Sunday, February 24, 2008

President of Shell Speaks

My school often gives me the opportunity to attend speakers from various backgrounds, covering many topics. Mr. Hoffmeister, President of Shell Oil, conducted a fifty-city tour across the US. He stopped by Columbia, SC to speak to the public (if you were willing to pay $25) and to the students at the Moore School of Business. His opening remarks were characterized as "provocative." He said this word several times and some of his remarks were. Best of all, the words he spoke came from an educated voice. It was clear that no one caught him off guard with their questions, but his responses were candid and very unpolitician-like. However, I did catch him saying to his assistant afterwards in the lobby that we were much better with our questions than Texas A&M. Go Cocks!!

I think it is becoming more important for corporations to interact with the public to gain support and educate the consumer. Many people would be appalled for working for a oil giant like Shell, but in reality, this company and other like it are leading the way for alternative fuel technologies. This tour hopefully changed some peoples minds about Shell and the oil industry.

I will admit that I am not the most knowledgeable about where my oil comes from and how it gets to me. I have gotten the chain emails saying that purchasing from one gas station will affect their profits and then the company will crumble to our will, thus bringing prices down. Of course, this doesn't work. I know that the US is currently dependent on foreign oil, but I don't think the World will be running out of oil in the next 50 years either. I also don't worry about global warming too much. I know that we will discover ways to cope with these problems.

What do I think? I actually agree with Mr. Hoffmeister and most of what he is saying (but not all of it). He says that the US consumer does not have a good education around energy. He says that the US has no strategy for the future of energy. He states that this is a problem for national security. He says that we are at the peak production for our current reserves of cheap and readily available oil. Also, he states that the US is hurting the poor and providing a social injustice by prohibiting its own oil production on federal lands.

It is this last point that I disagree with most. This is due to the fact that the amount extracted from these reserves will only equal to a few years supply for the World and will not have a great effect on prices or supply in the long run. Not to mention the possibility of the destruction of pristine habitats. It is hard to think that no oil will drip into the land surrounding the drilling platforms and pipes. Perhaps it is so small, that the habitat won't be affected by it, but to say that none will be introduced is a bit hard to believe.

As for the other statements, something should be done. Should it be the US that develops a strategy for energy consumption? Should we lead this World in this initiative? Is our national security actually threatened by increasingly common blackouts and the importation of foreign oil? I say yes and no. Producing domestically in the name of security seems a bit fishy. We and every other country in the World is not self sufficient. Therefore, trade is a must.

I do like how optimistic Mr. Hoffmeister is and I am right there with him. I think the World is going to see some awesome changes in the next few decades as we shift to alternative forms of energy. Also, I think Shell will continue to be a major player in the energy market. The company currently has the 3rd largest revenue of any corporation, but its profits are only a little above 7% of revenues at the end of the day. This is not considered fast growth by wallstreet and if I was a shareholder I would be demanding more. Since oil is a commodity and is not made a public good like water, prices are subject to wild fluctuations due to consumer perception and many other factors. Until other sources of energy are readily adopted and implemented, the price increases we see at the pump will continue. If it makes you feel any better, Europeans are paying close to $8/gallon at the pump at the moment. Will Americans pay this much? Would you pay this much? Europeans approve increases in gas taxes readily and the US hasn't had one since the Clinton administration and it only passed because of his popularity.

Lastly, Mr. Hoffmeister stated that the World will never run out of oil. Can you believe that? The media would have us believe differently, but I agree most strongly with this statement. The World has other sources of oil all over. At the moment it is too expensive to harvest these reserves. I am hoping that the World will change its ways and learn before we start eating away at these enormous reserves. Until then, I will continue to do my part by biking everywhere that is within a couple of miles of my home, recycling, and just being conscious of my purchase choices. Hopefully you will too.

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