Shell President: America's Energy Security a 'Mess'

Shell President John Hofmeister addressed U.S. policy makers on Feb. 21 to proffer suggestions for energy policy changes. Hofmeister urged policy shapers to extend the rights of U.S. companies by allowing them to drill the outer continental shelf of the U.S., which is currently illegal.

Hofmeister said that the U.S.'s energy consumption, along with outdated policy, have led to a failure in energy security.

"During the course of today, the U.S. will consume 10,000 gallons of oil a second," said Hoffmeister. "That equivalent is 21 million barrels of oil a day ... that's a swimming pool full of oil every second of every minute of every hour throughout the day.

"In addition, we will consume some 60 billion cubic feet of gas. Sixty billion cubic feet of gas, if stacked on top of each other, would be 25 roundtrips to the moon. So when you put that kind of energy consumption in perspective … when we deal with energy security in this country, that's a very big deal.

"It's the basis of our lifestyle."

Hofmeister admitted that while Shell has been one of the first big oil companies to invest in alternative energy sources, such supplies "while meaningful over the longer term … cannot displace or replace the kind of day-to-day demand for hydrocarbon energy" the U.S. has today.

"My goodness, what a mess we're in when it comes to national energy security," he concluded.

Hofmeister said that energy security should enjoy the same importance as homeland and economic security, because each contributes to the other as a part of the "foundation of America's well-being."

"With energy security, we can have the best of all worlds," he said.

The Shell president defines energy security as a "comprehensive, holistic strategy with a short-term makeup, a medium-term makeup, and a long-term makeup," which is how Shell designs its own business model.

Consequently, Hofmesiter said that this country's "short-term hurt" is that it imports more than 60% of the oil it consumes. The $2 trillion the U.S. spends on oil imports is $2 trillion that the country will never see again, he said. That money is used to develop and maintain resources for oil exporters in other parts of the world.

Last year, S&P's top-six oil companies were state-run companies, like PDVSA, Petrobras, and Rosneft. Hofmeister said the nationalism of natural resources is the "legitimate" right of sovereign nations, yet this is where American energy security fails. He said that contrary to popular belief, the energy market place is not a free market.

"When a cartel of countries can determine production limits which help to guide a price level, and when U.S. companies are prohibited by public law from developing U.S. natural resources, that represents constraint of a free market," said Hofmeister. "And so it is a myth to think that U.S. oil companies can just go and explore and produce where they choose in a free oil market."

Hofmeister pointed out that only 15% of the outer continental shelf of the U.S. is available for E&P purposes while 85% is off-limits by law.

"As long as that is the case, we are contributing to, in a sense, the lack of development of our own national natural resources," he said, "and it is necessary for us then to pull upon a pool of international natural resources, which are controlled by nationally sovereign nations."

Hofmister said that to secure the U.S.'s energy future, policies must be moved so that the country can manage its natural resources in the interest of the American people.

"Calling for a comprehensive, integrated, short-term, medium-term, long-term energy strategy would put in place for America an energy strategy that has not existed over the last 50 years," said Hofmeister. "The last time America had an energy strategy … in terms of a coherent, integrated, short-medium-long-term approach, was World War II.

"The strategy was simple: Produce all the energy the nation can produce and ration it to consumers in order to support the war effort.

"Since then, we've relied upon free markets, which have consistently lost their degrees of freedom over the last 50 years. It's time now for the nation … to approach energy security in a bipartisan nationally led model, such as we do with homeland security and economic security."

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