CNBC’s Ron Insana sat down with President Bush for an exclusive interview on topics including Social Security, personal savings accounts, the stock market, budget deficit, Medicare, oil prices, the dollar, international trade, and terror. Here is a transcript of that interview.


[Starting on Page 5 of the interview…]

Insana: Let me ask you about energy because you brought it up earlier.

President Bush: Yeah.

Insana: And you’ve expressed your concern about rising oil prices. There are some people who worry that even as we wait for your energy bill to be passed we could see a $3 or $4 price-per-gallon for gasoline this summer. Before the bill passes, is there anything you can do to bring down the price so that it’s not going to be a burden to the average American come this summer?

President Bush: A couple of points on that. First, you know, it took us awhile to get to where we are today and it’s going to take us awhile to become less dependent on foreign sources of energy. Even signing an energy bill, you don’t have an instant fix. Secondly, I fully understand high gas prices is beginning to really pinch a lot of our fellow citizens, and that’s troubling. There are some things that we need to do in the energy bill, which is encourage more exploration, we need to look refining capacity — how do we help put regulations in place that will encourage construction of refineries so, at the very minimum, there’s a steady source of supply of gasoline. Thirdly, obviously, internationally I’ll be talking to our friends about making sure that they understand that if they pinch the world economy too much, it’ll affect their ability to sell crude oil in the long run.

Insana: Let me ask you about that specifically —

President Bush: Sure.

Insana: — because Crown Prince Abdullah from Saudi Arabia is coming to Crawford at the end of the month.

President Bush: Right.

Insana: What are you going to tell him about that?

President Bush: Well, I’m going to explain to him that, you know, a, a, a, high-price crude oil will hurt the international economy.

Insana: Can he do anything about it? The Saudis are pumping flat out.

President Bush: Well, they’re not yet. I don’t think they’re pumping flat out. I do think you’re right, I think they’re near capacity, and so we’ve just got, got to get a straight answer from the government as to what they think their excess capacity is. I, I don’t think “flat out” is the right description. On the other hand, it is certainly not the way it was in the past, where they had, you know, millions of barrels of excess capacity. Nevertheless, there may be some things we can do. We can make sure that people aren’t getting cheated, you know. In other words, that there’s fair pricing, market pricing.

But this is a — this, this, this, this price of gasoline should be a wake-up call to the United States Congress to get an energy bill passed that encourages conservation, encourages exploration for hydrocarbons in environmentally friendly ways, causes us to open up more, you know, portals for liquefied natural gas to come from around the world. I mean, there’s a lot of things we need to do. I am for safe nuclear energy expansion. I’m for clean coal technologies. I know ultimately the automobile manufacturers, if the marketplace so demands, are going to have to come up with a different mixture of fuels and automobiles.

Insana: Well, GM and Ford are getting hit pretty hard right now based on how gasoline prices are. Are you worried about what the impact of a weakened General Motors might be on the economy because oil prices and gasoline prices are so high?

President Bush: Well, I think they’re going to have to learn to compete. In other words, if the consumer starts saying we want a different kind of automobile, they’re going to compete once again with, say, the Japanese automobile manufacturers to, to, to, to get a, to keep their lion’s share of market demand.

Insana: Can you try to relax the restrictions on reformulated gasoline? Could you release oil from the strategic petroleum reserve, or take some short-term measures should we see some sort of gasoline shock this summer?

President Bush: Well, you know, I, I — first of all, the SPRO was put in place for a national emergency. And that’s what it’s going to be used for. In terms of — we’re going to look at all regulations in terms of the manufacture of gasoline, refining of gasoline. Whether or not, you know, regulations that could prevent a refiner from expanding. The more supply there is of a, of, of a commodity, the, the, you know, it’s going to take pressure off of price. And we’ve got to look at ways to not only mitigate the regulatory causes of price, but also the regulations that will prevent, or discourage people from investing capital to create expansion of refineries.

Insana: Some of your loyal opponents on Capitol Hill today made some cynical comments suggesting that you don’t mind way high oil prices because they help some of your friends in the oil business. How would you respond to statements like that?

President Bush: I, I’m the president of everybody. And I — look, I go to Fort Hood, Texas, and I sit down at a table with a young solider and we’re talking about his tour of duty. And one of the first questions he asked me is what are you going to do about gasoline prices, Mr. President?

I mean, here’s a kid who has, you know, put his life on the line for our nation’s freedom and for peace and he’s worried about gasoline prices. ‘Course I’m worried about gasoline prices. And a high price of crude drives the price of gasoline.

And listen, I’ve been talking to Congress for three or four years now about getting a plan in place, getting a bill to my desk that reflects a comprehensive energy plan. And in all due respect to the members of Congress who are — might be somewhat critical of the administration, it’s time for them to stop debating and time for them to get a bill to my desk.

Insana: I want to ask more, a little bit more about energy with respect to its impact on the economy and inflation.

President Bush: Yeah.

Insana: The government, whether it’s, you know, your administration or even the Federal Reserve, that inflation’s not a problem right now. And that’s true unless you are filling up your car, buying a house, now picking up a cup of coffee at Starbucks, sending your kid to school, or paying your doctor bills. Is inflation a problem for the average American that’s going unrecognized by the federal government?

President Bush: No, I don’t think so. Yes, I think inflation can be a problem for the average American, and no, I don’t think it’s going unrecognized. As a matter of fact, why I was so strongly for tax relief, you know, I, I, I want there to be more money in the pockets of the average American family. And, you know, some are talking about running taxes back up. I think it would be a huge mistake. I think it would hurt the economy, but more importantly it would hurt the average American family.

Insana: One item that seems to be pushing up the price of oil is a falling U.S. dollar, because oil is priced in dollars.

President Bush: Right.

Insana: And some people are wondering if you are prepared to make a forceful statement or take forceful action to boost the value of the dollar and help drive down the price of oil.

President Bush: Right. Well, I, let me, I, I’ll try to make a forceful statement right now. This government is for a strong dollar. We do believe the market ought to set the price of the dollar relative to other currencies, but we are for a strong dollar.

Insana: Now, what about the Chinese currency? We’ll talk a little bit about trade here because you came out and said recently that you’d like to see the market set the price of the Chinese currency sometime soon.

President Bush: Right.

Insana: Are you getting any indications from the Chinese government, with which we now have a $160 billion annual trade deficit —

President Bush: No, Ron, I — listen, I, you know, I, I meant what I said, that China’s a trading partner, we would like to see them float their currency. They don’t move quite as quickly as we do in America. There have been some indications that they’re thinking about a, you know, a interim step toward floating the currency. We’re constantly urging them, if they’re going to take that step, to take it as soon as possible and eventually get to a float cur — a, a currency which floats. And, you know, I think you would find that officials all up and down our administration and different cabinet officers, cabinet secretariats are constantly talking to China about this issue.

Insana: How long do you think it’ll take them to do it?

President Bush: It’s hard for me to predict. It’s a non-transparent society. It’s not like a democracy, where the China can follow every single movement of our country and all the decision-making because you do a very find job of putting it on the airways and people, people can make calculations as to how fast the United States may or may not do something. We, we don’t have that same look into the Chinese government that…

Insana: They’ve been doing some interesting things on the energy front, cutting deals with Russia, Venezuela —

President Bush: Yeah.

Insana: — African nations. Do you think the Chinese are trying to crowd the U.S. out of the energy markets? Because five, 10 years from now, their needs are going to be even bigger than our own.

President Bush: You know, I don’t think so. I don’t think there’s a — you know, and a — a, kind of a, a, a economic war plan that would crowd the U.S. out of the energy market. I do think they’re trying to, you know, satisfy a huge appetite for a massive economy growth, a fast-growing economy. And I was pleased to see that, that they’re willing to, you know, build nuclear power plants. And I would hope India would do the same thing, these fast-growing under-developed economies. Because as they demand energy, it would be very helpful that a part of that demand is not in the hydrocarbon sector.

Listen, we’re all going to have to diversify away from hydrocarbons over time, Ron.

Insana: Right.

President Bush: I mean, we’re just going to have to change our habits. And that’s one of the reasons why I funded the hydrogen-powered automobile initiative, fully recognizing that, you know, with the decade we’re going to have to think about how to drive different — you know, power, power our automobiles. It’s a — the hydrocarbon society will still be with us, but it can’t be with us to the extent it is today.

[Interview continues]