Energy Secretary Spencer Abraham on Oil Prices

This is a partial transcript from Your World with Neil Cavuto, December 17, 2003, that was edited for clarity.

Watch Your World w/Cavuto weekdays at 4 p.m. and 1 a.m. ET.

NEIL CAVUTO, HOST: If you catch him, they will fall. Welcome everybody. I'm Neil Cavuto and this is Your World.

The idea was nab Saddam Hussein (search) and oil prices would fall rapidly; gasoline prices would do just the same. It has not happened. Why?

Let's ask the energy secretary of the United States, Spencer Abraham (search), fresh from a summit on liquid natural gas, among other things.

Mr. Secretary, always good to have you.

SPENCER ABRAHAM, ENERGY SECRETARY: Thanks, Neil, good to be with you.

CAVUTO: Why hasn't that happened, Secretary? It's surprising some folks that thought maybe by taking in Saddam you'd lessen the likelihood of sabotage of Iraqi oil fields. Oil prices would come down.

ABRAHAM: Well, Neil, I think there's a lot of things we can speculate about at this point. I think that really distracts from the most important thing, which is that the capture of Saddam Hussein, energy markets are going to look at a lot of variables.

Certainly, we're now entering a time of year in which there's a lot of demand and there are weather factors and there are other factors that are at play. And we can't just look at this as if it is an isolated incident involved.

And I don't want to speculate beyond it, because there just are too many things that are usually involved.

CAVUTO: You're too classy to speculate, sir, but I'm not. I want to push this a little further, if you'll indulge me.

And that is this notion that now, with him behind bars, we are not going to see as many incidents with Iraqi oil fields or bombing of key pipelines, that sort of thing. We've not seen that, to be sure, since he has been captured. Are you comfortable that we will not?

ABRAHAM: Well, let me just say this. You know, the issues that relate to the production of oil in Iraq are in part influenced by sabotage and events of terror.

But, we also have learned that the infrastructure itself is very weak, and I think the markets understand it's going to take some time for Iraqi oil production to really resume at the levels it used to be.

That just isn't going to happen overnight, regardless of the condition of Saddam.

And as to whether or not there will be more terror attacks, I would have to really defer that question to the people on the ground in the U.S. command authority. Clearly, they're doing everything they can to follow up on the leads they're getting from the capture of Saddam and make sure that they minimize to the extent we possibly can the acts of terror.

CAVUTO: But in the meantime, secretary, it's Mother Nature trumping Saddam Hussein. In other words, all the cold bouts we've been having in the Midwest, particularly the East Coast, that's going to have more effect on energy prices, as you see it, than what's happening in the Middle East?

ABRAHAM: Well, the fluctuations you start to get at this time of year are influenced by the weather. There are some things which we can't control. Weather is one of them.

When you have the first cold spell, the kinds of storms we've had in the eastern part of the United States and in the northern hemisphere, as we go forward through the winter, I mean, that's going to influence it, as well.

The bottom line is, though, that we have been talking for two-and-a- half years in our administration about the fact that our energy security is often challenged. We need a national energy policy to address it.

That's why we need a bill in Congress to pass, an energy bill that can help us to address these on a long-term basis.

This week we've got 20 energy ministers here in the United States to talk about how we can guarantee a much stronger and stable supply of gas in the future. And we're working on that every day in the administration.

CAVUTO: Do you find that we're getting hit a little bit earlier than we thought, both on natural gas prices, heating oil prices, by extension, oil prices in general, than we normally are at this time of year? And that for Americans going into the winter, this could be bad news?

ABRAHAM: No, I don't think it should be looked at that way. You know, there's inevitably a point when winter strikes. And the question isn't going to be whether there is a first storm. There's always the first bad weather of winter.

It's how cold the winter will be, in comparison to the average, how long the winter lasts.

Last year, as you know we had a colder than normal winter; it lasted a long time. It tended to, of course, make the natural gas and home heating oil marketplace tighter as the year went on.

The real issue is whether or not the extremes are reached and how long the cold snaps, the cold weather periods, last. And it's too early to tell that right now.

CAVUTO: Do you have a sense, secretary, that we are going to have to be a little bit more vigilant than we thought we would have to be on issues like conservation. That maybe if this does continue, you would have to bow to administration critics who say that the White House has not been focusing on conservation...

ABRAHAM: The administration critics....

CAVUTO: ... as much as you should.

ABRAHAM: Well, the critics are just wrong.

I mean, if you look at our energy plan, energy efficiency and conservation are highlights in this plan. It may not be something the critics want to hear, but that's what is in the plan if you read it.

If you look at our budget for energy efficiency and renewable energy, you'll see that President Bush has submitted requests to Congress for more money for those programs than any Congress has approved in 20 years. And we consistently have been asking for more money in these areas.

So that's just simply wrong.

As to whether or not it's important, the answer is of course, yes. And earlier this year, in June, when we recognized that this winter's natural gas storage levels might be low, our department launched a smart energy campaign, working with a number of nonprofit organizations, with industry, to try to emphasize the importance of conservation. And we made some good progress, I think.

And that, in terms of short-term solutions, whether it's for this winter or for the next few years, is a key part of it.

But long-term, we need more supply, we're going to need to import more gas. We're going to need to develop alternative energy sources. That's what this administration is attempting to do.

CAVUTO: So, the pickup in the economic activity that we have seen, secretary, that kind of puts you behind a double-edged sword, doesn't it? I mean, that increases demand, likely lifts the price of energy.

Is that the conundrum you're in?

ABRAHAM: Well, nobody is willing to sacrifice an economic recovery in order to replenish the storage of energy supplies.

We're excited about the recovery. It's obviously going strong. That will put more demand on energy in the marketplace. It's one of the reasons that we're trying to develop both, on the one hand, more effective efficiency and conservation programs, and the other, more supply, both domestic and imported.

CAVUTO: All right. Secretary, always a pleasure having you on.

ABRAHAM: Good to be with you, again.

CAVUTO: Thank you. The energy secretary of the United States.

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