• This is a partial transcript from "Your World with Neil Cavuto," October 7, 2004, that was edited for clarity.

    NEIL CAVUTO, HOST: Just in time for the big debate, with oil topping, for $53 a barrel (search), is President Bush over a barrel?

    Well, Admiral James Watkins says no, not at all. He's the former energy secretary under the president's father, President Bush Sr.

    Secretary, good to have you.

    ADMIRAL JAMES WATKINS, FORMER ENERGY SECRETARY: Good to be here, Neil. Thank you.

    CAVUTO: What are you looking for, sir?

    WATKINS: Well, you know, I have to go back to 1992 following the Gulf War (search) and looking at the parallels between today's situation. The Gulf War had ended. The Iraqis were out of Kuwait. We were cleaning up the Kuwaiti fires and so forth.

    Prices spiked in January of '90 and '91 and then declined rapidly, because we had a good relationship between the international energy agencies in Paris that runs, keeps track of the oil inventory across the world. And we felt that we had it under control.

    We had special operations centers set up with the Saudis to make sure that the stock market wasn't spooked at the time. We had demonstrated through an exercise that we could use our strategic petroleum reserves.  All of that was done, and all of that was helpful.

    So I think that there are parallels, and I'm hoping that we can be sensible about the degree to which this president or his opponent can really impact, certainly over the next few months, on these incredible prices of fossil energy across the world.

    CAVUTO: But let me ask you something, Admiral. You know there's a big debate tomorrow night.

    WATKINS: Yes.

    CAVUTO: And I can almost predict that the high-energy situation is going to be a key topic of the debate. And I can predict, as well, that we'll likely hear Senator Kerry advocate that maybe it's time to tap the reserve more aggressively than we've done besides just the president's post-hurricane tipping.

    Do you see that?

    WATKINS: Yes, I see that. That's a gimmick, in my opinion.

    CAVUTO: Why? Why is it a gimmick?

    WATKINS: It's 700 million barrel of oil sitting down there. It's ready to open to our refineries. Nevertheless, it's a small amount in terms of the national demand and the thirst we have for oil.

    We consume 18 billion barrels a day in this country, most in the transportation sector. You're not going to get the kind of impact people are looking for.

    The stock market now is affected by about $10 a barrel just ton uncertainties and the volatility in the world market. Not because of what we might do with the strategic petroleum reserve.

    Do I think it's a good idea? I don't know. I don't have the information now.

    CAVUTO: But Secretary, could you argue, as some have that — I know we don't tap unless there's an emergency, but for a lot of Americans looking at home heating bills that could be 60 plus percent higher than a year ago, that's an emergency.

    WATKINS: Well, OK. It's an emergency. But we have a lot of other things that come to bear on this.

    The refineries in this country. There are already at capacity. We have a limited ability to push out more oil. So the heating oil is going to be expensive next year, almost no matter what we do today.

    We had the same problem when I was secretary of energy. Heating bills in the northeast are going to go up. What are you going to do? We had to get a waiver of the Jones Act. We said otherwise our tankers have to send everything offshore. Our own American flag tankers could not bring oil to our own people.

    We got a tanker diverted to New York with 200,000 barrels on board to be able to handle the northeast heating oil crunch. These are the kinds of things that can be done, and they can be done.

    CAVUTO: All right. All right. Admiral, Secretary, a pleasure.  Thank you, appreciate it.

    WATKINS: Thank you very much.

    CAVUTO: Admiral James Watkins.

    Now the other side from the Kerry campaign headquarters, Roger Valentine. Roger is John Kerry's senior advisor for energy.

    Sir, good to have you.

    ROGER VALENTINE, SENIOR ADVISOR FOR ENERGY, KERRY CAMPAIGN: Glad to be here.

    CAVUTO: Do you recommend tapping the reserve?

    VALENTINE: John Kerry has been pretty clear about the strategic petroleum reserve.

    The first point is this administration has mismanaged the reserve in a way that has tightened markets and raised prices. They've done that by essentially putting on autopilot the buying of oil to put into the reserve.  In other words, they buy the same amount, regardless of what the price of oil is.

    Well, what we had done in the Clinton administration, which made a lot more sense, is we kept the reserve at a robust level, but we followed basic principles of supply and demand and basic principals of the market. We bought when oil was cheap. You slow down your purchases when oil is expensive.

    And what this administration has done by continuing on this autopilot approach to the reserve has kept prices up and kept pressure on the market.

    CAVUTO: Here's what I'm not clear on, then. What would you do differently? Do you think conditions right now warrant tapping the reserve, getting oil out of that reserve to ameliorate things?

    VALENTINE: Well, John Kerry has not said that. He has certainly said that we need to keep that option on the table. And frankly, the very minimal swath that the administration did after the hurricanes was a perfectly reasonable response to that situation.

    But Neil, I think the main point we're missing here is strategic oil reserve is really a minor part of this overall problem.

    CAVUTO: OK. So I understand that, Roger, if you'll forgive my ignorance here. What you're saying is the president's policy as far as the degree to which he has tapped the reserve to address post-hurricane production limits is enough. You're not going to recommend anything more than that as far as the reserve is concerned, right?