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Houston Chronicle: Gasoline basics remain the same

John Hofmeister, President Shell Oil Co

(“The supply and demand relationships that took us to $3 a gallon are the exact same supply and demand relationships that are ever present,” said John Hofmeister, president of Shell Oil Co., who spoke to reporters Tuesday before a speech to the Consumer Energy Alliance in Houston.
MIKE WINTROATH: AP)

Oct. 17, 2006, 11:11PM

Shell president says cut demand, increase supply to lower prices

By BRETT CLANTON
Copyright 2006 Houston Chronicle

The price of gasoline may have plummeted in recent weeks, but the days of $3 gas probably aren’t gone for good, Royal Dutch Shell’s top U.S. executive said Tuesday.

“The supply and demand relationships that took us to $3 a gallon are the exact same supply and demand relationships that are ever present,” said John Hofmeister, president of Shell Oil Co., who spoke to reporters Tuesday before a speech to the Consumer Energy Alliance in Houston.

To change the equation, consumers must conserve more energy or oil companies must be permitted to expand exploration to areas that are off limits, he said.

“I think the supply side will win,” Hofmeister said, referring to the oil companies.

“In other words, we will get more supplies, which will create a more relaxed price atmosphere.”

The remarks come as industry groups continue to push to open federally protected lands to oil and gas drilling despite recent defeats in Washington.

Meanwhile, the industry is also working to improve the image of Big Oil to a skeptical public, an effort seen last year after oil companies began reporting huge profits when hurricanes pummeled the Gulf Coast.

Next week, that push could get another test when the biggest U.S. oil companies report financial results for the third quarter. Those reports are expected to show strong returns once again.

“The oil industry has struggled for a long time to convey its message,” said Michelle Michot Foss, head of the Center for Energy Economics at the University of Texas, who attended the conference Tuesday.

Yet consumers must also be more educated about how energy is produced and the costs involved before attacking the energy industry each time the price of gasoline goes up a few cents a gallon or their heating bill goes up, she said.

To that end, Shell said in June it would send its top executives to 50 U.S. cities over the next two years to meet with consumers face to face and explain the challenges the industry faces as world demand for energy grows.

Hofmeister’s speech to the Consumer Energy Alliance was called a “subset” of that effort by a company spokeswoman, but not an official stop. The Tuesday conference was organized by radio talk show host Dan Patrick, Republican candidate for state Senate District 7.

So far, the Shell tour has made stops in 10 cities, including Irvine, Calif., and Miami, Fla. And while Hofmeister said the effort is helping to change the perception of the industry, there is a “huge, huge amount of education left to be done.”

He added: ”People are used to that period of easy oil, low prices, plenty of availability. But the world’s changed dramatically since then. It is our job to go out and explain what happened, and what we are doing about it, which is really the most important message.”

In addition, Hofmeister said the falling price of oil will not lead the company to cut exploration activities.

Rather, he suggested Shell’s recent strong profits may allow it to do just the opposite.

“I am pleased as punch that our profitability is robust because it enables us to invest in more supplies.”

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