“If for some reason that oil weapon becomes a Saudi response, and they may get other friends to join them in responding with an oil effect, the whole world economy could be shaken by a shortage of oil.”
This is the week we show our respect and gratitude to veterans for their service to our country. But that sentiment doesn’t have to be reserved just for Veterans Day.
So we’re dependent on foreign oil. How bad could that be?
John Hofmeister went on CNBC on Thursday to talk about the current and future price of oil, and he gave viewers more to think about when he elevated the discussion to include the need for alternatives to meet the world’s growing appetite for transportation fuel.
The global oil trade is a “contrived market” not subject to the usual laws of supply and demand, and the United States has an “absolute requirement” to use alternatives if it hopes to wean itself off imported oil, former Shell Oil president John Hofmeister said during the keynote speech at the National Ethanol Conference. Read more →
Ever since oil prices, and with them gasoline prices, began plummeting last fall, the trend has been portrayed in varying forms as a “gift” or an “early holiday present” or a “tax rebate” for consumers, who are expected to give thanks for this free stuff.
Just in time for the Fourth of July weekend: Our very own John Hofmeister speaking words of wisdom about the need for the United States to wean itself off oil as its dominant transportation fuel.
“It’s incumbent upon the United States of America to become more oil independent,” Hofmeister said at a security conference in Israel in June. “Because it still relies on nearly 7 million barrels a day of imports, and in a nation that uses 18 and a half to 19 million barrels of oil per day, the loss or the risk of 7 million barrels a day of imports puts that nation at about two-thirds of independence, and that’s not enough for the world’s largest economy.
“So there remains an interdependence, until the U.S. can find independence, and it has every right and every responsibility to pursue independence. As does every other nation.”
Watch Hofmeister’s full talk at the Herzliya Conference in Tel Aviv:
Hofmeister knows of what he speaks: He was the president of Shell Oil Co., the American subsidiary of oil giant Royal Dutch Shell, from 2005 to 2008. The author of “Why We Hate the Oil Companies” now travels the world talking about the need for alternatives to oil. He’s not only on the board of directors and advisors at Fuel Freedom, he founded a nonprofit called Citizens for Affordable Energy.
U.S. crude prices closed at $56.96 a barrel Wednesday, down $2.51 or 4 percent, the biggest one-day drop since April 8. Compare that to last summer, when the price was above $100. But the market remains volatile, and Hofmeister said having oil at an affordable price long-term is necessary for national security.
“If you’re not taking care of yourself, no one else will,” Hofmeister said. “And so nations should look to their security — not just to their defense forces, but to their energy supplies — which in the United States, is why I’m almost entirely focused now on transitioning natural gas to transportation fuels, as well as biofuels, as well as electricity for transportation. Because the future of oil is simply limited. We’re not running out. It won’t disappear. But it simply won’t be available at this price for an indefinite future.”
Hofmeister expanded on another of his major themes: that natural gas, which is cheap and plentiful in the United States, could help the U.S. and other nations reduce oil consumption. Natural gas is used as a fuel in its gaseous, compressed form — as CNG and LNG — and it can also be processed into liquid alcohol fuel, ethanol or methanol.
“Over the next decade, nations like the United States, or like Israel, or like much of Europe if not the whole of Europe, that are not transitioning at least a third of their oil demand away from oil and toward natural gas will only look back in regret.”
(Photo credit: Poet Biorefining plant in Macon, Missouri. From FarmProgress.com)
When it comes to oil companies and how they think, John Hofmeister knows of what he speaks. So when the former president of Shell Oil took to the lectern at the Hudson Institute’s “Fueling American Growth” conference in Washington, D.C., on Thursday and told the assembled that Big Oil actually doesn’t like high oil prices, it shouldn’t have come as a surprise.
And yet … let us gather that in: Companies like BP and ExxonMobil that post billions in earnings (or slightly less, as the price of oil slipped late in 2014 and into 2015) actually prefer a world in which a barrel of oil trades at a safe, predictable, boring price.
Here’s an excerpt from Hofmeister’s remarks:
Contrary to some popular belief, oil companies don’t actually like high oil prices. They like predictable, rational prices that deliver a return on investment over time. Companies do not like spiking, ever-higher prices, because of what happens as a consequence: The cure to high oil prices is high oil prices. People stop buying. Surpluses develop and prices collapse.
What’s the cure to low prices? Low prices. Because people stop producing and, sure enough, we run into shortages, and prices rise. This ever-continuing volatility is not good for the industry, it’s not good for national security, and it is horrific for the economy. And oil companies have been around for a long time. They see beyond the advantages of volatility either way, and look for those predictable price spots – they call them sweet spots, actually – where you can achieve an attractive investor return on investment, and you can maintain a stable workforce, and you can invest in R&D, and you can produce just enough energy to keep the nation well-supplied.
Hofmeister, who’s on the board of advisors with Fuel Freedom Foundation and is one of the stars of the foundation’s documentary, PUMP, has predicted that oil prices will continue to surge upward over the next year because U.S. drillers won’t be able to simply ramp up production quickly again after the recent downturn in prices forced many of them to suspend operations.
The foundation has argued that the best way to reduce oil consumption, end oil-market volatility and make prices gasoline permanently low for consumers is to open the transportation-fuel market to cheaper, cleaner alternatives like ethanol and methanol.
Hofmeister said: “We will never get past the volatility of oil until we get to alternatives to oil.”
The primary reason that I care so much about alternatives and future fuels is, as a person from the oil patch, I know the limitations. I know what’s possible and what’s not, and the appetite for oil worldwide will never, ever be satisfied from the oil patch. It can’t be. The risks, the costs, the geopolitics, really cannot begin to address the 2 billion people on this earth who really don’t have access to oil-based petroleum fuels, and most of them never will. There just isn’t enough.
You can watch the whole video clip here:
PUMP the Movie is now available on Netflix, giving millions of Americans the chance to watch an important film that shows the patch forward to ending our dependence on oil.
The documentary, produced by Fuel Freedom Foundation and narrated by Jason Bateman, was originally released in theaters last September. In fact, it’s still showing on big screens around the country, as the foundation has worked with partners to host screenings on college campuses and for nonprofits.
(For a full schedule of showings, as well as movie reviews and other content, check out PUMPtheMovie.com.)
But Netflix is a whole new level. The video-on-demand service is now available in 36 percent of U.S. homes, compared with 13.5 percent for Amazon Prime and 6.5 percent for Hulu Plus. Thirty-five million people watch movies and TV shows using Netflix’s streaming service, while another 5 million still get DVDs by mail. (We have DVDs for sale too, in an attractive blue case, on our website).
PUMP charts the century-long story of oil and how it built its monopoly on the U.S. transportation-fuel industry. There are interviews with major energy and auto-industry players like John Hofmeister, former president of Shell Oil Company, and Tesla Motors founder Elon Musk.
Much of the film is dedicated to solutions to our oil addiction: For example, ethanol, which is cheaper than gasoline and burns cleaner, with fewer toxic emissions, can be made from plenty of “feedstocks” besides corn.
Here’s a clip from the film featuring alcohol-fuels expert David Blume, telling us about the possibilities:
Another voice in that snippet belongs to Marc Rauch, editor of the Auto Channel website, who says: “Ethanol is not just any competitor [to gasoline]. It is the better fuel. It has always been the better fuel.”
The point is choice: American drivers deserve more than just one. To learn how we can achieve it, in the cars, trucks and SUVs we drive today, pick up the remote and watch PUMP.
Whatever the floor is for oil, $50 doesn’t seem to be it.
Brent crude closed just a few barrel-drops within that threshold Friday, down 85 cents to $50.11. U.S. crude fell 43 cents to $48.36. The marks are the lowest for crude since April 2009, and represented the seventh straight week of losses.
However, prices recovered from even steeper losses during the day after Baker Hughes, the U.S. oilfield-services company, announced that the number of rigs drilling for oil domestically had fallen by 61 this week, the most during a week since 1991.
Read more in Reuters.
That contraction in supply has many observers believing that prices will find the bottom soon. Former Shell Oil President John Hofmeister, one of the experts quoted in PUMP the Movie, notes that the surplus of oil we keep hearing about only amounts to roughly 1 percent of global consumption, which is about 90 million barrels a day (The U.S. uses about 18 mbd). He thinks the current slide is an “anomaly,” and that prices will begin climbing again in the spring.
Here’s what he said on Bloomberg:
At some point … we have to reassess where are we, in terms of the supply-demand equilibrium. … I call this an anomaly, in terms of oil price, but I wouldn’t be surprised to see it bottoming out … and starting to go up again late in the spring. … It doesn’t take much to wipe out this anomaly.
Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York, told Reuters:
“In my opinion we have not stabilized out yet. I do think that after seven weeks of losses, you will see a bounceback at some point, and people are waiting for that to short into. I am.”
