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The Plain Dealer: Shell exec promotes new view of gas use

Saturday, August 26, 2006
John Funk
Plain Dealer Reporter

Shell Oil Co. wants you to become a conservationist.

The American division of the European-based oil giant Royal Dutch Shell is sending its president and top leadership team to 50 U.S. cities to help foster a “culture of conservation” – a change in your values about energy use at home, on the road and in the workplace.

But you don’t have to scrap your SUV – unless you don’t like paying so much to fill the tank. That would be the marketplace in action.

“We are not in the business of asking people to use less gasoline,” Shell President John Hofmeister said Friday to a standing-room-only luncheon crowd at the City Club of Cleveland, the third stop on the national trek. “And we are not asking people not to buy SUVS.”

The aim of the multistate marathon is also to explain what Shell is doing to produce more oil and natural gas and to talk up the necessity of scrapping government rules that ban drilling on the offshore continental shelf and in environmentally sensitive areas on federal lands.

In his half-hour City Club speech, Hofmeister developed the theme that Shell is working to give the nation “energy security,” which he defined as available and affordable energy now and into the future.

His main points:

The U.S. and global economies are based on fossil fuels and will be for decades, despite research and pilot projects to harness alternative energy sources such as wind and solar.

Global demand for oil and oil products threatens to outstrip global production, now about 85 million barrels of oil per day.

Exploration and production of traditional sources of oil are under way at breakneck speed.

Shell is involved in development of so-called unconventional sources, such as oil sands in Canada and soon oil shale in the American West.

North American gas supplies must be augmented by liquefied natural gas from abroad. LNG now accounts for less than 3 percent of gas supplies but must grow to 20 percent to keep gas prices from spiking. But building LNG gas terminals is difficult because of government red tape and local resistance to such facilities.

Hydrogen and biofuels such as ethanol may be the motor fuels of the future, and Shell is investing in them today, including a $1 million grant this week for hydrogen research at Ohio State University.

Electric utilities must build modern power plants with equipment that turns coal to gas before burning it to completely remove pollutants.

Conservation is key to making all this work.

For the record, Hofmeister does not own an SUV and never has. The Pennsylvania native, who has spent many years working and living in Europe, said he owns a Volkswagen luxury car that averages 23 miles per gallon.

Hofmeister’s message nonetheless is that the nation’s energy gluttony – burning up 25 percent of the global oil production with just 8 percent of the world’s population – is not sustainable, especially when the other 92 percent of the world wants to behave the same.

Just as Europeans long ago embraced energy conservation, Americans are going to have to do the same – and they’re doing it already, Hofmeister said in an interview after his speech.

But Shell is not in favor of government regulation or tax incentives to prod conservation, as is done in Europe.

“I am in favor of Americans adopting their own values and behaviors on a market basis that embraces conservation,” he said.

What happens to conservation when oil prices fall – as Hofmeister, other oil company executives and market analysts believe they will – if there are no government rules to enforce it?

People will remember $3 gasoline, he said, and act accordingly even if pump prices fall below $2.

“I think a values change can be stimulated for a long time to come,” he said.

While that may be difficult to prove, given the nation’s fleet of SUVs, Hofmeister thinks home building already reflects future high energy costs and the culture of conservation.

“I believe anyone building a home today uses the best insulation he can find,” he said, “because they have learned that whether heat or cooling, the prices of energy are high.

“That is a behavior change. Government had nothing to do with it.”

To reach this Plain Dealer reporter:

[email protected], 216-999-4138

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