John Hofmeister is the retiring president of Shell Oil...
Glenn: From midtown Manhattan in Rockefeller Plaza, this is the third most listened to show in all of America. My name is Glenn Beck. John Hofmeister is the retiring president of Shell Oil and he is on the -- he's on the phone with me now.
John, I was told by one of my producers that you're outgoing as the president and I said, was it because he was on my show last night?
Hofmeister: Well, this has been announced sometime ago. It's a natural transition. Good to be with you, Glenn.
Glenn: John, last night I had you on the TV show and we talked about the record profits of big oil and I am so tired of hearing about the record profits on big oil without talking about -- for instance, Exxon just announced today with their profits that they paid more in taxes than any corporation in U.S. history.
Hofmeister: That doesn't surprise me. On a global basis, I know I gave you a number yesterday of 1 billion dollars for last year and that's a pretty big number to pay in taxes.
Glenn: Yeah. Exxon income taxes were $9.32 billion in the first quarter and, in fact, CNN -- I love this -- CNN said Exxon paid $1,185 in income tax every -- no. I'm sorry. They said -- oh, shoot. They said that it was -- well, now I can't find it. Where is it, Stu? Following the CNN lead.
They paid -- well, I can't find it. They paid all this money and what they were trying to do was CNN was saying they made so much money in profits that they could have bought all of this gas, you know, the X number of gallons of gas. Well, what they didn't do is they didn't say how many gallons of gas they would pay with their income tax.
Hofmeister: Yeah. Well, I usually use a different term. I think about how many dollars we are not putting into new exploration, new production of more oil and gas or alternative energies for the future by virtue of what we're paying to the governments that we work for.
Glenn: John, tell me about the -- because Hillary Clinton wants to seizure profits and everybody always says, "Oh, my gosh. These tax breaks that these oil companies are getting." Tell me about the tax breaks.
Hofmeister: Well, the tax breaks are a myth. What happens is, in Congress in 2004, the Congress, in its judgment, decided that much of what the energy companies do is manufacturing. After all, we have some 10 refineries that manufacture gasoline products, aviation fuels, etc. So, we were then able to use an appreciated or an accelerated depreciation allowance in order to create more jobs for America.
So, when people use the word "tax incentive," when we're actually doing our work, we are creating new jobs for Americans at our U.S.-based refineries and as a privilege of doing that, we get to accelerate some of the depreciation. I don't consider that an incentive at all. I consider that a way every other manufacturer in America is doing business. Why not extend it to oil manufacturing, as well?
Glenn: Do you get breaks for alternative energy?
Hofmeister: Well, if -- there are breaks. For example, we're in the wind business. Right now there is an incentive that enables wind companies like Shell to set up wind farms and, again, depreciate more rapidly or get other tax credits for the setting up of wind farms, which is in the national interest. Wind farms are very expensive, very high capital for which there is no profit and if there is no profit, our shareholders say, Well, why are you doing that? When we show them that we are actually saving shareholders money by taking advantage of certain incentives for new forms of energy, which is experimental but actually make a difference, then our shareholders say, Oh, okay. We understand that and they support it.
Glenn: Oil is now -- what is it today? $110 a barrel. That's good news, down over 2.50 today. I talked to -- I've talked to several people and they say that the days of cheap oil are gone forever. Agree or disagree?
Hofmeister: I basically agree with that if you're thinking about conventional, easy oil. It's scarcer and scarcer to get the big fines that are inexpensive to produce. We have a project now in the Gulf of Mexico where we're working through 700 feet of water. The reservoir is 28,000 feet below the surface of the earth and it's a good reservoir and will produce hundreds of millions of barrels from this other of prolific oil, but how do you lift barrels of oil from -- really it's a total of almost 7 miles to get it to the surface of the ocean which is then 100 miles from the coast of Texas and we have to transport it and then refine it and then get it to customers. So, that's called expensive conventional oil.
The days of, you know, our good friend, you know, the -- Uncle Jeb where he, you know, shot a bullet in the ground and out to him bubbling crude, those days are gone. We have exploited those, although we could go back into old fields with and probably get a lot more oils out of what are considered decommissioned or oil fields, using enhanced oil technology.
Glenn: What do you think that the price of oil is going to be, you know, in the short-term? Do you think -- now, the Nigerian strike just was settled today.
Hofmeister: If we had sound national policy and we get rid of this ridiculous 30-year moratorium on prohibiting American oil companies from exploring and producing oil in the outer continental shelf, 85 percent of which is off limits, if we could access domestic resources, if we had a sound energy policy that took into consideration short, medium, and long term issues, I think we could settle in a range of 60 to $80 a barrel, depending upon global circumstances, and wouldn't that be good for the American economy and wouldn't that be good for job creation and wouldn't that be good for maintaining our lifestyle?
Glenn: Wouldn't that be bad -- not to play Devil's advocate for you, wouldn't that be bad for the caribou? Wouldn't that be bad for the whales? Wouldn't that be bad for planet earth?
Stu: Keep in mind I said, short, medium, and long-term. In the short-term if we're going to maintain the existing strength of this country, have jobs, and continue to have the lifestyle that we have, we have no choice other than hydrocarbons, but if you look over the medium and longer term, there are technologies that could be brought to bear on the efficient use of molecules.
For example, an internal combustion engine only uses 20 percent of the energy to give you mobility. 80 percent is wasted as heat. There has to be better technology than the internal combustion engine and companies like Shell and GM are working on that that give you hydrogen fuel cell vehicles. Over the medium to longer term, we can produce more energy with less CO2 in the efficient use of all of the machines and appliances that we have, as well as lighting. In addition, we can also reduce CO2 by using the technology of carbon capture and storage at stationary power generating stations. New power generating stations should be induced or incentivized to begin using carbon capture and storage, whether that's with coal burning or with coal gasification. The technology is there, but it needs enabling legislation to make it affordable so that we can get a price on carbon.
We're proponents at Shell of a national cap and trade session, where we set a cap on emissions and we begin using innovation and technology to bring down emissions but there needs to be a price of carbon which can be set through a trading system.
Glenn: Why would you do that? Why would you be for that?
Hofmeister: We're for it because we think it's going to create huge economic value over the next decade. Whole new industries will spring up if we begin to control emissions and start trading on new energy saving or energy conservation because, I mean, let's face it. We don't know everything today. There's all kinds of new innovation and technology which will create whole new industries around carbon management. We think that's worth pursuing.
Glenn: Scientists announced today that there is a 10-year break in global warming. So, we've just bought ourselves 10 years on this global warming, which I believe is nonsense, but at least the solutions are nonsense. How long do we have -- if we continue to screw around the way we are, how long do we have before we cannot afford our lifestyle?
Hofmeister: Well, the reason Shell is an advocate for going now is so that we don't have to answer that question. We're not climatologists at Shell.
Glenn: No, no. I'm not talking about global warming. I'm talking about if we don't stop screwing around, if we don't unleash the energy power here in our own country and be able to take the shackles off of exploring and creating our own energy, if policy doesn't change, how long before we cannot afford the energy that we're currently and expected to consume?
Hofmeister: I would submit we're already sliding down a slippery slope and that started actually about the middle of this decade, whereas the competitiveness of China, India, and other developing nations increased, our competitiveness decreased because we have overpriced energy to American businesses and consumers. We've overpriced it because we have limited access to it. We have not done anything other than punish those who would like to produce more energy by restricting their ability to move, let's say, to the outer continental shelf that's off limits or made it so difficult to add expansions to our refineries that people chose not to do it but did it in other words parts of the world. So, we have incentivized food producers, manufacturers to move offshore, because there is more affordable energy elsewhere in the world.
We have already started down the slippery slope of making energy too expensive for this country, making infrastructure very difficult to build. Try to build a power plant today. We are making it so difficult by public resistance, often coming from just a few elite sources that don't think about the implications for low income and middle income Americans, that we're already sliding down that slippery slope, Glenn, which is why my voice has been so strong recently and in my retirement it's going to get louder and a bit more critical and a bit more edgy, maybe even like yours, to where -- you know, my next business is to establish a nongovernmental agency called Citizens For Affordable Energy and we're going to look across the population of America from individuals to companies to say please join us in leveraging the pragmatism of the American spirit to make energy affordable in the future.
Glenn: John, do you know David Neeleman?
Hofmeister: No, I don't.
Glenn: Do you know who he is? The president of Jet Blue, the founder of Jet Blue?
Glenn: David is a very good friend of mine and I have been talking to him about energy for a very long time and this guy is just now building an airline in Brazil. He came to me three years ago and he said -- I said to him, "Boy, I'm really concerned about oil, David. I think we're headed in the next few years for real trouble in oil." He said, "Oh, yeah."
He tried to get his company to build oil reserves and, you know, have their own oil reserves just like we have natural strategic oil reserves and they said no. He said, Well, then what do we do? Let's come up with coal to oil. Let's build plants.
He got together with GE and everybody else. All he needed is for the government to underwrite the loans. If oil was ever collapsed by OPEC -- I think it was at 30 or $40 a barrel -- the government would make up the difference for the loans because that's what they did to synthetic oil in the Eighties. The government said no. Then he went into sugar ethanol and said, Let's just buy up a swath of land and I'm going to start planting sugar. Let's talk to Brazil. Let's start planting some other sugar there. Let's do that. The government again said no. Every step of the way people are saying no.
How are you and your future company going to be able to make an impact? The desire is there. The customers are there. The ingenuity is there. The dollars are there, but the government will not tell you what the policy will be to be able to stabilize that market.
Hofmeister: I've thought with this a lot and thought hard about it and here I think is the issue: This country still works very well when it comes to a subject like home land security because we solve our problems in a bipartisan way. This country works pretty well when it comes to economic security because, with all of the shake-out that we've seen in the dotcom breakdown or with all of the shakedown with the mortgage crisis and so forth, we ultimately come together in a bipartisan way. What we have failed to do repeatedly, generation after generation, for the last 50 years, is come together on energy security.
My efforts will be to create a nonpartisan effort to solve our energy problems through good public policy by getting an overwhelming number of Americans to say, We need this. This is still a democracy. This is still where the majority matters. And I believe -- maybe I'm naive, some may call me foolish, but I believe that if we approach energy in a nonpartisan fashion -- and that's been the problem, especially the last 20 years, is partisanship. If one party proposes, the other party says no. If one president --
Glenn: On both sides.
Hofmeister: It's just -- it's an embarrassment to the world --
Glenn: It is.
Hofmeister: -- that we are so partisan when it comes to energy. In this regard, I have to be somewhat blameful of my own industry because the industry has unfortunately been in its own way too partisan and it has been too one-sided in its approach and it has also not been forthcoming in describing to the American people what the issues are and what needs to be done. We've been too quiet, too silent on issues that we would rather not, you know, have public debate over; and I think that's wrong, as well.
Glenn: John, we will help and play any role that we could play to be able to help you on that. I hope you will return as a guest here and also involve us in any way that you think that we could help because energy -- without energy we're in deep, deep trouble in this country and something has to happen quickly and I think you're on the right path.
Hofmeister: Well, thank you. I'll take you up on that, Glenn.
Glenn: May I just ask one last question? Where do you see the price of gas this summer? Do you have any concept of what direction we're headed, what we should expect?
Hofmeister: Well, at the current rate of demand supply, I think we're going to enter a period of a bit more stability in price although, heavens forbid, I could ever accurately predict a price, but because demand is slipping due to unfortunate economic downturn conditions, I think we're seeing, you know, a slight decrease in demand. That will have an impact, but here's an issue. What about the hurricane season and what might the hurricane season do to production alone in the Gulf of Mexico? That is a perineal worry. We're still enough hand to mouth that if we have a tough hurricane season and we start shutting down refineries because of the storms that are pending, we'll have immediate repercussions because the conditions that existed years ago in the Katrina/Rita season, nothing has really changed except we have protected our facilities better. We've learned some lessons, but we're still heavily concentrated on the gulf cost for production because frankly most of the rest of the country doesn't want us.
Glenn: John Hofmeister from Shell, the retiring president of Shell. Thank you again and I hope to talk to you again soon.
Hofmeister: You bet.
Glenn: Bye bye.