O'REILLY: In the "Factor Investigation" segment tonight, more than 100,000 people have voted in the BillOReilly.com poll, which asks do you believe the U.S. oil companies are price gouging? Eighty-nine percent said yes. Just 11 percent do not believe that.

By the way, the price of a gallon of regular unleaded is up about $1 a gallon from a year ago.

But the perception is not the same as the reality. And we want to know exactly who's making all the money and how they're doing so. With us now, John BIRGER, senior writer at Fortune magazine and Elizabeth MACDONALD, senior editor at Forbes magazine.

All right, Elizabeth, you were here last time. And this is basically as dumbed down as I can make it so even I understand it.

Oil comes to the United States from the OPEC countries in tankers, and it arrives. And then it goes into refineries around the country. All right?

The oil companies pay for that to happen. They pay OPEC. They pay for the tankers. They pay for the refineries, all right? The big five, most of them.

It gets into the refinery. They take the oil. They turn it into gasoline. That comes to everybody's gas station. Who sets the price of the gallon of gasoline?

MACDONALD: The oil and gas companies, based on what the oil and gas actually gets — is trading at on the open market, on the commodities exchanges.

But the problem here is that when gas station owners are telling you that that they feel that the refineries are gouging consumers, then people ought to sit up and take notice and pay attention.

O'REILLY: All right. So the guy ,O'REILLY, he's — what is he? Chevron? He's the CEO of Chevron . He sits there with his guys at a big, long, shiny table. And does he say, "I'm going to charge $3.50 a gallon?"

MACDONALD: Based on what the market will bear, he will — he along with his other executives at his company will see what the other oil and gas companies are charging, and they'll figure out what the wholesale price should be.

O'REILLY: So they're all looking at each other?

MACDONALD: Based on what the market is telling them in terms of the commodities exchanges.

O'REILLY: Now nobody knows what the market is, Mr. Berger. Nobody knows what that is. It's not a person.

See, if I buy a McDonald's Big Mac, I know the Big Mac was set at a price by the McDonald's Corporation. They said, "We're going to charge $1.75 for the Big Mac." I know that. But I don't know what the market is or the commodity or the mercantile. These aren't human beings.

BIRGER, SENIOR WRITER, FORTUNE MAGAZINE: I can tell you, there are no big, long, shiny tables where a cabal of oil moguls are out there setting prices. These prices are set on open markets by traders and investors all around the globe, who are simultaneously bidding or selling and buying oil. And the price...

O'REILLY: Are you telling me the five big oil companies don't buy oil? Of course they do.

BIRGER: Of course they do, yes. But they don't...

O'REILLY: They negotiate the...

BIRGER: But the chairman of Chevron doesn't wake up one morning and say the price of gasoline is going to be $3 a gallon.

O'REILLY: Well, doesn't the chairman of Chevron, David O'REILLY, say to OPEC, "I'll pay you this amount for the oil. This is what I'll pay you"?

BIRGER: No.

O'REILLY: He doesn't say that?

MACDONALD: No.

O'REILLY: He doesn't control his product?

BIRGER: No, he doesn't.

O'REILLY: All right. That's interesting.

MACDONALD: I disagree with that. On Shell's own web site, they say that they go in and they set what the price of gasoline will be, based on what the market is telling them that the market will bear.

O'REILLY: That's what I think. They charge what they think they can get away with.

MACDONALD: Right. And the problem is what's going on is we've had a lot of oil company mergers. I'm only reporting back what the independent or the grand gas station owners are telling me. I'm basically a reporter here.

The gas stations want supply and demand to dictate the prices. They want an open market. They want the free market to work.

O'REILLY: But you can't have an open market when you only have five major oil companies.

MACDONALD: That's right. What they're saying is because of the oil mergers they're saying that there is a lack of competition at one end of the hose and at the same time they're being priced out of the markets at the other end of the hose.

There is something like four companies who are — who are basically governing the gas supplies in 28 states. That's 2/3 of the supplies in 28 states. That's a lot of gas.

So basically, I mean people believe in the free enterprise system. The gas station owners want the free enterprise system. They're telling us that, "Wait a second. We feel consumers are getting gouged."

O'REILLY: All right. Now, if I own a gas station, Mr. Berger, all right, in Fort Lee, New Jersey, OK, I buy my gas from whom?

BIRGER: From a refiner like Valero or Sunoco or even a Chevron.

O'REILLY: All right. So I buy my gas. I have a deal with one of the big oil companies which refine the gasoline, correct?

BIRGER: Essentially.

O'REILLY: I can't bargain with them, can I? I can't say...

BIRGER: Of course you can. Of course you can.

O'REILLY: A little gas station, Rudy down there who's putting the gas in my tank, can say, "Hey, you, I'm not going to pay you that. I'm going to pay you this?"

BIRGER: Well, they can say, "Look, I'm not going to buy from your refinery. I'm going to buy from another."

O'REILLY: What if they're all the same price?

BIRGER: Here's the problem. Ten years ago, there was a ton of excess refining capacity in this country. There was — there were too much refineries — too many refineries and not enough demand for gas.

O'REILLY: And now there aren't as much.

BIRGER: And now all these refineries are running at maximum capacity.

O'REILLY: But I think they're price fixing. I think all the refineries are saying to Rudy at the gas station, "We're going to charge you this. And if you don't like it, you're not going to get any gas."

BIRGER: Let's say — let's say that all the major refineries got together and — obviously, this can't happen — but let's say they got together and reduced oil prices or gasoline prices by 20 percent.

O'REILLY: Which is what I suggested they do.

BIRGER: I know. So what do you think would happen? What I think would happen is you would see a huge increase in demand for gasoline, because obviously...

O'REILLY: We're getting into speculation now. But if they reduced it 20 percent, we would expect the consumer, which is — who is cutting back now, to keep it down. Maybe they wouldn't.

BIRGER: I think there'd be hoarding. I think — I think consumers would go out and hoard.

O'REILLY: That's not what our discussion is.

BIRGER: That would lead to shortages.

O'REILLY: Our discussion is today is that I believe — and I think you believe what I believe — that these major oil companies are telling their gas station people, all right, through the refineries, "This is what we're going to charge you, and we don't really care if you buy it or not. We'll sell it to somebody else."

MACDONALD: Here is the situation. Gas stations, 99 percent of them have a contractual obligation to sell the gas that they get from the different refiners. But they are saying, "Look, we want an open supply system where we can get our gas anywhere."

O'REILLY: They make big money, these gas stations?

MACDONALD: They don't make a lot of money. And the other issue is — this is important, even the Congressional Budget Office said recently in terms of the effect of Katrina on the economy, they said this will result in a temporary redistribution of income from consumers to the stockholders of refineries.

O'REILLY: All right. So the big five oil companies — and I'm going to give you both 20 seconds to wrap it up — are the ones all the way down this oil pipeline that are making the most money, correct?

MACDONALD: Correct.

O'REILLY: Correct?

BIRGER: Correct, but there's no antidote, I don't think.

O'REILLY: Well, I'll find one. I will find one.

BIRGER: I agree. I absolutely agree that the gas station owners are not the people to be concerned with.

O'REILLY: OK. The gas station owners ain't making it. Probably the tanker people ain't making it. It's the greedy oil companies that are making it. I think we should make an investigation into those people.

MACDONALD: Can I say one thing?

O'REILLY: Go ahead.

MACDONALD: It's important.

O'REILLY: Real quick.

MACDONALD: Senator Ron Wyden Democrat out of Oregon, is one of the only congressmen who's been asking for this investigation. He wants to see — he wants to see a little bit more sunlight as to how gas is actually priced.

O'REILLY: Absolutely. We need sunlight.

MACDONALD: Right.

O'REILLY: Because it's a national security situation. It is not an open market. It is a closed market.

Thank you both for coming in.