Why some public attitudes worry Shell Oil's president

Feb. 22, 2008
Shell Oil Co. President John D. Hofmeister discovered some troubling attitudes as he met with local business and government leaders during his most recent visits to 50 US cities.

Shell Oil Co. President John D. Hofmeister discovered some troubling attitudes as he met with local business and government leaders during his most recent visits to 50 US cities.

"People have embraced $3/gal gasoline. They haven't embraced the oil industry. We're more than disliked; we're disrespected, and it's the industry's own fault," he told reporters during a stop in Washington on Feb. 14.

That makes the oil and gas industry an easy target for some politicians who use high profits created by high crude oil prices to justify punitive legislation, Hofmeister continued. "Bad public policies for the purpose of spiting the oil companies hurt consumers," he maintained.

He said that he's also concerned by substantial beliefs that the United States is running out of oil, and that biofuels will solve the problem. The first ignores the 100 billion bbl of technically recoverable oil and gas within this country and the trillion bbl trapped in Colorado, Wyoming and Utah's oil shale deposits. The second overlooks considerable logistical and technological challenges in making biofuels commercial.

"We think there's a lot that can be done with biofuels and refinery additives, but the problem is not just with the fuel. If miles driven increase or if engine technology doesn't change, there won't be much carbon reduction," Hofmeister said.

Stands on taxes

He said that Shell does not oppose taxes generally because it considers them a cost of doing business. It doesn't even mind levies to help finance new technologies because it fully intends to be a leading participant, Hofmeister said. But the company dislikes recurring proposals to tax only the five biggest US oil companies.

"Taking money from these companies because they've been successful is objectionable. If a tax was imposed across the entire industry, that would be another matter," Hofmeister said.

He said that when Congress considered dramatically expanding the Renewable Fuels Standard in 2007, Shell expressed strong concern that the technology did not exist to meet such an aggressive goal. It also pressed for an "off-ramp" in case it became obvious that the mandate would not succeed. Its biggest argument has been the significant differences between pilot plants and commercial production.

That does not mean that Shell opposes a role for alcohol in motor fuels, Hofmeister emphasized. "We've been in the ethanol business for 30 years. We don't fear it. But we believe that more of it needs to come from waste products, such as the corn stalk instead of the kernel," he said.

Strategy shortfall

Like other industry executives, Hofmeister said that the failure to recognize that oil and gas will need to continue playing a major part in meeting US energy demand in the near term is probably the biggest single domestic policy mistake which could be made.

"As long as 85% of the US Outer Continental Shelf is off-limits, we are relying on an international pool where other countries practice resource nationalism. There's nothing wrong with their doing that. It's the right of any sovereign nation to define how its natural resources will be used," he said.

"But a comprehensive US energy strategy has not existed since World War II. Since that time, this country has relied on markets which have increasingly grown less free," Hofmeister continued.

"Since our independence, homeland security has been a priority of this country. So has economic security. Energy security should be on the same platform. Without it, homeland and economic insecurity increase," he maintained.

Contact Nick Snow at [email protected]