>> the senate gavels in tomorrow, and first up will be dean heller replacing john ensign. and there will be a procedural vote on the nomination to james cole as deputy attorney general. there'll be live coverage on c- span2. south carolina is the first southern states to hold a presidential primary. >> this week on "newsmakers," our guest jack gerard and the energy policy reporter with bloomberg news. jim, take the first question.

>> how you explain the rise in oil prices, and is the country going to see some relief? >> it is probably a reflection of crude oil. there is increasing demand in places such as china and india, also the value of the dollar and some of the unrest in the middle east and africa. the other component we should focus on is the supply side, because at the end of the day, it is about supply and demand, and that is the one area we have not done as well as we could have. we have promised we would buy a lot in the united states.

we have indicated we would like them to produce more energy to help us with the gas price. we need to focus on producing in america, and that is the one factor of the price of gasoline we have control of, and the more we work on that, the better we will be in a long time. >> the view expect gas prices to also fall? >> if we looked up the price -- do you expect gas prices to also fog? >> as the price of crude falls, you will see gasoline fall. if we could predict what the price of energy would be, we would not be doing this show today. >> it is about an average of $4 a gallon. the you think it will go down much below that or nearer $3? >> i cannot predict where i think it will be. others suggest we will see a

high point again appearance -- highpoint again. that is what sets the price of gasoline. that is the vast majority of the price. the other unfortunate factor today is our unemployment rate is up. it suggests our economy may be slowing down. economic recovery puts demand on crude oil and increases the cost, so we take another turn, slow the economy down. that pressure will diminish as well. we need to get the american people back to work. we need to get the unemployment rate well down below 9%. >> in the all of us are talking on this friday afternoon. go ahead with your question.

my question is how fast do we see the impact? how fast are we going to see an increase in supply when the use of oil has not affected the price at the top? >> there are two things to focus on. the first is these are long lead lines, because we pay for the right to go look. the government does not know if there is oil and gas out there. we pay for the right to find out if there is, and once we potentially discover something, and we pay for the right to hold that and also pay a portion of the revenue. these are somewhere between three years and seven years from the point of issue to actual production, so it does take a

while. however, the second dimension and we should focus on is how it is perceived. the message they need to send is that help is on the way. the administration has done almost everything to delay, to defer, to discourage the development of american oil and natural gas. those that are looking at long- term cost of energy are saying it appears debt the united states is not reducing the. and one of the greatest things we can do is send the signal to the marketplace that we are serious about producing by americans, four americans, so we

will not be as dependent on other sources. >> the obama administration is critical of the republican proposal, saying they undercut safety reforms just last year. what would you say to them? >> it is unfortunate they would say that. that contributes to polarization. if you look get the bill the house passed, it does not deal with safety. -- look at the bill the house passed, it does not deal with safety. the industry itself is moving to increase our safety standards, which is our number one priority, so there is a lot of finger-pointing.

>> places -- it places profit above safety. the republican bills you are supporting would precede the safety that would address the concerns. are you worried about the perception the will of this replaces a profit of about nine -- above all else? >> -- are you worried about the perception that this places profit above all of hamas and marks -- above all else? >> it was not proven. we have been producing and oil and natural gas in the gulf of mexico for 65 years. we have drilled over 42,000 wells in the gulf, and this is the first time in anything of this magnitude has occurred. it is clearly a tragic accident.

the industry moves very closely to look at our personnel and equipment and a variety of other things to make sure safety is number one, because it is our top priority, but that should not detract from the top energy reality. we produce about one-third of the oil and natural gas the and we consume, and the majority of that comes from the gulf of mexico. it is down as a result of the moratorium placed on the administration. it is estimated by next year to be down as much as 25%. that does not help us. >> to get back to going back to drilling after the deepwater horizon incident in april. the same republicans who are

sponsoring these three bills to put the drilling back on the fast track that are talking about elises region le -- about leases and the amount of oil they contain are the same as ones that are saying, we cannot put any pills out on reform or reforms needed after the disaster until we see the causes, and a big major investigation -- and we have yet to see that, sir shouldn't we wait to see what happens before we go and pass the bills that speed up drilling? >> yes, we do need to hear from that investigative body, but we know what we need to do to move ahead in this industry and as a country to produce the energy we

demand. today's 69% of the people support the expansion and development of the outer continental shelf. they struggle under increased energy. there deal is that we cannot afford to wait a year or two or three or four to get our energy house in order. we rely on and natural gas from outside sources. many say we need to focus on domestic production. we can do them together. we can continue to focus on safety and still produce oil and natural gas in the country needs. >> do we need to know and -- do we know what needs to be done on the safety front when we do not have a definitive conclusion from this major investigation? >> there have been a number of

other investigations here reuter -- investigations. we organize industry task forces. we brought together the best minds in the world to say what can we improve. four of our largest industry providers committed $1 billion to develop a containment system. we hope this never happens in the gulf of mexico again. we moved quickly given the long waits time to drill, why not wait six months for the commission to finish its report. good >> that goes to lead times in the production of oil and natural gas. do we want to tell the american people and we cannot do two things at one time because we do not have the political will?

we think we can do both things at the same time you're give we think we need to focus on what ever the report may include, but we can focus on the changes to safety practices, so it all and feeds into the hole. this is one part of it, but we do not have to hold everything else back and waiting for the last piece. it is strongly supported by good bipartisan margins. >> you talked about supply and demand. what did you think about proposals to reduce consumption? the fact of the matter is even if we drilled all we could

really, we would still have to rely on foreign supplies, so shouldn't we worry about that more than just focusing on drilling? >> absolutely. we should be focusing on every aspect of shrilling in our economy. how do we use it more efficiently? how do we use and less than we will use less in the future? the oil and natural gas industry -- how do we use less in the future. we invested $58 billion in low carbon admitting technologies. we are major players in solar and wind and algae. we understand what it takes to produce energy at low cost, so

you are right. we have got to figure out how we consume less but at the same time figure out how to diversify that energy face and figure out other forms. the one piece in the oil and natural gas that is really a game changer is the vast resources of natural gas new- found, and in the past few years, that restores has tripled. it can be used to generate electricity. some are proposing that for automobiles. we are the major investors trying to find those new frontiers, so it is a great point. we are all about oil and natural gas, but we are also about these other forms of energy, and we are going to need a mix as we try to supply what the country needs.

>> we started off talking about the higher oil and natural gas prices. democrats would like to use some of that money to repeal some tax breaks to oil and gas company's debt and use it to support clean energy and oil and gas production. good >> first, we need to dispel some myths about tax provisions and earnings. myth is who owns oil and natural gas. corporate management only owns 1.5%. the other 98.5% is owned by americans.

pensionned in aren't and -- it is in our attention palance -- our pension plans. we talk about earnings, they are large, but they are large because they are large companies. you are punishing the retirees and their 401 k plans, the firefighters' union, the policemen, and others who invest in oil and natural gas. >> exxon made in $10 billion in three months. >> that is what i would like to dispel. >> the you think it would affect the industry? >> let's talk about what those are. these are company-wide industries.

these are available to google, microsoft, etc., and the proposals are punitive. they have identified five oil and gas companies, and they are saying, we are going to take that away from you. we are going to leave it for the other industries, but we are going to punish you because you are successful. the oil and natural gas industry supports the employment of 9.2 million americans. we believe there are another 1 million american jobs and we can create. why we would want to penalize a successful peace of our american industry is beyond us. >> and wood industry be affected by a tax cut compared to profits hammond region would industry be affected by a tax cut compared to -- which industry be affected

by a tax cut compared to profits? >> we are saying, we are going to take away their earnings for the purpose of giving away because you have been successful. why would we not do that in this country? it does not make a bid to of sense, and it had -- a bit of sense, and it has nothing to do with the price of gas. >> why wouldn't they take some of the burden? everyone is getting hurt. everyone is getting penalized. why shouldn't very profitable companies pay some of that burden, health and debt, helped us balance the budget -- help the debt, help us to balance the

budget? >> we do. we pay more than our fair share. the oil and natural gas industry contributed 85 and million dollars a day to the federal government in the form of taxes, royalties, and the list goes on. the effective tax rate for the oil and gas industry is 41%. the effective tax rate for the other standard and poor's industrial companies on average is 26%. we are clearly not only paying our fair share. we are paying more than our share. we begrudge people saying, let's keep penalizing a successful industry that makes such a significant contribution to our

country. some of these proposals are not fair. they are designed to punish success. we do not think that is sound policy. >> when you put in the 41% number, does that include tax breaks? >> the tax breaks people talk about our standard provisions. a 41% does not include those. the 41% of effective tax rate applies to our industry. that is what we pay today. >> you have leases you currently are on, and you are not using down. what is your response? >> another myth designed to figure point. -- now to figure that out. shell oil has been trying have an operation out there. they are in the fourth year.

they spent close to $4 billion. they are waiting for a government permit to have the opportunity to drill and see if they can find oil and natural gas on this release. the government quantifies that as vital, because our rating on a government permit. -- as idol, because of our rating on a government permit. we pay for the rights to look. it does not make logical sense for a company to want to hold the least to pay the federal government. it is a red herring. it is designed to turn the attention away from failed energy policy said this -- of this administration and some in congress who say, we do not want to produce natural gas in this country. we do not think that is a good

sound policy. we will educate the public on this today. >> let's go back to money. as you know, some of the reforms the bureau wants to do are going to require more money. in his budget climate, they are not able to hire the crack inspectors they want without being able to pay them, and in this budget climate, we have yet to see what is going to happen with the 2012 budget, but if they do not get the money they need, the president of the oil commission said, like other countries of president -- oil and gas should pay for their own oversight hearing goodwill the industry support that?

after this huge -- should pay for their own oversight. will the industry support that? will they have their own oversight? >> we support them having more money. we have sent a letter to congress to allocate more money to our regulator to do what you described, to hire more experts, so they can be an effective, robust regulator over the industry. the industry contributes 85 in million dollars a year to the federal government. if they needed more money, surely they kidnap give them ample what they need. we sent -- they could give ample of and what not -- give what

they need. we believe that this and the best interests of the country, because the more you can arrange clarity and provide a quick action, the better off we are going to d.c. -- going to be. >> so not additional inspections. >> it goes back to the debate of fairness. and we pay the federal government billions of dollars. surely they confined within that additional resources to regulate the industry. it comes down to how they can the federal government be? -- how big can the federal government be? we thing with the billions of dollars we could generate, they are adequate resources. we think it is not so much a question they have as how do they use it.

they ought to take the resources and focus on making sure they are a robust regulator. >> quick time for a couple more questions. garrett park's a post a cap on -- >> they put a cap on liability. what does the industry think is an appropriate level? >> there are a number of proposals out the one that is not appropriate is unlimited liability. unlimited liability really results in no economic activity, new production of oil and natural gas in the gulf region and no production of oil and natural gas in the gulf. -- results in no economic activity, no production of oil

and natural gas in the gulf. we understand it is our responsibility. when tragic situations occur, that is our responsibility. we want to protect the environment, so we understand that is our goal, and we are working to figure out what that appropriate level should be. >> let's talk about one of the changes that happened, which is the requirement that companies proved they can contain an oil spill. there are two containment systems out there, and they are being used by companies as they get passes for bill but were stopped, after we saw what transpired in goals and last year, we were doing everything

we could -- after what transpired in the gulf it depends they are depending on those who work, and if those do not work, we are back to the same situation, which is days if not weeks intercepting a narrow drill pipe, so my understanding is they have not been tested, so how do we know they are going to work? if they do not work, what is our best resource? >> the production of energy in the oil and gas industry, it is a question of managing risk, and how do you manage the to make sure you protect the environment?

that is a number one priority of industry. that comes down to safety and environmental protection. we have taken all the lessons learned. based on that experience, we are going to build a containment system that can be used in other parts of the gulf. they understand and we take that as our responsibility. for people to understand these are cavalier decision is not fair. there is a lot invested in these organizations. industry is incentivize to make sure those technologies to work. we have moved to develop these technologies to satisfy the new requirements and regulations, but we will stay focused on

data. we are committed to spending millions of dollars on another development tuesday, how do we make that better -- to say, how do we make that better? we recognize that is our responsibility. >> there is a difference between having something ready on the shore to be deployed and knowing for sure rather the woodwork -- whether that would work. >> i wish we could ensure everybody there is no risk in life. there is risk in everything we do. what we need to do is manage those risks to make it highly improbable they will happen again. that is what we are doing with the new regulatory regime. we are doing everything we can to make sure that is minimized. >> i appreciate your time. >> i appreciate your time.