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Pittsburgh Post-Gazette: Students pepper Shell Oil president with questions

Shell Oil President John Hofmeister

(Shell Oil President John Hofmeister speaks to high school students yesterday at Pine-Richland High School. Bob Donaldson, Post-Gazette)

Friday, February 09, 2007
By Elwin Green,

The president of Shell Oil Co. spoke with the conviction of an evangelist when he shared three of his beliefs with the 200 or so students gathered at Pine-Richland High School yesterday morning. 
 
There were no obvious on-the-spot conversions among the skeptical students, although John Hofmeister’s message was as plain and direct as an old-time Baptist preacher’s:

1. We need energy.

2. There’s plenty of energy out there, enough to supply our energy needs “as far as we can see out into the future.”

3. The thing that makes energy so expensive is public policy, because present policies inhibit the development of energy sources that could bring the costs of energy down.

To make his first point, he simply quizzed the audience on how many of them drove cars, owned a computer or an iPod, or wore makeup (much of which is petroleum-based). Then he combined the second and third points by informing them that 85 percent of America’s coastlines and large stretches of land west of the Mississippi are off-limits for oil and gas exploration, thus increasing — if not creating — our need to import oil.

When question-and-answer time came, it was apparent that at least the first questioner wasn’t yet a true believer: “When we consider the environment, is the answer to our energy problems as simple as changing public policy?”

Public policy has to include holding companies such as Shell accountable for environmental impacts, Mr. Hofmeister answered.

A second student asked why the United States lags other nations in switching to alternative fuels, citing India for its greater use of natural gas to fuel vehicles.

Mr. Hofmeister gently demurred on the idea that the United States is behind other nations — Shell’s parent company, Royal Dutch Shell, is based in London. But he said the adoption of alternative fuels was largely a matter of economics, of “what is the cheapest form of energy available.” Then he pointed again to public policy, which “can set incentives in motion” to accelerate the adoption of alternative fuels.

And so it went. Where a less well-prepared presenter might have stumbled, or fallen completely on his face, Mr. Hofmeister never lost his poise.

For instance, when a student asked him why Shell should wait for changes in public policy rather than taking the lead to be more environmentally responsible, Mr. Hofmeister simply apologized for not having been clear and explained that his company made a commitment in 1997 to shrink its carbon footprint by 5 percent by 2010, and that it is on track to achieve that goal.

And when a student asked, given the billions in profits earned by his company (Royal Dutch Shell last week said it earned $25.4 billion in 2006), “How much do you make?” he answered, “Somewhere between what a Steelers rookie makes and what Ben Roethlisberger makes.”

The school program was part of a whirlwind visit to Pittsburgh that included a breakfast meeting at the Duquesne Club, a luncheon at the Rivers Club and an evening town hall meeting at the Pittsburgh Hilton. His visit, coordinated by the World Affairs Council of Pittsburgh, makes Pittsburgh the 25th city in a 50-city tour that began six months ago. The Shell executive says he hopes to do two things that oil companies have not done well in the past: Educate the public and listen.

He said that coming face to face with consumers across the country has been a learning experience for him.

The biggest surprise, he said, has been the intensity of feeling that people have about energy.

“There’s a much deeper concern on the part of many, many parents and grandparents than I expected about the future of energy. There’s also more anger than I realized at prices and profits.”

Mr. Hofmeister said that most of the anger that consumers feel is rooted in a misunderstanding.

“Most oil company profits come from crude oil, not from the finished product,” he said.

For instance, he said, Shell might be able to extract crude for as little as $7 to $8 a barrel, creating a plump margin when it sells at market prices upward of $50 a barrel. By contrast, each dollar of gasoline sold at the pump generates a nickel’s worth of profit or less, with the rest going to pay for federal and taxes, retailing and marketing costs, manufacturing and distribution costs, and the crude oil needed to make the gasoline.

“We’re not trying to be loved,” he said of his outreach efforts. “It’s hard to love an oil company. We are trying to engage, and I’m really happy about how willing people are to be engaged.”

(Elwin Green can be reached at [email protected] or 412-263-1969. )

http://www.post-gazette.com/pg/07040/760653-28.stm

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