Former Shell Oil President: $5 Gasoline in U.S. by 2012

by | Dec 28, 2010

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Americans will pay $5 for a gallon of gasoline by 2012, thanks to growing global demand for oil, tighter supplies and inadequate responses by the U.S. government, the former president of Shell Oil said Sunday in an interview with Platts Energy Week Television.

John Hofmeister also predicted little or no new drilling in deep waters of the Gulf of Mexico for the next two years, as Washington continues to respond to the BP oil spill with tighter regulation of the oil and gas industry.

“If we stay on our current course, within a decade we’re into energy shortages in this country big time,” said Hofmeister, who retired from Shell in 2008 and now heads a grass-roots group called Citizens for Affordable Energy.

“Blackouts, brownouts, gas lines, rationing–that’s my projection based upon the current inability to make to make decisions,” Hofmeister said. “The politically driven choices that are being made, which are non-choices, essentially frittering at the edges of renewable energy, stifling production in hydrocarbon energy–that’s a sure path for not enough energy for American consumers. When American consumers are short or prices are so high–$5 a gallon for gasoline, for example, by 2012–that’s going to set a new tone. It’s going to be panic time for politicians. They’re suddenly going to get the sense that we better do something.”

“The 112th [Congress] has potential for compromise, but we’ll see. I’m predicting actually a worse outcome over the next two years, which takes us to 2012 with higher gasoline prices, uncertainty as to the future of hydrocarbons, more regulation on the hydrocarbon industry based on who the administration is today,” he said. “And what I fear  the most is that by 2012 prices will be so high that we’ll have a backlash from the electorate and we’ll go into reverse and will go back to as hydro-carbon only type of future with maybe some nuclear, instead of moving on into the 21st century.”

Hofmeister said U.S. oil production will suffer from government response to the explosion of BP’s Macondo well last April and the resulting largest oil spill in U.S. history. He said while the government has officially lifted a moratorium on deepwater drilling in the Gulf of Mexico, slow implementation of new regulations means the freeze on new permits continues.

“I’m expecting no new drilling for two more years at least, maybe one or two token wells,” he said.

The government response will persuade oil companies to increasingly look outside the U.S. for drilling options, he said.

“What the administration doesn’t understand about the industry is how it plans its capital budgets,” he said. “It plans a capital budget on a three-year cycle. If the Gulf of Mexico is uncertain, which it is because nobody knows when they can drill again, then that money will be reallocated elsewhere around the world.”

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