This is a rush transcript from "Hannity & Colmes," July 23, 2008. This copy may not be in its final form and may be updated.

SEAN HANNITY, CO-HOST: Just a short time ago I interviewed presumptive Republican nominee Senator John McCain on the campaign trail in Allentown, Pennsylvania.

(BEGIN VIDEOTAPE)

HANNITY: Senator McCain, good to see you again.

Video: McCain talks Iraq, Obama and media bias

Video: Part 2: McCain on picking a running mate

Video: Part 3: McCain's solution to oil crisis

SEN. JOHN MCCAIN, R-ARIZ., PRESIDENTIAL CANDIDATE: Thank you, Sean. Good to be with you again.

HANNITY: Appreciate you spending sometime with us.

First question is, how many times have you been to Iraq and Afghanistan?

MCCAIN: Eight times and several times to Afghanistan, as well, and I've tried to go periodically.

HANNITY: And more recently, I guess, it was March?

MCCAIN: Yes.

HANNITY: And how many times has Katie Couric, and Charlie Gibson, and Brian Williams been with you?

MCCAIN: Not often, but it is what it is.

HANNITY: Well, let me ask you about that, because this is Barack Obama. He is your opponent, and his first trip ever to Afghanistan, hasn't been back to Iraq in 900 some odd days, and the three major networks and their big stars out there to cover this.

Does that bother you at all? Is that — what do you think of that? Is that media bias?

MCCAIN: No, but, you know, one of the things that's very interesting, he had never before asked to sit down and get a briefing from General Petraeus. I mean — and the other thing I thought was interesting, he issued his policy statement towards Iraq and Afghanistan, which as you mentioned never been to, before he left.

Now, I've got to tell you, Sean. I've traveled around the world, usually at your expense.

HANNITY: At my expense.

MCCAIN: . but I make my policy statements and speeches after I've learned along the way, so it's pretty clear that Senator Obama was not going to change his wrong view that the success had not succeeded, and the fact is it has succeeded, and we're winning, and he refuses to acknowledge that.

HANNITY: Well, he — actually up until the week before he had on his Web site that the surge wasn't working, and then they purged that part of it, and they talked about the minor success, but he still won't admit that the surge has been successful.

Is that just a political posture?

MCCAIN: No rational person who was in Iraq two years ago and saw the situation, and it was dire then. We were on the verge of losing a war, and seeing it now, no rational person cannot say that the surge has succeeded, and there's one other thing about this.

It makes you just marvel and stand in awe of the young men and women who did all this. Our service members — there were political pundits that you and I like and admire that said it was lost. Harry Reid, the majority leader of the Senator, it was lost.

And yet these young people under the inspirational leadership of General Petraeus and other, and others went out there, and they succeed in this thing, and it's — what a testimonial it is to the brave men and women, and when you say it wasn't because of them, then I think it's a disservice to them.

HANNITY: You had some very strong things to say in the last couple of days as it relates to this and to Senator Barack Obama. Again, just before he went on this trip, his Web site said the surge is not working, now it says — he talks about the improved security in Iraq.

But you said, if he had his way, we would have lost, that it would have been a catastrophe, he was wrong then, he's wrong now, and still cannot acknowledge the surge has succeeded, and then you went on to say, I would rather lose a political campaign than lose a war. But Obama would rather lose a war than a political campaign.

MCCAIN: But let me say again, this surge — as you know, I supported it when it wasn't popular. I was even called by Republicans for being disloyal because I fought against the failed strategy of nearly four years. And as you also well recall, there were times when my campaign was declared dead and buried.

HANNITY: I remember, one summer.

MCCAIN: But I did what I thought was right for the — I knew was right for the country because of my background and experience and knowledge and judgment. Senator Obama railed against, fought against, he wants — he voted to cut off funding for the troops in Iraq, and still will not acknowledge that the surge has succeeded.

So no rational person could look at the situation in Iraq on the ground and that's been there two years ago and say that the surge hasn't succeeded.

HANNITY: Yes.

MCCAIN: So it's clear to me that there must be political calculations in his judgment because no rational observer could conclude anything else.

HANNITY: But he had set a timetable, 16 months, and then he talked about, just prior to the tip, that he'd refine his position and that he would listen to the generals on the ground. He got a lot of heat from the left wing, and then he immediately switched back to that position. So then he goes on this trip with a predetermined outcome in terms of where his position is going to be.

What does that mean to you in terms of his qualifications to be the commander in chief and the next president?

MCCAIN: Well, let me point out that also his — during the primaries if we'd have done what he'd wanted to do, the troops would have been out last March. Last March, they would have been gone. We'd have never given the surge a chance to succeed.

The thing that disturbs me is we know that Afghanistan is a major challenge, but the same strategy that succeeded in Iraq has to be employed in Afghanistan.

General Petraeus, as you know, is the architect of that, along with some other brave and wonderful people. So if you didn't learn the lesson of how we were able to succeed in Iraq and are winning the war and he won't transfer that to Afghanistan and other counter insurgencies — what this is, is basically a counterinsurgency (INAUDIBLE) surge.

And it has a lot more to do with troop — than troop levels. It has to do with winning — with holding and winning in neighborhoods and staying there, and security, and normal lives going forward and all of that. It's a part of a counterinsurgency strategy.

If he refuses to acknowledge that it's succeeded in Iraq, what would be his plans for Afghanistan which is a very complex and difficult challenge?

HANNITY: I want to talk about that. I want to go back to that in a second.

MCCAIN: Yes.

HANNITY: But I want to go back to the media question here for just a second.

Barack Obama had an op-ed published in the "New York Times." You wanted to have your op-ed published in the "New York Times." It was rejected, and they sent you a note saying, well, if yours would mirror — was the term that they used — that of Barack Obama's they would consider publishing it.

Now I've been saying, and my audience knows I'm conservative, we may look at 2008 as the year that journalism died in America. But you've been there eight times, you don't have the major networks with you, you don't have the "New York Times" offering reciprocity.

What does that mean in terms of media coverage in this campaign? I know you're laughing, but.

MCCAIN: All I can do is be amused. It is what it is.

Sean, you know very well that if anybody complains, then, you know, that's just non-productive. I'm happy with where our campaign is. We are very close in the polls. I'm happy with how we've been doing. I look forward the convention and the two months following.

I'm convinced we can win this race. I'm the underdog, I've got a lot of work to do, but I'm proud of our campaign, and I'm convinced that we can get direct to the American people.

HANNITY: Even if Scott Rasmussen has a poll, 49 percent of Americans think the media is trying to help Barack Obama win. Only 14 percent think they're trying to help you win.

MCCAIN: The American people are very wise.

(END VIDEOTAPE)

ALAN COLMES, CO-HOST: Coming up more of Sean's exclusive interview with John McCain and rumors continue to grow about who he's eyeing to be his number two. Will the presidential hopeful address just that and also whether he's made his decision already? That answer coming up right after the break.

(COMMERCIAL BREAK)

COLMES: We now continue with more of Sean's exclusive interview with Senator John McCain.

(BEGIN VIDEOTAPE)

HANNITY: I want to stay on foreign policy for just a second here. I did notice he, at one time, said we're air-raiding villages and killing civilians, talking about Afghanistan. He once said it would be a profound mistake under any circumstances to use nuclear weapons.

He once talked about invading an ally, Pakistan. He once referred to Iran, Cuba, and Venezuela, they're tiny countries, they're not a serious threat, and then he said — although he's changed as of today — the issue of Ahmadinejad that he would meet without preconditions.

MCCAIN: All I can say is that Senator Obama does not have any background on these issues, and I would hope that he would do his best to learn. One of the reasons why I encouraged him to go to Iraq. I didn't know he would issue a policy statement the day before he left, but I think the American people are most concerned about our economy, that I know we're going to talk about, and gas prices, but they also want the peace.

I can win the peace. I know how to win wars. I hate wars. No one understands war and the tragedy of it better than the veteran who feels the keen loss of a comrade, so — most keenly the loss of a comrade.

And so I believe that American people will take that in to consideration, and, frankly, they will take into consideration Senator Obama's judgment about Iraq and the brave young men and women to not applaud their success and their strategy.

I think, frankly, Americans don't agree with him.

HANNITY: We'll move on for just a second.

Reports that you are close to choosing your vice president. Is that true?

MCCAIN: We have said exactly the same thing all along, as you know, Sean, that we'll make the decision when we make it. The obvious impact of mentioning somebody's name or where we are would cause a flurry of speculation.

HANNITY: I think this would be the perfect time by the way.

MCCAIN: I think this would be a good show to make that announcement.

HANNITY: I'll take that as a promise if you want to offer it. But — well, first of all, had — you've obviously been looking very closely.

MCCAIN: Yes.

HANNITY: A lot of names have been mentioned. Bobby Jindal said today that he wanted to take his name out of the running as I'm sure you're aware of. He did mention, and I think it got a lot of news of some comments you made about Governor Pawlenty. Mitt Romney's name has been mentioned a lot.

How many can you — first of all, have you made a final decision?

MCCAIN: No.

HANNITY: How many contenders are there?

MCCAIN: Sean, I can't do that.

HANNITY: No?

MCCAIN: Look, I love you, but I can't do that.

HANNITY: Are there four, five?

MCCAIN: . to go down that slippery slope — 400.

HANNITY: 400. Well, by the way, anyone whose name is mentioned, we get on the show and we ask if they're being vetted.

MCCAIN: Alan is not on the list.

HANNITY: I'm sure he's going to be very shocked in hearing that.

What are you — all right, then what are you looking for in a vice president?

MCCAIN: Someone who shares your priorities, your principles, your values, and I've got to also say priorities. One of the toughest decisions a president makes is setting priorities, and so that has to be — those obviously important characteristics, and one of them, of course, is someone who can take your place immediately.

That's maybe viewed by some as even more important in my case.

HANNITY: Well, OK. Is age an issue?

MCCAIN: Sure. It was in the primaries. It will be an issue, and that's why I have to go out there and do what I've done for a long, long time. Campaign hard, show I'm capable of 24/7, and convince the American people that I am most qualified.

HANNITY: You've got to use one of those Reagan lines that you're not going to allow your opponent's youth and inexperience to be a factor in this campaign?

MCCAIN: I've stolen many lines from President Reagan, and I'd be glad to steal that one. But I want to convince the American people that I can inspire a generation of Americans to serve a cause greater than their self- interests.

Right now, as you well know and our viewers know, trust and confidence in Washington is at its lowest level, 9 percent approval rating of Congress. Complete gridlock. 84 percent of the American people think the country's on the wrong track.

We've got to inspire them again and show them that America's best days are ahead of us which is something I profoundly believe.

(END VIDEOTAPE)

HANNITY: And coming up more of my exclusive interview with Senator John McCain. I asked him what he's going to do about rising gas prices, plus what does he think of, not just Obama, the candidate, but Barack Obama, the man, coming up.

(COMMERCIAL BREAK)

HANNITY: And here's more of my exclusive interview with Senator John McCain.

(BEGIN VIDEOTAPE)

HANNITY: Senator, I know because everywhere I go people talk to me about the high price of a gallon of gasoline and the impact that it's having on their lives, the economy, their families, and most Americans are angry when they find out that we have more resources here in the United States that we're not tapping into.

I've even argued that we have a clear and present danger facing the United States, the possibility of an energy war.

Am I overstating the case?

MCCAIN: No. We are sending $700 billion a year overseas to countries that don't like us very much. Some of that money ends up in the hands of terrorist organizations. It's one of the greatest transfers of wealth in history.

You are exactly on the mark, and I think Americans are beginning to figure it out. Of course we have to drill offshore. Of course, we have to exploit every means we have of bridging this gap while we make the transition to energy independence.

I viewed a new automobile the other day called the Volt. I pray it succeeds. It could revolutionize the automobile industry. And I want to just mention, again, we all love wind, tide, solar, all that, nuclear power, nuclear power.

The French can build a nuclear power plant in five years. We should build 45 nuclear power plants by 2030, and that will create 700,000 jobs, and it's clean.

Senator Obama opposes offshore drilling, he opposes nuclear, he opposes — gas tax holiday, he opposes giving an award for a real battery- driven car. So he's Dr. No.

HANNITY: And coal.

MCCAIN: Yes, and coal. And we've got to invest $200 billion a year in pure research and development in clean coal technology. We are sitting on the world's largest supply of energy in the form of coal reserves. We've got to have clean coal technology.

HANNITY: You have come under some scrutiny and criticism because you changed your position on offshore drilling, and my question to you is would you consider changing that position on ANWR? There's nothing there. It's only one of the 19 million acres. They'd only use 2,000 of them for exploration.

Do you think you'd reconsider in light of the high price of gas?

MCCAIN: I will look at everything. I still don't believe it's called the National Wildlife Refuge, but on the offshore drilling, I've always said that it's left up to the states. It's still left up to the states, but it is also important as far as the price of a barrel of oil is concerned.

You know when the president made the announcement that we were going to lift the federal moratorium, which wasn't that big a deal, the price of oil dropped $10 a gallon. So those people that said just telling.

HANNITY: A barrel.

MCCAIN: Excuse — $10 a barrel. And the people that said that we couldn't affect the price of a barrel of oil were wrong, because if we tell the world we're going to have our own reserves, and we're not going to be dependent as we make this transition to independence.

HANNITY: Sure.

MCCAIN: . that it will matter as far as the price of a barrel of oil is concerned, my friend, and I'm confident that an oil executives say, and I hope you'll have one on your program.

HANNITY: Yes.

MCCAIN: . or an expert, they're telling me that we could get some of this oil within a year or two. That's not — it's not this 10 year, you know.

HANNITY: Two years, outer continental shelf.

MCCAIN: Yes.

HANNITY: Eighty-six billion barrels of oil are available there.

You know this has got to be a defining issue. If you are for nuclear energy, Barack Obama is against it. You're for a suspension of the gas tax.

MCCAIN: Off shore drilling — yes.

HANNITY: He's — you know, he's against that. You're for offshore, he's against that. You're for expanding coal mining, he is against that.

These are major differences in the campaign.

MCCAIN: I think they are major differences, and I think if you — and I'd love for you to sometime come to a town hall meeting with me as I just had.

When you say to an audience I think we have to drill offshore and exploit our resources there, they stand and applaud. They get it. American people — sometimes we don't give them quite as much credit as they deserve for knowing what's going on.

They know we've got to be independent of foreign oil. They know that we have to go to nuclear power. They know these things, and they care, and it matters.

HANNITY: Let me ask you this. There's been a lot made about your opponent's, let's say, shifting positions. I could run through my list, but my — I'll be in trouble with my boss, so I've got to be careful because I've brought it up quite often.

But, on many — most of the major issues that he ran on, in the nominating process against Hillary Clinton, he's now shifted fairly dramatically. So my question to you is, what does that say to you about Barack Obama as a person, about miss character, about who he is?

MCCAIN: I think the American people want straight talk. I think the reason why I'm the nominee of the party is because I went to places and told them things they didn't want to know as well as what they want to know. And I — again, I think the American people are aware of this, and I think it will impact their judgment.

I've got to stick to my positions, and I will, and I know that some of them aren't popular, but at least Americans right now say, look, I may not agree with this guy, but at least I know where he's coming from.

HANNITY: Let me ask you this. Senator Obama actually took a shot at little old Sean Hannity recently.

MCCAIN: I saw that.

HANNITY: Did you see that?

MCCAIN: I saw that.

HANNITY: He said if you start being subjected to rants by Sean Hannity and the like day in and out, that will drive up your negatives. And he was talking about my criticism of Michelle Obama's comments.

Now Michelle Obama was quoted as saying America is a downright mean country in 2008 and for the first time in her adult life she is proud of her country.

Is that fair game? Is that fair?

MCCAIN: I don't know, Sean. I think that — I'd love to see families kept out of the political arena. I understand what the nature of politics today, but I'd love to see all of our families completely out of the political discussion if I could.

HANNITY: What about the radical associations? We spent a lot of time. Reverend Wright, Tony Rezko, William Ayers, Father Pfleger. We've discussed a lot of these associations in detail.

When you couple that with maybe those comments he made in San Francisco when he used the term "bitter Americans," in Pennsylvania, clinging to their guns, religion, with antipathy to those who aren't like them, does that reveal a lot about Senator Obama, his judgment?

You've been — you seemed reluctant to bring these things up.

MCCAIN: Well, first of all, in the case of Mr. Ayers, anybody who said that he's sorry that he didn't bomb more, and in that kind of a close relationship, that kind of person I think has to be rejected.

I think also that we want to campaign as much in a most respectful fashion. I admire Senator Obama for what he's been able to accomplish. I respect the enormous victory that he won over a very tough opponent in Senator Clinton who I also happen to admire.

But I think that Americans care very much about what we're going to do for them, but I also think they're going to judge our records, and — but right now they're hurting very badly, as you know, and they want a concrete set of proposals, for example, for energy independence. That's what they want to hear right now.

(END VIDEOTAPE)

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