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Milwaukee Journal Sentinel: Shell exec buffs firm’s image: CEO stops in city as part of national tour to respond to consumer issues

By Thomas Content
Published: Mar 21, 2007: Wisconsin

How bad is Big Oil’s image?: So bad that the chief executive of one of the nation’s largest oil companies is on a 50-city tour trying to communicate what the industry is doing to expand oil production, respond to consumer frustration over energy costs, and deliver a message about bills being drafted in Madison and Washington, D.C.

John Hofmeister, president of Shell Oil USA, on Tuesday used an appearance in Milwaukee, 29th on the 50-city tour, to praise efforts under way in Congress to enact a law restricting emissions of gases linked to global warming and criticize a state plan to tax oil company profits.

A favorability survey conducted last year by the Edelman public relations firm ranked the oil industry dead last, 20th of 20 industries surveyed.

“Not a good place to be,” Hofmeister said during a talk to members of the Metropolitan Milwaukee Association of Commerce.

After 2005, when hurricanes damaged the industry infrastructure and prices rose, Hofmeister said he was congratulating employees for getting refineries and rigs back in service.

But the feedback was blunt, from consumers at service stations angry about gas prices to state attorneys general leveling charges of price-gouging. Shell executives were called to testify in front of both houses of Congress and a state panel in Milwaukee appointed by Gov. Jim Doyle.

“It’s like we were punishing American consumers. Whose fault is it that it seems like we’re at war with one another? I point the finger of blame right here,” Hofmeister said, pointing at his own chest. “The companies have an obligation to tell our story and explain how our business works, and explain what we’re trying to do for energy security.”

The cure for high oil and gasoline prices, he said, is to increase supply, something the oil industry wasn’t considering 10 years ago when oil was at $10 a barrel, he said.

Now, with oil prices at more than $56 a barrel, the industry is investing in new refineries and plans to extract oil from unconventional sources, such as the Alberta oil sands in Canada and oil shale in the Rocky Mountains region, Hofmeister said.

Hofmeister offered pointed criticism for Doyle’s plan to raise $272 million from oil companies to help fund the 2007-’09 state budget.

The legislation is flawed and discriminatory, he said, adding that similar pieces of legislation have been thrown out by courts in other states.

The Doyle plan calls for a tax of 2.5% on the cost of a barrel of oil sold in Wisconsin.

“The inability to pass on costs that are incurred in the normal course of doing business is changing the economic model, and there is no other state in the country that has achieved that,” Hofmeister said.

The effect would be similar to a tax on the interest that banks charge their customers, along with a requirement that banks couldn’t pass on those costs to their customers, Hofmeister said.

But state Administration Secretary Mike Morgan said similar assessments have been enacted in other states, and a U.S. Supreme Court decision in 1988 gives the state the power to shield consumers from attempts by oil companies to pass on the assessments to consumers.

“We can and will shield the public from any attempt on the part of oil companies to pass on the assessment,” he said.

Morgan noted that Hofmeister sent a lower-level executive to testify at Doyle’s oil profits hearing in late 2005.

“But now that the public has become all too aware of the huge amounts of money that are being reaped by these high oil prices, they feel they have an image problem.”

On global warming, Hofmeister said he sent a letter this week to Rep. John Dingell (D-Mich.), one of a group of lawmakers holding hearings on global warming this spring.

“It’s real, it’s here, it’s now,” he said of global warming. “Let’s move on.”

Shell’s parent company has long supported the Kyoto protocol that would require nations to reduce their emissions of carbon dioxide and other greenhouse gases, a policy opposed by the U.S. government.

“Shell’s view is that it’s time for the government to step up” for national legislation to manage greenhouse gases as well as a cap-and-trade system that allows flexibility to industries in achieving reductions in emissions.

Shell opposes a voluntary plan, endorsed by some energy-industry companies such as Milwaukee-based We Energies.


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