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Why We Hate the Oil Companies: Straight Talk from an Energy Insider

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I'm hardly a 'Drill, Baby, Drill' fanatic, I very much believe we should be moving full-speed ahead with cleaner alternatives and get off of hydrocarbons as soon as possible.

That being said, the information this guy presents has opened my eyes a bit to the real problems with cutting back on oil, etc, and relying on clean energy alternatives too quickly. The fact is we are no where near the point where the infrastructure to produce sufficient energy to meet even our current energy needs exists with alternatives...much less the demand of the future as we continue to grow. Cutting back too fast means suddenly energy is horribly expensive, because there is less of it. Simple economics. It's those without money that are going to suffer if and when this happens. Higher energy prices mean higher prices of everything, and many are barely hanging on as it is.

So, yes, alternative fuels and clean energy sources, as many and as fast as possible! But! It isn't as easy and as "tra-la-la", holding hands and singing songs as we dance into the green utopia as it sounds...some of what this author talks about is going to have to be taken into serious consideration if we want to get there in a realistic sense.

Why We Hate the Oil Companies is a book about energy, the economy and politics. I became aware of the book during the BP oil spill in the Gulf of Mexico. The author, John Hofmeister is the former President of Shell Oil, in North America. Each night, despondent, I watched Anderson Cooper or Campbell Brown on CNN interview various pundits, interested parties, stakeholders, etc. Frequently John Hofmeister was the industry "expert". I heard him speak about the limited options considered by the various leaders in resolving the oil leak compared to the much broader set of choices, often unconsidered. He would say some things that challenged my personal views.

I have been trying to find the video clip of an interview where he was challenged on the intrinsic safety of deep-water drilling. His response, paraphrased was that oil companies do deep-water drilling because they are not allowed to do the much safer shallow-water drilling. I believe there may be good reasons to not do shallow-water drilling, however - it never occurred to me that we had much more accessible, and safer to reach oil closer to shore. It was his statements that I could not readily place within my base-knowledge, either to affirm or deny that made me curious about his book as its title flashed beneath his name, night after night, during the oil spill.

In the book, Mr. Hofmeister builds the following case. First, a clean, post-industrial economy of the future will use more energy, not less than an old-line manufacturing economy. For example, "The comparatively low cost and plentiful supply of energy throughout the 1990s and the first years of the twenty-first century helped drive a low unemployment rate and a lifestyle of larger cars, commuting to larger houses, located farther from downtown employment centers or industrial areas." (Amazon Kindle: 336) This is a key concept in his analysis. U.S. economic success and the standard of living of its citizenry is dependent on access to low-cost energy. Repeatedly in the book, he returns to the idea that high-cost, less reliable energy disproportionately punishes those with low-income, the working-class and the middle-class. In the information age, energy becomes more important, not less, he believes.

The former President of Shell Oil - America then begins to describe what he perceives to be the inability of our political institutions to develop sound energy policy and how recent history is replete with examples of that inability causing harm and misery to U.S. citizens at varying degrees. "The call for American energy independence was first made more than 35 years ago. At that time, we imported about one-third of our oil from other nations. After three and a half decades of repeated commitments by presidents, presidential candidates, and countless elected and appointed officials of both major parties at federal and state levels, after dozens of energy bills over the intervening years, through recessions and periods of heady economic growth and prosperity, by 2008 we imported two-thirds of our oil from other nations. Our reliance on foreign oil increased, not deceased." (Amazon Kindle: 458-461) More importantly, he concludes that recent examples of energy disruption and temporary fuel price spikes are a foreshadowing of greater energy and economic troubles in the near, medium and long-term. He believes these interruptions and energy cost volatility will inevitably force the U.S. economy into a position in which it is unable to meet the reasonable expectations of our country's citizenry and possible loss of our superpower status.

John Hofmeister spends significant portions of the book discussing the scale and enormity of our current energy infrastructure. One such example is as follows, "Americans use...10,000 gallons [of oil] per second." (Amazon Kindle: 502-06) Or, "Nearly half of the electricity in the United States comes from coal-burning generating plants...we burn through a [train] car-load of coal every three seconds, 20 car-loads per minute, 1,200 per hour." (Amazon Kindle: 624 - 630) As he compares this to alternative energy sources he resoundingly concludes, alternative energy sources cannot replace this behemoth fast enough to avoid unprecedented economic distress. "[W]e can't just turn it off. In an electron society, we couldn't run our hospitals, banks, companies, households, governments, schools, and public safety without it. For these reasons, it is naïve and dangerous simply to argue for no more coal." (Amazon Kindle 636)

Why have we failed in nearly forty-years to fix our energy dependence or secure long-term energy access? The former Big Oil executive lists four reasons: incompatible and misinformed beliefs of the right and the left on energy and the environment; incompatible time scales for development of energy and implementation of energy policy compared to election cycles; infighting between different energy industries such as coal vs. nuclear or natural gas versus wind and solar as each sub-industry uses their influence with their constituents, stakeholders and their beholden politicians, and finally; the NIMBY or "not in my back yard" syndrome. All of these items form a nexus where elected politicians make decisions or direct regulatory agencies. This leads to policy incoherence and a related reduction in energy production, refinement and transmission infrastructure development that leaves America vulnerable to unpredictable but expected events. Hurricanes, summer heat, Middle-Eastern geo-political turmoil all will produce disruption. America's dependence on Gulf Oil, OPEC Oil, inability to build new nuclear plants, unwillingness to invest in new coal plants or build new refineries makes us dependent on an unnecessary few number of energy sources all with unique risks and vulnerabilities.

The former oil executive is also the CEO of Citizens for Affordable Energy, Inc. He strongly advocates for alternative energy in his book, but consistently makes the case that changes in policy, unrealistic time frames and misunderstanding of the scale of energy use, as well as vituperative banter by ideologues prevent the development and implementation of new technologies in a rational manner. (The subtitle on one chapter says, "Put in charge of energy, the right wing will destroy the earth; the left wing will destroy our society.") He does have some of his own venom for corn-based bio-energy in the form of ethanol. He suggests that the cost and energy use in its production to be so high as to make it a nonsensical choice. After several paragraphs describing engine efficiency, difficulty in transporting the fuel, cost of production, etc., he concludes, "All things considered, corn ethanol is a bad idea for everyone but the corn farmers." (Amazon Kindle 868)

So, what is John Hofmeister's solution? The formation of a regulatory body called the "Federal Energy Resources System" (FERS). Mr. Hofmeister spends considerable time discussing the Federal Reserve Bank and its relative success in managing our economy since the Great Depression. He suggests that the EPA and Energy departments be rolled together in it, that it be given enough authority to over-ride individual state objections to projects (such as Massachusetts's opposition to a Wind Farm off the coasts of Nantucket and Martha's Vineyard). He touts the length of time in which Federal Reserve governors serve (14 years) and the extension of the four-year terms of the Chair by presidents of opposing parties as proof of the bipartisan manner in which it operates.

When reading the book, and discussing it with my friends on the right and the left, their hostility was palpable. I found them trying to find labels that both belittled and appropriately placed the author of the book into a simple box. "He's a shill for the oil industry. Maybe alternative fuels require enormous government subsidies, but traditional energy forms receive just as many. There is no proof that global warming is real, we're just at the tail end of the last ice age." are examples of the many ad hoc criticisms I received while discussing this book. I do not have an opinion about FERS. Mr. Hofmeister made a compelling case that he believed in global warming, protecting the environment and that other fuel sources besides oil could serve America's energy needs well. He equally strongly made the case that America was vulnerable and that low-cost and stable energy were a necessary part of our super power status and the wellbeing of our citizenry in the future and that elimination of hydrocarbons, desirable as it is could cause havoc on our well being.

Why do we hate the oil companies? John Hofmeister believes that their shortsighted management has made them easy targets to the passionate, if incoherent politics that is part of our time. They are a scapegoat and have come to symbolize 40 years of failed energy policy, as well as the center of the populace's anxiety every time gasoline prices spike, or there are power outages during the summer heat. He makes a strong case that we are in trouble and things may get worse. His solution to the problem is less compelling to me. I enjoyed what I learned by reading the book but I did find it depressing. Hopefully, I am moderately better informed.

Everyone concerned will the energy and associated political issues will benefit greatly from reading this book. The more so that the author, as a former president of Shell Oil Company, had walked the talk. Add to this the insightfulness and clarity of the presentation.

Inept political governance is the major point in author's explanations for the sorry state of the U.S. energy policies. He points to the fact that all alternative energy sources produce presently only two percent of the energy in the U.S. Besides, they are heavily subsidized. Developing each of them to become a meaningful replacement for the carbon fuels will take many years. He is also critical of the American attraction to living on vast spreads of land. He sees hope in the grass root movements.

Author is concerned that increasing artificially the gasoline price would be unfair to half of the population, namely, to those who are under the median annual income. We submit, A Better Organization: Facing Threats to Our Country, this could be done `naturally', via the environmental levies which are based on the overall environmental costs (caused by the gasoline engine exhaust in particular) and implemented gradually. The framework of the levies would engage the exceptional adaptive capabilities of the capitalist free market economy and result in the orderly economic restructuring towards the energy, as well as environmental sustainability.

Author points to the inefficiency of the internal combustion engine, where only 20 percent of energy goes into the generation of movement. He advises the development of an electrical engine for short distances and a fuel cell engine for long distances. The environmental levies, again, would steer in this direction.

At the political governance level, author advocates the establishment of the energy policy board. It has to be independent of government. In this regard, it would be similar to the present Federal Reserve System in the U.S. And we contend that the same considerations lead to the necessity of the environmental levies board.

I heard Mr. Hofmeister lecture at Florida State University and ordered his book since the local libraries didn't seem to be doing it. He makes a strong case for shoring up the "bridge" hydrocarbons and nuclear while we are going about setting up the "new" alternative energies and hydrogen fuel cells. The current utilities infrastructure is aging and no new nuclear or coal plants have been built since the 70's--the life expectancy of a utility plant is 50 yrs and the average age of our plants is 38 yrs and it takes about a decade to get a plant online - so in 10 yrs if we haven't done anything we will be facing brownouts and shortages - which all the "alternative energy sources" planned will not make up for. To get some consistent policies so companies can plan ahead, he suggests an "energy resources board" like the Federal Reserve Board - independent of political cycles and made up of experts-- to set policy and plan for the future phase-in of both alterantive and cleaner traditional energy sources. As a former president of Shell Oil, he testifies to the difficulty of getting new infrastructure (in his case a liquefied gas receiving station in LI Sound-an area that is coming up on its energy limits since Shoreham nuclear plant was denied in the 1970's) - there is a thicket of agency permits and rules both local and national that companies have to jump through and even then there is no assurance of getting something built - so they have largely given up. If his facts are right, then we should be paying attention, even though when he talks about preserving the "American lifestyle" I have to wonder just whose "American lifestyle" he wants to preserve, because I see an awful lot muscle trucks and living beyond one's means in the "American lifestyle" around here. Unfortunately I think his sound points will not resonate with folks who want a change because 1) his title doesn't express the thesis of his book - which should have been "why we will need coal, oil, and nuclear for the foreseeable future" - or "what we should be doing about the non-alternative energy sources while we are experimenting with the alternatives" and 2) his timing is awful - a book with that title coming out on the heels of the Deepwater Horizon oil spill-ouch. And using the Federal Reserve Board as a model for keeping us out of trouble??- the experts didn't do too good a job of that when they fueled the real estate bubble with their low interest rates, did they? Even he concedes it will probably take a series of energy crises in the coming decade to get energy policy de-politicized and moving ahead with a coherent plan. He does make a good point that other countries, including Canada, France, Germany and China, are already developing coherent plans for their transition from "non-OPEC oil". Look folks, we may hate the oil companies, but lets face it, these are the guys who know what it takes to realistically get us where we want (and need) to go and if they are telling us we're being un-realistic, we need to listen.

This book is very helpful in understanding the energy spectrum and what's really happening. It's amazing John Hofmeister would take the time to write this book. If you did not read this you need to and read it with an open mind. John's trying to bring clarity to this space.

It has definitely made me think with a different mindset.

Sincerely,
Jason

John Hofmeister is an energy expert. Based on his knowledge and experience, he presents an even-handed, objective and factual review of US energy policy, and the possible future roles of all the major sources of energy. He suggests a better plan for moving ahead with US energy policy. Educational, informative, no-holds-barred. Best comprehensive piece on energy I've ever read. Dr. Warren Wilhelm, President, Global Consulting Alliance.

John Hofmeister, former president of Shell Oil, predicts that unless we act now, within ten years this country will slide into an "energy abyss"

It's a scary prospect. According to Mr. Hofmeister, we will be confronted with much higher energy prices, electrical brownouts and blackouts, shortages of liquid fuels and stunted economic growth - not as temporary inconveniences, but as a way of life.

Mr. Hofmeister (for whom I had the honor of writing speeches when he was at Shell) sketches this grim scenario in his new book, Why We Hate the Oil Companies - Straight Talk From an Energy Insider. A political scientist as well as an energy executive, he is uniquely qualified to analyze our current energy policy quagmire and to suggest a way out.

According to Mr. Hofmeister, the crux of the problem is that energy executives and politicians live in different time zones. New supplies of oil are not brought to market by turning on a spigot. Permits must be acquired, regulations met, capital raised, pipelines and other infrastructure built and wells dug before a drop of new oil is produced. Consequently, energy executives must think in terms of decades.

Politicians, in contrast, think in terms of two-year election cycles. Often, they think no further than the next public opinion poll or the nightly news. Because they are obsessed with getting themselves re-elected, they pay little heed to the long-term consequences of the policies they champion in order to look good at any given moment.

Endless bickering between the politicians and the energy industry, fanned by extremists on what Mr. Hofmeister terms the "reckless right and the ludicrous left," hamstrings constructive efforts to meet America's long-term energy needs. So we continue to drift toward the energy abyss. Mr. Hofmeister points out that since the Arab oil embargo in the early 1970s, eight U.S. presidents and 18 U.S. Congresses have committed this country to "energy independence" and we haven't achieved it yet.

To break the policy gridlock, and to formulate realistic, long-term energy solutions for this country's future, Mr. Hofmeister puts forth what will likely strike many Americans as an impossibly radical solution. He proposes the creation of a Federal Energy Resources Board.

Modeled after the Federal Reserve Board, his proposed Federal Energy Resources Board (FERB) would consist of a board of governors appointed by the president for 14-year terms, subject to confirmation by the Senate. Also like the Fed, the FERB would be assisted by regional boards that would take account of the differing energy needs and resources of the different regions of the country.

Mr. Hofmeister admits that skeptics of big government are likely to "choke" on such a proposal. In reply, he notes that we already have massive government regulation of the energy sector, and it doesn't work. Why not try a big government solution that might succeed? Moreover, he sees no reason why private energy companies shouldn't continue to flourish under a Federal Energy Resources Board, just as private financial institutions flourish under the Fed.

Mr. Hofmeister is a realist. He understands that the energy sector is already under the control of a mass of federal and state regulatory agencies, and congressional and state legislature committees. He is aware that none of barons in charge of these fiefdoms will yield power willingly to the kind of super-authority that he has proposed. But he is convinced that a national grassroots movement could ultimately bring about such a change. Toward this end, he has founded the non-profit Citizens for Affordable Energy, based in Houston, Texas, [...].

The philosopher Nietzsche once said that when you stare into an abyss, the abyss stares back into you. John Hofmeister has taken a fearless look into America's energy abyss, and has come back with some tough, honest and sensible proposals to avert catastrophe. His book deserves widespread and thoughtful reading.

Its good to finally hear an informed opinion on the energy debate. The book delivers the straight story without the misguided emotion of the Greens, the vote pandering of the politicians or the profit above all else far right.
There are many facts in this book that we should all be aware of -- like the fact that "green energy" can't begin to satisfy our demand, or that we have been recklessly polluting the atmosphere green house gasses. And that our elected officials have done nothing to remedy the situation.
The book argues for a frank diologue between honest politicial and an educated electorate that results in a rational long term plan for energy supply and consumption.

Every American who drives a car should read this and educate him/herself with the truth. Hofmeister has a long career as both a consumer and producer of energy. No politics, Republicans and Democrats are both guilty of obscuring the facts to push their agendas. Pros and cons on both sides, and what we can expect in our future if we don't wake up now. Realistic and responsible proposals to create a sustainable energy plan for the USA.

I read John Hofmeister's book with a great deal of interest since I have recently retired from a major oil company as a senior R&D executive. John does as excellent job explaining the scale of the energy industry, which is extraordinarily large and complex and few people in and out of politics understand this. So calls for renewable energy technologies rapidly replacing fossil duel based energy as the driving force of our economy and lifestyle lack a sense of reality. Minimum of 25 years, and more like 50 to make a substantial change. He makes this case clearly, and he is credible since he is a relaitvely newcomer to the oil industry. I really enjoyed John making the case for the huge difference in time horizons and time windows of politicians and energy policy. The political window is at most two years, the energy policy is measured in 10, 20 and 50 year windows. The mismatch is huge. John describes a great proposal, energy policy managed similar to monitary policy, by an independent national board and regional groups. He describes this idea in some detail, and he also tells how he has been unable to get politicians of either party to pay attention. It is a good and fast read, clear discussion and explanations of complex issues. Highly recommend this book.