Shell exec: Oil prices could continue to rise

Unless Congress allows expanded drilling on the outer continental shelf of the United States, fuel prices are going to continue to increase, the head of the Shell Oil Company told TODAY.

“If we don’t bring more oil and gas into the system we’re going to have to pay more and more and more,” Shell President John Hofmeister told TODAY host Meredith Vieira. “I’d hate to see prices double and triple what they are today because we failed to explore for more gas and oil.”

Hofmeister, who last visited TODAY a year ago, is in the midst of a 50-city “listening tour” he began a year ago to address the public’s anger with the high price of energy and the huge profits being reaped by oil companies. Public opinion polls have ranked oil companies last out of 21 industries with an approval rating of 10 to 15 percent.

“We’ve been to 33 cities since I was here a year ago,” he told Vieira. “We’ve talked to thousands and thousands of people from coast to coast. What they’re saying is, ‘We are angry, we are frustrated, and we’re in fear we’re running out of oil and gas.’”

The good news, he said, is “there’s plenty of oil and gas out there.” But, he added, the oil companies aren’t allowed to go after it.

“Part of the crunch we’re feeling right now is public policy that allows us to only access oil and gas in 15 percent of the outer continental shelf; 85 percent, we’re banned from exploring for oil and gas. Meanwhile we bring in expensive imports from around the world,” he said.

Technology, he said, will ultimately free the country of its dependence on oil. But, he warned, it will happen “not overnight, but over decades.”

In the meantime, increased supply has to come from somewhere. Shell supports biofuels and is developing technology to produce ethanol from plant cellulose to replace 10 percent of the energy that today comes from oil.

In 1973, Middle East oil producers embargoed shipments to the United States in response to the Yom Kippur War. At the time, the country imported about 35 percent of its oil. Since then and through six different presidents, America’s dependency on foreign oil has increased to more than 60 percent.

As prices have increased, so have oil company profits, which for Shell totaled $7.28 billion in the first 90 days of this year and $26.31 billion for 2006. The national average for a gallon of regular is at $3.07, ranging from a high of $3.48 in California to $2.81 in South Carolina. That’s 17 cents a gallon more than a year ago and 23 cents a gallon more than a month ago. A recent CNN poll reported that 66 percent of Americans say they’re suffering financial hardship as a result of the high cost of fuel.

Hofmeister called fuel prices “very painful.” When Vieira asked him if the prices are “reasonable,” he replied: “It’s reasonable from a supply-demand situation.”

The industry is in its normal spring maintenance schedule, which restricts refining capacity. Recent fires at refineries in Texas and California have also crimped supply, putting inventories at the lowest point in 16 years, Hofmeister said.

‘Great sport to attack oil companies’
Vieira quoted politicians, including New York Sen. Charles Schumer, who have accused Big Oil companies of colluding with each other to restrict supply and keep prices — and profits — high.

“We do not collude with one another,” Hofmeister said. “It’s great sport to attack the oil companies, particularly when people are upset. But ... with margins being what they are, we’re trying to produce everything that we can.”

Vieira asked him if he could see the new Democrat-controlled Congress supporting expanded off-shore drilling. Exploration on the continental shelf was severely curtailed 25 years ago after a major oil spill off Santa Barbara in California. The industry says that improvements in technology will allow drilling today without the risk of damage to the environment.

“Here’s the reality,” Hofmeister replied: “We have a 100-year infrastructure of oil and gas. We have to continue to feed that infrastructure to sustain our economic growth model, to sustain our lifestyle.”

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