Shell's Former President on Achieving Freedom of Choice in the American Fuel Market
An interview with former President of Shell, John Hofmeister
Former President of Shell John Hofmeister tells it like is. During his tenure in Big Oil, Hofmeister launched an extensive outreach program to discuss critical global energy challenges—an unprecedented effort he has continued to this day. In addition to founding the nonprofit, grassroots firm Citizens for Affordable Energy,
Hofmeister recently joined a high-caliber advisory board at the Fuel Freedom Foundation, a nonprofit, nonpartisan organization. The goal: to educate the masses about the consequences of America's “crippling oil addition,” and the importance of an open fuel market that would allow replacement fuels like ethanol, methanol, natural gas and electric vehicles to fairly compete with gasoline at the pump.
In an interview with Energy Digital, Hofmeister discusses his efforts to get us there.
Q: What is your current energy vision and how has it changed since your tenure at Shell?
The vision is the same. What drove the outreach initiative at Shell is exactly what is driving my current outreach... for the American people to be adequately served by the industry and to have affordable energy, government has to be pressured by the public into having far more responsive energy policies... We have been victims in this country of cartel pricing for so long we think it's normal.
We can't get out of the ditch we're in unless we change the game, and the only way to do that is to do what I've been saying since I became President of Shell, which is to create a national energy strategy plan and implement it. That's exactly what Fuel Freedom and Citizens for Affordable Energy is advocating.
We are years into the issue high gas prices, we've had both Republican and Democratic leadership, and frankly, the leaders of both parties should be ashamed of themselves for not serving the American public in a way that affects every person and every company's pocketbook dramatically.
Q: Do you feel that you were effective in getting the point across?
I think I was hugely discounted by elected officials, being the Senior person at a major company in the US, because I don't think the oil companies are respected the way they could be. But the oil companies have basically done themselves in by not focussing appropriately on the real customers: the public. [They] tend to ignore the public and don't even see the retail customer as their ultimate customer—they think it's just a customer of the wholesaler that they're selling to.
I didn't grow up in the oil and gas industry. My early career was at GE, where the customer means everything. The person who ultimately pays the price of the product is the customer, and they deserve to be well served.
Q: What are your thoughts on the current administration's energy policies?
From the White House standpoint, it's all talk and no action... At the Cabinet level, however, I'm very pleased to see the Energy Secretary [Ernest Moniz] and the Secretary of the Interior [Sally Jewel] nominees. I think they bring a lot of fresh air into the second term, which is desperately needed. During the first three years of the [Obama] administration, natural gas was never even mentioned and the President was clearly anti-hydrocarbon by his deeds and words.
Q: Will America's shale boom save the country from OPEC's “cartel pricing” scheme?
Yes. We can not afford to miss the opportunity to increase domestic hydrocarbon production, both oil and natural gas, to end this relationship with OPEC that has cost US consumers an incredible price. I attribute the nation's deficit, fiscal crisis, the jobless recovery (such as it is) and decaying infrastructure, to cartel pricing.
The fact that we have for all these decades had the chance to produce more domestic energy, but chose not to in hindsight was a horrible mistake. But our political leadership still has not learned the lesson to this day, because government is still a disabler in terms of moving natural gas to a transportation fuel rather than an enabler.
Government] is taking no leadership other than some rhetoric around the production of natural gas for transportation, and instead working on imposing new federal regulations on fracking on top of state regulations. It's a slap in the face to the states and it's a power grab by the feds—and for what reason? The states have the legal authority and exercise it full well in this country with respect to energy matters. You can see pockets of prosperity in places like Oklahoma, Colorado, North Dakota, Texas, and so on, but on federal lands, drilling, permits and production is down. What message is that sending to the American economy? The leadership remains convoluted to say the least.
Q: How can grassroots, nonpartisan groups help Americans achieve freedom in the choice of fuel?
Fuel Freedom, Citizens for Affordable Energy and the US Energy Security Council are three organizations of several basically talking about the same thing, about need for the public to better understand what's possible.
The more the people know, the more they can help influence industry outcomes.
At the same time, the three organizations also talk to institutional leaders across the board—government, academic, association, corporate and NGO leaders—about energy matters, so that the education is broad based.
They are also nonpartisan. There is no political agenda—the agenda is the economy, national security, freedom of choice for consumers. Why should we have a monopoly of fuel? If we have a choice in the type of vehicle we drive, why don't we have a choice of fuel?
We have the opportunity, because we now know what we have in the ground and what we can grow on top of the ground: biofuels, oil, natural gas, ethanol or electricity. Let's use it alternatives to the fullest and help the public understand how possible that is.
Q: What needs to be done to open up the market, so that the alternatives can truly compete with oil?
What we desperately need are a couple of signals from the federal level of government and the EPA that will allow methanol as an alternative alcohol fuel to ethanol. Once that signal is given, then the midstream market can go to work building the infrastructure to make methanol from natural gas. It doesn't take government spending, just signals.
Secondly, we need to send signals to the auto industry regarding the importance of flex fuel engines for the
future marketplace.... For a very low price—maybe several hundred dollars—a car could be adjusted to take higher blends of alcohol fuels, saving several thousands of dollars in fuel over the course of its life cycle. We need a signal from the White House and Congress that we want to increase fuel competition by maximizing the flex fuel availability of the engines and by licensing alternative fuels for use as a transportation fuel.
To get it done, we need the masses of the people of this country to tell Washington 'we need this. You work for us, so make this happen.'
We could increase oil production from 7 million to 10 million barrels per day. Ten million out of the 18 million bpd
of oil we consumer could be produced domestically. We could also increase natural gas from 65 billion cubic feet per day to 100 billion cubic feet per day and get rid of 5 million barrels of imported oil per day.
It would take a few years, but the money that would be invested in the country to produce domestic resources is money that would stay in the country. It would boost the economy and profits down the supply chain, create jobs, create value for shareholders, and significantly reduce the country's carbon footprint.
Q: Considering the reality of meeting future energy demands, it's hard to believe how politicized the topic has become. What do you have to say about the current dialogue and its inhibiting effect on progress?
I think we have too many elected and appointed officials who approach energy in a binary fashion... So we end up with Republicans trying to kill off or slow down investments in alternative energy in favor of hydrocarbon energy, while Democrats do the opposite. How about we all just agree that we need it all?
If we put policies in place to enable what the private marketplace thinks is worth funding, we would see a lot more investment in research for solar and wind, storage of electricity, alternative fuels, etc. Of course, we can't just flip a switch to a new energy source, but we have a problem to solve when the population is growing at an exponential rate. We'll need all of the above.
Unfortunately, it's more important for politicians to play a power game of their own design than it is to enable the American consumer to have freedom of choice, which is utter selfishness on the part of elected officials. I've said it to their faces, they know my position.
Q: Still, are you optimistic about our ability to meet future energy demands?
What will save this country from its government is the fact that we have strong and viable institutions that outlast political terms of any elected official—from corporate to environmental groups. I also believe in the common sense of the American people when they are given good information. That's a great combination.
Q: Will we ever see $2 per gallon at the pump again?
Absolutely, you can just count the days. From the point at which the government signals the ability to have competitive fuels available to the marketplace, we will immediately see the price of fuels drop. And we should see that change in direction by the end of the decade.
