Hofmeister: U.S. must not be victimized by ‘contrived’ oil market
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.
Hofmeister, the author of the book “Why We Hate the Oil Companies” who’s also a member of Fuel Freedom’s board of advisors and directors, used his insider’s knowledge to explain to attendees at the New Orleans conference on Tuesday why the U.S. will need to “produce more of everything” to displace the 7 million barrels of oil a day it imports to keep the economy functioning.
“More domestic oil, more domestic natural gas, more domestic biomass fuel. We would need every bit of it. And why wouldn’t we want it? Rather than to be subject to the vagaries, subject to the manipulation, subject to what is truly a contrived marketplace for oil, which is roughly 96 percent of all our transportation fuel.”
You can listen to the audio of Hofmeister’s speech on this Domestic Fuel post.
The theme of this year’s NEC, the annual gathering put on by the Renewable Fuels Association (Hofmeister is seen above with RFA president and CEO Bob Dinneen), is “Fueling a High Octane Future.” Ethanol is naturally higher in octane rating that regular gasoline, which burns more efficiently and can increase performance in vehicles. High-octane fuels also produce fewer greenhouse-gas emissions and smog-forming pollutants.
The reason oil prices are so low — Brent crude closed at $32.18 Tuesday, while U.S. crude settled at $29.04 — isn’t just about global oversupply, Hofmeister said:
“I start from the premise … that oil is a contrived market. It is not a competitive, input-output, supply vs. demand marketplace, and here’s the reason: In November 2014, one man in the kingdom of Saudi Arabia [oil minister Ali al-Naimi] made the executive decision that, with the upcoming OPEC meeting in Vienna, the kingdom of Saudi Arabia would take the position of not reducing oil production” to stop falling prices.
The U.S. shale-oil industry was “collateral damage” of that decision, Hofmeister said.
“U.S. companies know how to adapt to cost pressure: They shut down rigs, they shut down equipment. They lay off people.
“We’ve been through cycles like this before, because oil has been a contrived market for a very long time. So you think, what does all this have to do with ethanol. I think it has everything to do with the United States’ absolute requirement to become fully energy independent, to not be the victim of a contrived oil market, to not be victimized by the necessity of importing oil to get the through the day.
“Today we’ll import 7 million barrels of oil. And instead of importing oil to get through the day, why aren’t we developing on a strategy … basis the alternative fuels that we have in this country that can dismiss any dependency on foreign oil, forever? Yes, forever! We don’t need foreign oil if we fully utilize biomass, for making fuel. If we convert natural gas to alternative fuels, such as LNG, CNG, ethanol, methanol, GTL (a form of diesel). Take advantage of biodiesel, take advantage of corn-based and other plant-based ethanol.”
Related posts:
- Oil prices will inevitably rise. That’s what they do
- Hofmeister: Oil companies actually hate high prices
- Thanks for the gift, OPEC. Can we keep it?
- Former Shell Oil chief: U.S. must become more oil independent
