The Detroit News: American’s won’t give up SUVs, Shell Oil president predicts

Thursday, February 14, 2008
David Shepardson / Detroit News Washington

WASHINGTON — The president of Shell Oil Co. said today that Americans were unlikely to give up their SUVs, despite a new law requiring automakers to boost the fuel efficiency of the vehicles by 40 percent by 2020.

“The vast majority of Americans love their big cars and I think the auto companies will follow the market,” said John Hofmeister, the president of Royal Dutch Shell PLC’s U.S. unit, in a meeting with reporters here.

He said the new fuel economy standards that hike fuel efficiency by 40 percent to a combined 35 miles per gallon over the next 12 years would have a “modest” impact on U.S. gasoline consumption by 2020, saying they didn’t see big numbers of hydrogen vehicles or plug-in hybrids by then.

The oil company released a report in Washington today titled: “A National Dialogue on Energy Security” following the company’s 50 town hall meetings over 18 months. About 250 Shell executives met with 15,000 Americans and found that the oil industry had a rotten reputation.

“We found a strong streak of visceral anger and zero sympathy toward the oil industry. We were somewhat prepared for this based on the ‘hate mail’ we had been receiving since prices first spiked,” the report said.

Hofmeister said the tour revisited the low public image of the oil industry.

“We have a long way to go as an industry to be not just liked but respected. We are basically disrespected through our own fault,” he said. “We’ve done a poor job of communicating our messages, of explaining ourselves our in justifying our actions We’re vulnerable if we’re not transparent.”

Hofmeister said at every town hall meeting, Americans expressed concern about losing their larger vehicles. “Person after person after person said, ‘Don’t take my SUV away from me,” Hofmeister said. “There may be a few people that like the idea of a smaller modest car.”

Hofmeister said automakers can combine size and comfort with alternative fuels. “We’ll be there to provide the fuels whatever they look like,” he said.

He said he didn’t know what the “tipping point” gasoline price was where Americans would give up their gas-guzzlers.

“The U.S. has a particular love-affair with its lifestyle and we have not seen a large embrace of mass-transit systems literally in the last 50 years,” Hofmeister said. “People continue to choose a lifestyle where commuting is a big part of that lifestyle.”

Hofmeister noted that Americans’ demand for gasoline is relatively inflexible.

Noting that in December 1998 a barrel of oil cost $8.50, he asked: “Who would have thought nine years later at 90 plus dollars for crude, at three plus dollars at the retail pump we would see continued demand increase?”

He also questioned the congressional mandate of using 36 billion gallons of ethanol by 2022, which would account for 20 percent of U.S. fuel use. Under the energy bill signed into last in December, blenders must use 9 billion gallons in 2008, up from just 4.9 billion in 2006.

Hofmeister said the company has had some disappointing results with E85, a fuel that consists of 85 percent ethanol and 15 percent gasoline. He suggested E20 would be a better way to go, if automakers could convert engines to use it.

He said many Shell customers who use E85 “were very disturbed by the poor miles per gallon.” The company’s pilot project in Chicago to sell E85 has been “the sales are very disappointing.”

Some automakers have suggested the oil industry favors E10 or E20 because it would represent a competitive fuel to gasoline as E85 would.

Hofmeister said the oil industry supports temporary tax breaks for renewable technologies like wind, hydrogen, solar or biofuels, but doesn’t want “punitive” taxes.

Shell is already working on all four of those technologies. The House passed a bill that last year that would have funded alternative energy by rolling back $13.5 billion in oil industry tax breaks over 10 years.

“We don’t fear ethanol,” Hofmeister. “We do feel strong that larger quantities of ethanol should come from biomass waste rather than from foodstocks,” he said, “but there comes a point where enough is enough and consumers who eat don’t need to pay both the fuel price and the food price of a scare resource.”

You can reach David Shepardson at (202) 662 – 8735 or [email protected].

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