US
ANCHORS: LARRY KUDLOW; JIM CRAMER
BODY:
LARRY KUDLOW, co-host:
All right. With oil prices sky-high, is it time to sell off some of the oil stockpile in the Strategic Petroleum Reserves? With us now are two key senators, Mr. Carl Levin and Ms. Susan Collins. They're co-sponsors of the bill proposing just that.
Senator Collins, if I may begin with you, normally in Wall Street parlance, you're supposed to buy low and sell high, but in Strategic Petroleum Reserve actions, we're buying higher and higher and that has really helped keep oil prices high. Can you change this?
Senator SUSAN COLLINS (Republican, Maine): Well, that's exactly what we're trying to do. It makes absolutely no sense for the federal government to be buying when oil is at record highs and supplies are very tight. We're putting pressure on the market that's driving up the cost of oil and gasoline for the average consumer, making it more expensive for our trucking and airline industries. This just defies common sense.
JIM CRAMER, co-host:
All right, well, Senator Levin, where is the bill? What can happen? What's realistic here?
Senator CARL LEVIN (Democrat, Michigan): Senator Collins and I offered an amendment which passed the Senate a couple weeks ago. It's now going be considered by the House, hopefully. And by the way, we're not selling off oil in the Strategic Petroleum Reserve. What we're saying is don't add oil to a reserve which is 93 percent filled when the additional oil is going to reduce supplies even more, as Senator Collins says, in the commercial market, and according to all of the observers, is going to drive up further the price of gasoline if we add that last 50 million or 60 million barrels.
KUDLOW: Well, Senator Collins, let's stay with that thought from Mr. Levin, because some of the Wall Street analysts are saying that oil traders see SPRO as a backstop, buying, gobbling up oil, and so they're piling on with speculation, and that really is helping to drive prices higher.
Sen. COLLINS: That's exactly right. The federal government is scheduled to purchase some 53 million barrels of oil to fill up the SPRO, and it just doesn't make sense to do that. That is having an impact on the overall oil market, it is causing traders looking to the future to bid up the price because they know that these purchases are now scheduled to occur. What we're saying is let's halt that. The reserve is already 93 percent full, as Senator Levin pointed out. We don't need it for national security reasons, and it's the worst possible time for the federal government to be putting pressure on the market.
CRAMER: All right, Senator Levin, we've had some pretty good news about the number of barrels per day that Iraq is now shipping, although it's been lost in a cloud of-you know, people don't talk about it, but they're shipping two and a half million. Why is Iraq a member of OPEC? Why did we allow that? Why didn't we try to bust OPEC?
Sen. LEVIN: Well, we ought to try to bust OPEC, and Iraq is presumably going to do what Iraq wants to do and not be dictated by us in that regard. They're going to fairly soon be a government that has their own sovereignty, but I think probably the only answer-it's not a very great one for me, but the only answer would be that we're not going to dictate to Iraq what they're going to do. We sure as heck can dictate to ourselves what we're going to do, and if we'd only listened to the staff, the experts at the DOE, what they told us in 2002 was that what we're doing is absolutely foolish, as Senator Collins said. This is what they said; just one line here says it all. They say commercial petroleum inventories are low, retail product prices are high, economic growth is low, the government should avoid acquiring oil for the reserve under these circumstances. We just wish that the DOE, the Department of Energy, and the administration would listen to the experts in their own agency.
KUDLOW: Well, except economic growth is creating higher demands for oil, I would say, both here and in China. But, Senator Collins, is the energy bill-so-called, alleged energy bill-still alive in the Senate? Can you give us any commentary on where that thing's going? Namely, will it produce more power to grow the economy?
Sen. COLLINS: Well, I'm not optimistic that the energy bill that's going to be coming before us in its new supposedly improved form is really going to do much to reduce our reliance on foreign oil, to increase production or to promote conservation. So I think you have to put me still in the doubters category for the passage of that bill this year.
CRAMER: All right, Senator Levin, did we make a mistake in this country in the last 10 years in allowing an unprecedented amount of mergers to occur between major oil companies? Because we now find ourselves in what, at least from the stock side, I would say, is the golden age of refining, because there hasn't been a new refinery built and it's impossible to put a new one in and the majors have been closing them.
Sen. LEVIN: We lost a refinery in Michigan, so that's a very sensitive subject. But I can't say that overall I'm enough of an expert to talk to you about the impact of mergers on oil prices. My instinct is yes, but I can't claim to be an expert on that.
KUDLOW: Well, Senator Collins, another one, industry issue, hybrid cars, hybrid cars, fuel cell-type cars. Honda makes them, Toyota makes them but a story in The Wall Street Journal this morning suggested the US automakers do not make them. Is there some way to encourage our guys to make them, because it may come in handy with high oil prices?
Sen. COLLINS: I think that we should have a tax credit available for consumers who purchase these hybrid cars. That's a provision that should be included in an energy bill that would help promote energy conservation. These cars have improved dramatically in recent years and I really hope that American manufacturers will start producing them so that we don't have to just look to Honda and Toyota for these products. I think there'd be a tremendous demand for them if we just provided a bit of a tax incentive to consumers.
CRAMER: Let's hear what the senator from Michigan has to say about that. Senator?
Sen. LEVIN: Very much agree, and tax incentives will help stimulate demand. But the good news is that American hybrids will be available this year. There should be hybrids at least from Ford and possibly from one other manufacturer by the end of this year, but those tax incentives to stimulate the demand are essential and should be added as quickly as possible and increased, as a matter of fact, from what's been proposed by the administration.
CRAMER: Just one comment, you guys, either one of you, but Senator Levin's got the floor. Aren't you guys-don't you hate each other? I mean, you know, that's the perception now.
Sen. LEVIN: How could we possibly hate each other? We've been together here in the Senate...
Sen. COLLINS: ...(Unintelligible).
Sen. LEVIN: ...working together on all kinds of projects.
KUDLOW: How do you make...
Sen. LEVIN: Even when we disagree on issues, there's no reason to do anything except embrace each other.
KUDLOW: With all respect in the highest possible sense, you make a great couple. Senator Collins, in the remaining 30 seconds or so, are we going to get a reasonably tight federal budget coming out of the Senate, in your judgment?
Sen. COLLINS: Yes, I think that the budget that the Senate ultimately passes will be a responsible one. I'm hoping that it will have some rules for enforcing limits on spending. I think that's really critical. But I think it will be a tight budget.
CRAMER: All right, Senators Collins and Levin, thank you so much...
KUDLOW: Yeah. Great, great.
CRAMER: ...for coming on K&C, thank you for another sane discussion in an otherwise kind of insane news day. Great to see you guys.
KUDLOW: Appreciate it.
Sen. LEVIN: Thanks.
Sen. COLLINS: Thank you.