Wednesday marks the 16th consecutive day of record-setting gas prices with the average reaching $3.62 per gallon, according to AAA. The president, John Hoffmeister, of Shell Gas Company, the American division of Royal Dutch Shell, discussed the issue of rising gas prices with John Roberts on “American Morning” on CNN.
Here is a brief excerpt of the interview:
ROBERTS: What do you say to people who are in this budget crunch of trying to fill up the family car?
HOFMEISTER: I say we need more gas to be produced in this country. I’ve been saying that for three years, ever since I took this position [as president of Shell].
If the U.S. set a goal to produce 2 to 3 million barrels more a day in this country, we would send a shock around the world that would immediately say to the speculators, hey, U.S. is serious. President [Bush] said something yesterday about this. I didn’t hear him, but 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: The president is advocating more drilling on U.S. territory. Isn’t it true that globally we’re starting to reach a peak in production and that within maybe a decade or two oil production will begin to decrease?
HOFMEISTER: Well, I think there is some argument [that] with convenient, easy oil we will peak sometime in the next decade. I think Shell sees that coming, but in terms of total oil supply to the world, we’re a long way from reaching peak oil because it doesn’t take into account unconventional oil.
I think the president brings up a good point in that we could, we have the available domestic supplies off the coast of Alaska as well as [the Alaska National Wildlife Refuge]. Shell has won $2 billion worth of high bids for the Chukchi Sea — that’s a few years off before we could begin production.
But let’s remember there’s more than 100 billion barrels of untouched oil and gas in this country that is subject to a 30-year moratorium. Now, there’s only one body in this country that can set a 30-year moratorium, and that’s the U.S. government.
ROBERTS: Sen. Hillary Clinton wants to slap you with a 50 percent tax on what she calls windfall profit, profit above a certain level. Is that a good idea?
HOFMEISTER: Look at our revenues and our income for the last quarter. If we had made $7.8 million on $114 million of revenue, nobody would call that excessive, because that’s 7½ percent. We made $7.8 billion profit on $114 billion revenue — same 7½ percent. So to me that is not an excessive number when banks and pharmaceuticals and IT companies earn a whole lot more.
ROBERTS: Would it hurt you if she put in place this tax on the windfall profits?
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.
ROBERTS: Where is the top of all this? How high can the price of a barrel of oil go? How high will the cost of a gallon of gasoline go?
HOFMEISTER: I heard somebody say the other day it’s as long as a piece of string. We don’t know.
ROBERTS: The president of OPEC said $200 a barrel.
HOFMEISTER: Yeah, well, there are some countries out there subsidizing the cost of their energy to their consumers and industries to compete with America — or against America — because they think America won’t solve the problem.
ROBERTS: You’re saying you have no idea where the top is.
HOFMEISTER: We don’t know. But we should produce more oil in this country.