Former Shell CEO Explains Why Oil Cos. Are Hated
WASHINGTON, D.C. -- John Hofmeister, former president of Shell Oil Co. who now runs the advocacy group Citizens for Affordable Energy, is writing a new book called "Why We Hate the Oil Companies," in which he denounces the "parochialism" of the industry, as well as politicians' "hollow" promises of energy independence.
The Washington Post spoke with Hofmeister about the BP oil spill in the Gulf of Mexico, whether cheap energy is a constitutional right and why Congress will never fix our energy problems. Below are excerpts from the interview:
Washington Post: Why do we hate oil companies?
Hofmeister: The short answer is because the government has taught us to. Government's failure over many decades to make the difficult decisions and choices with respect to our energy future means they look for a scapegoat when things go wrong. The primary scapegoats they choose are the oil companies, whether about prices, environmental issues or supply issues; it's always the oil companies' fault.
WP: Are the oil companies blameless?
Hofmeister: The oil companies have earned the disfavor of government by a) choosing sides, preferring a particular party in general and b) maintaining a wall of silence, which ultimately comes back to hurt them.
WP: How does the corporate culture of oil companies compare with that of other industries?
Hofmeister: From an insider perspective, I never worked with more brilliant, committed people than inside the oil industry. From an external sense, I never worked with a more introverted culture. In my early career, working with General Electric for example, there was a requirement for senior GE folks to engage the community on an ongoing basis, because everyone in the community was a current or potential customer. On the retail side of the business of oil, it's the opposite.
WP: In your book, you talk about some road trips you took to gas stations across the country. What was the most annoying moment?
Hofmeister: I was visiting Erie, Pa., to just take the measure of Shell gas stations. I drove up to this particular station and noticed how filthy it was outside. And when I went inside, it was even filthier. There was trash all over the coffee space where people mix cream and sugar. There was trash on the checkout counter. And there was the operator wearing his Shell shirt, who, as I approached him, turned his back to me. I asked, "How's business?" He said, "It's none of your business, that's how's business." I asked, "How are you dealing with high gas prices?" He said, "Who are you?" I pulled out my business card and said, "I'm Shell's president." Then he started screaming at me: "You're taking food off my family's table. You're making billions, and I'm pinching nickels. You have no right to treat us the way you're treating us." We ended up having a long conversation. ... We didn't part friends, but we parted politely.
WP: What's your reaction to the oil spill in the Gulf of Mexico?
Hofmeister: This is horrific. This is everybody's worst nightmare within the industry: an uncontrollable well in a vulnerable geography. However, in the fullness of time, this tragedy will be an anomaly.
Because we're never going to drill another?
Hofmeister: With the tens of thousands of wells that have been safely drilled and operated, this is a first. It needs to be a last. But there's a 40-year track record of reliable operating that needs to govern our thinking on the gulf and offshore drilling in general. Otherwise we become more vulnerable on foreign imports, less secure and economically disadvantaged by not developing our own resources.
WP: But this is like airplanes or terrorism. One mistake can have huge consequences.
Hofmeister: No hydrocarbon activity can ever be completely fail-safe because things happen you don't know about -- whether a methane leak in a coal mine, a poorly cemented tight gas well in Pennsylvania or a blowout in the bottom of the Gulf of Mexico. There are risks associated with hydrocarbon extraction in the same way there are risks in every industrial pursuit, whether aircraft, marine or food processing. In the case of hydrocarbons, when things go wrong, they go spectacularly wrong. But not having a sound energy policy is what has pushed us into ever-deeper waters.
WP: Nonetheless, BP seems to have been unprepared.
Hofmeister: Every company has its own crisis plans, but every spill takes on its own personality. I'm not in a position to say what happened on the rig ... I think BP is doing a remarkable job of figuring out how to control the flow and deal with the aftermath. They're starting from nothing.
WP: They weren't supposed to be starting from nothing. Isn't that part of the problem?
Hofmeister: That's an issue, no question.
WP: You write that the government's failure to provide affordable energy and a sustainable environment violates our constitutional rights. I don't remember reading about affordable energy in the Constitution.
Hofmeister: For the last 100 years, our national leadership has supported our entire nation having access to energy. The rural electrification bill [of the 1930s] said you could live anywhere in the country and have the right to be hooked up to the grid. The public service commissions said companies should provide people with the most affordable energy. This affordable energy has led to the world's greatest economy and most envied lifestyle. So why would Americans, after 100 years, not conclude that it is part of their civil rights under the life, liberty and pursuit of happiness clause that they would have affordable energy into their future?
WP: You propose the creation of a powerful Federal Energy Resources Board that would include "knowledgeable leaders" to choose technologies and allocate resources. Wouldn't that arrangement be fundamentally undemocratic?
Hofmeister: It would only come into existence through an act of Congress, just as the Federal Reserve Act created the Fed. The board members would be presidential appointments with confirmation by the Senate, like Fed governors ... The criteria for selection is what's important. You need someone who knows about science and technology ... such as John Holdren, the White House science adviser. Distinguished former CEOs who know and understand what energy is all about, someone like [former GE chief executive] Jack Welch. I think you would avoid the conflict with energy producers. I think you need bankers and finance people, someone like [former Citigroup executive] John Reed. The high-tech electronics world probably has more at stake, so you could look at [Apple chief executive] Steve Jobs. Someone from the environmental community who is not politically labelled ... Al Gore is too politically labeled.
WP: It still seems like a declaration of the failure of Congress and the democratic process.
Hofmeister: The politics of energy have created an ideology in the nation around energy. We now have the view that some energy is good energy and some energy is bad energy. Energy is energy. The creation of energy causes harm. It has implications, no matter what type of energy it is. If it's wind or solar, it has consequences or implications. We shouldn't be looking at this ideologically through Democratic or Republican eyes.
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The Washington Post spoke with Hofmeister about the BP oil spill in the Gulf of Mexico, whether cheap energy is a constitutional right and why Congress will never fix our energy problems. Below are excerpts from the interview:
Washington Post: Why do we hate oil companies?
Hofmeister: The short answer is because the government has taught us to. Government's failure over many decades to make the difficult decisions and choices with respect to our energy future means they look for a scapegoat when things go wrong. The primary scapegoats they choose are the oil companies, whether about prices, environmental issues or supply issues; it's always the oil companies' fault.
WP: Are the oil companies blameless?
Hofmeister: The oil companies have earned the disfavor of government by a) choosing sides, preferring a particular party in general and b) maintaining a wall of silence, which ultimately comes back to hurt them.
WP: How does the corporate culture of oil companies compare with that of other industries?
Hofmeister: From an insider perspective, I never worked with more brilliant, committed people than inside the oil industry. From an external sense, I never worked with a more introverted culture. In my early career, working with General Electric for example, there was a requirement for senior GE folks to engage the community on an ongoing basis, because everyone in the community was a current or potential customer. On the retail side of the business of oil, it's the opposite.
WP: In your book, you talk about some road trips you took to gas stations across the country. What was the most annoying moment?
Hofmeister: I was visiting Erie, Pa., to just take the measure of Shell gas stations. I drove up to this particular station and noticed how filthy it was outside. And when I went inside, it was even filthier. There was trash all over the coffee space where people mix cream and sugar. There was trash on the checkout counter. And there was the operator wearing his Shell shirt, who, as I approached him, turned his back to me. I asked, "How's business?" He said, "It's none of your business, that's how's business." I asked, "How are you dealing with high gas prices?" He said, "Who are you?" I pulled out my business card and said, "I'm Shell's president." Then he started screaming at me: "You're taking food off my family's table. You're making billions, and I'm pinching nickels. You have no right to treat us the way you're treating us." We ended up having a long conversation. ... We didn't part friends, but we parted politely.
WP: What's your reaction to the oil spill in the Gulf of Mexico?
Hofmeister: This is horrific. This is everybody's worst nightmare within the industry: an uncontrollable well in a vulnerable geography. However, in the fullness of time, this tragedy will be an anomaly.
Because we're never going to drill another?
Hofmeister: With the tens of thousands of wells that have been safely drilled and operated, this is a first. It needs to be a last. But there's a 40-year track record of reliable operating that needs to govern our thinking on the gulf and offshore drilling in general. Otherwise we become more vulnerable on foreign imports, less secure and economically disadvantaged by not developing our own resources.
WP: But this is like airplanes or terrorism. One mistake can have huge consequences.
Hofmeister: No hydrocarbon activity can ever be completely fail-safe because things happen you don't know about -- whether a methane leak in a coal mine, a poorly cemented tight gas well in Pennsylvania or a blowout in the bottom of the Gulf of Mexico. There are risks associated with hydrocarbon extraction in the same way there are risks in every industrial pursuit, whether aircraft, marine or food processing. In the case of hydrocarbons, when things go wrong, they go spectacularly wrong. But not having a sound energy policy is what has pushed us into ever-deeper waters.
WP: Nonetheless, BP seems to have been unprepared.
Hofmeister: Every company has its own crisis plans, but every spill takes on its own personality. I'm not in a position to say what happened on the rig ... I think BP is doing a remarkable job of figuring out how to control the flow and deal with the aftermath. They're starting from nothing.
WP: They weren't supposed to be starting from nothing. Isn't that part of the problem?
Hofmeister: That's an issue, no question.
WP: You write that the government's failure to provide affordable energy and a sustainable environment violates our constitutional rights. I don't remember reading about affordable energy in the Constitution.
Hofmeister: For the last 100 years, our national leadership has supported our entire nation having access to energy. The rural electrification bill [of the 1930s] said you could live anywhere in the country and have the right to be hooked up to the grid. The public service commissions said companies should provide people with the most affordable energy. This affordable energy has led to the world's greatest economy and most envied lifestyle. So why would Americans, after 100 years, not conclude that it is part of their civil rights under the life, liberty and pursuit of happiness clause that they would have affordable energy into their future?
WP: You propose the creation of a powerful Federal Energy Resources Board that would include "knowledgeable leaders" to choose technologies and allocate resources. Wouldn't that arrangement be fundamentally undemocratic?
Hofmeister: It would only come into existence through an act of Congress, just as the Federal Reserve Act created the Fed. The board members would be presidential appointments with confirmation by the Senate, like Fed governors ... The criteria for selection is what's important. You need someone who knows about science and technology ... such as John Holdren, the White House science adviser. Distinguished former CEOs who know and understand what energy is all about, someone like [former GE chief executive] Jack Welch. I think you would avoid the conflict with energy producers. I think you need bankers and finance people, someone like [former Citigroup executive] John Reed. The high-tech electronics world probably has more at stake, so you could look at [Apple chief executive] Steve Jobs. Someone from the environmental community who is not politically labelled ... Al Gore is too politically labeled.
WP: It still seems like a declaration of the failure of Congress and the democratic process.
Hofmeister: The politics of energy have created an ideology in the nation around energy. We now have the view that some energy is good energy and some energy is bad energy. Energy is energy. The creation of energy causes harm. It has implications, no matter what type of energy it is. If it's wind or solar, it has consequences or implications. We shouldn't be looking at this ideologically through Democratic or Republican eyes.
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