OAK BROOK, Ill. -- With oil nearing $120 per barrel, gasoline averaging $3.62 per gallon and $4 fuel—gasoline and diesel—now a retail reality, President Bush, members of Congress and presidential candidates Hillary Clinton, John McCain and Barack Obama are all weighing in on energy, discussing issues such as federal gasoline-tax relief, Major Oil "windfall profits," domestic drilling and refineries and alternative energy sources. And Shell's John Hofmeister and Chevron's David O'Reilly have also weighed in.
Hofmeister, president of Houston-based Shell Oil Co., addressed rising [image-nocss] gasoline prices during an interview Wednesday with John Roberts on CNN's American Morning. Roberts asked, "What do you say to people who are in this budget crunch of trying to fill up the family car?"
Hofmeister said, "We need more gas to be produced in this country. I've been saying that for three years, ever since I took this position. If the U.S. set a goal to produce two to three million barrels more a day in this country, we would send a shock around the world that would immediately say to the speculators, hey, the U.S. is serious. President [Bush] said something yesterday about this…. I think that's good news. But we should set a specific target. The presidential candidates should be out there on the postings saying let's increase domestic production by 2 to 3 million barrels a day. That would be something that would put money back into this country, jobs back into this country, and it would bring more supply toward the Americans who need it."
Roberts asked, "Senator Hillary Clinton wants to slap you with a 50% tax on what she calls windfall profit, profit above a certain level…. Would it hurt you if she put in place this tax on the windfall profits?"
Answered Hofmeister, "Sure it would. It would slow down investment. Taxing the oil companies was tried in the '80s. It drove us to do imports, which is exactly the problem we have today."
Click herefor the full interview.
And O'Reilly, CEO of San Ramon, Calif.-based Chevron, spoke to The Wall Street Journal yesterday. The Journal asked, "What do you say to consumers who are paying $100 every time they pull into a gas station to fill up their pickup trucks?"
O'Reilly answered, "The price of crude is not determined by drivers in Texas. It is determined by the total demand for energy globally. Oil production in this country has been in decline, and we're importing more and more oil. And we're competing for that oil with the people who are importing it into other countries to satisfy their needs. That's what's impacting the price at the pump today."
WSJ: Chevron is a major producer of crude oil, as well. Don't you have any control over the prices?
O'Reilly: Absolutely not. Our crude-oil production is about 1.5 million barrels a day, out of 88 million barrels a day globally. So we produce 2% of the total global supply. In reality, even though we're a very big company, we're a very, very small producer.
WSJ: In a 2005 speech, you said, "The time we could count on cheap oil and even cheaper natural gas is clearly ending." That day, oil cost $47 a barrel. Today it's close to $120. Any other predictions?
O'Reilly: Do I see the market going up significantly from where it is today? No, probably not. You are seeing the impact of the higher prices on demand. For example, here in the U.S., we've seen gasoline demand drop somewhat in the first quarter of the year. People are using gasoline more efficiently. Big trucks are selling much more slowly. Smaller, more efficient automobiles are selling [better]. The market is telling us that behavior change is required and I think we're starting to see it, but we need to see more of it.
WSJ: What do you think is the likely range for oil prices?
O'Reilly: I can't predict what the price is going to be. You would have to tell me what the economic situation in the world is going to be a year from now. I don't think it is going to get back to those relatively low levels we experienced in the late '90s and early 2000s.
WSJ: Ever?
O'Reilly: No.
WSJ: Gasoline use in the U.S. is down. Do you see signs of that happening elsewhere?
O'Reilly: No. I was in Turkey a couple of months ago. The price of gasoline is almost $11 a gallon. They're selling a record number of automobiles. Traffic is backed up all over Istanbul.
WSJ: When you hear politicians talk about oil independence, what's your reaction?
O'Reilly: Unrealistic.
WSJ: Won't ever happen?
O'Reilly: No. Not in the time frame they talk about. We are actually going steadily in the opposite direction. We are not incentivizing investment in oil-and-gas exploration in this country. We are turning down coal-fired power plants because of concerns about the environment. We are slow to renew the use of nuclear power, so we are digging ourselves into a deeper hole here, in my view.
WSJ: In a few months, we'll have a new U.S. president. What energy-policy changes do you think will be imperative in the new administration?
O'Reilly: We've got to look at opening up OCS—the outer continental shelf—to oil-and-gas exploration. We can explore for and produce oil off [the coast of] Norway, Denmark, the Netherlands, the U.K., but we can't off 85% of the United States outer continental shelf. Why is that?
Click herefor the full interview.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.