$5 gasoline in U.S. by 2012 former Shell Oil President Tells Platts Energy Week
Washington - December 27, 2010
Weekly TV program also featured power outlook from several energy CEOs
Americans will pay $5 for a gallon of gasoline by 2012, thanks to growing global demand for oil, tighter supplies and inadequate responses by the US government, the former president of Shell Oil said Sunday. He made his comments in an interview with Platts Energy Week an independent, all-energy news and talk show.
John Hofmeister also predicted little or no new drilling in deep waters of the Gulf of Mexico for the next two years, as Washington continues to respond to the BP oil spill with tighter regulation of the oil and gas industry.
"If we stay on our current course, within a decade we're into energy shortages in this country big time," said Hofmeister, who retired from Shell in 2008 and now heads a grass-roots group called Citizens for Affordable Energy.
"Blackouts, brownouts, gas lines, rationing -- that's my projection based upon the current inability to make to make decisions," Hofmeister said. "The politically driven choices that are being made, which are non-choices, essentially frittering at the edges of renewable energy, stifling production in hydrocarbon energy -- that's a sure path for not enough energy for American consumers. When American consumers are short or prices are so high -- $5 a gallon for gasoline, for example, by 2012 -- that's going to set a new tone. It's going to be panic time for politicians. They're suddenly going to get the sense that we better do something."
Hofmeister, whose interview was taped December 1 during a Platts Global Energy Outlook Forum in New York, said he expected the result of the November elections will worsen political gridlock in Washington. Voters gave Republicans control of the House of Representatives and more seats in the Senate in the Congress that convenes in January.
"The 112th [Congress] has potential for compromise, but we'll see. I'm predicting actually a worse outcome over the next two years, which takes us to 2012 with higher gasoline prices, uncertainty as to the future of hydrocarbons, more regulation on the hydrocarbon industry based on who the administration is today," he said. "And what I fear the most is that by 2012 prices will be so high that we'll have a backlash from the electorate and we'll go into reverse and will go back to as hydro-carbon only type of future with maybe some nuclear, instead of moving on into the 21st century."
Hofmeister said U.S. oil production will suffer from government response to the explosion of BP's Macondo well last April and the resulting largest oil spill in US history. He said while the government has officially lifted a moratorium on deepwater drilling in the Gulf of Mexico, slow implementation of new regulations means the freeze on new permits continues.
"I'm expecting no new drilling for two more years at least, maybe one or two token wells," he said.
The government response will persuade oil companies to increasingly look outside the US for drilling options, he said.
"What the administration doesn't understand about the industry is how it plans its capital budgets," he said. "It plans a capital budget on a three-year cycle. If the Gulf of Mexico is uncertain, which it is because nobody knows when they can drill again, then that money will be reallocated elsewhere around the world."
Hofmeister gathered his views on U.S. energy supply and demand earlier in the year in a book called "Why We Hate Oil Companies: Straight Talk from an Energy Insider." Among is recommendations is a government agency modeled after the Federal Reserve to development national energy policy.
He said in the interview that while the idea is generally dismissed in Washington as politically unfeasible, it may take hold once global competition for oil and other energy supplies grows intense.
"That will be the game changer," he said. "That will mean the current governmental system which incorporates politics into every energy decision has to be pushed aside by the independent regulatory approach which I'm promoting." To access the full interview, click here.
Energy executives also offered their views on the greatest challenges facing the energy industry ahead. To access these comments, click here.
Cape Wind CEO Jim Gordon spoke with program host Bill Loveless about the real prospects for wind power in the United States, noting there is at least 900,000 megawatts of potential. Cape Wind is on the verge of becoming the United States’ first offshore wind project, with a price tag of about $1 billion. To access this interview in full, click here.
In another program segment focusing on power, Bill Loveless spoke with Kurt Yeager, Director of EnergyConnect, about how demand response technology is changing the way utility companies manage their energy consumption. This interview is accessible by clicking here.
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