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Kentucky.com: Shell chief questions need for new oil refineries Posted on Sat, Oct. 08, 2005  

 

GROWING PREFERENCE SEEN FOR HIGHER-MILEAGE VEHICLES

 

By Kevin G. Hall

 

KNIGHT RIDDER NEWS SERVICES

 

WASHINGTON - Consumer preferences for higher-mileage vehicles could slow oil and gasoline demand in coming years and lessen the urgency to build significant numbers of new refineries in the United States, Shell Oil Co. President John Hofmeister said yesterday.

 

Hofmeister told Knight Ridder Newspapers that efforts by President Bush and Congress to provide incentives to build new refineries are welcome, but a key assumption -- that the demand for gasoline will continue to increase -- could be flawed. Hofmeister said the growing consumer demand for cars and trucks that get better gas mileage could change the outlook for future gasoline use.

 

"I would submit the likelihood of consumption patterns changing is higher, rather than lower," Hofmeister said, suggesting the change would take some of the pressure off the need to build new refineries. Shell is the U.S. arm of Royal Dutch Shell, one of the world's largest private oil companies.

 

Yesterday, Republican leaders in the House of Representatives twisted arms to narrowly pass legislation supported by President Bush to simplify the process of expanding refineries or constructing new ones. The measure is driven by concerns that the nation's refining capacity is insufficient.

 

Similar legislation will be debated soon in the Senate.

 

No new U.S. refineries have been built since 1976. U.S. refinery capacity stood at 17.9 million barrels a day in 1981 but stands near 17.1 million barrels a day now. American refineries have been running flat out but have been unable to keep up with U.S. oil consumption, which is nearly 21 million barrels a day. Growing gasoline imports bridge the production gap.

 

Hurricanes Katrina and Rita damaged Gulf Coast refineries -- which account for 47 percent of the nation's refining capacity -- and crippled about 15 percent of capacity. Production and supply disruptions sent gasoline prices soaring to all-time highs in September, and lawmakers scurrying to propose emergency legislation that would spur building of more refineries to ease the nation's capacity crunch.

 

President Bush repeated Tuesday during a news conference that America needs more refineries, but he isn't saying just how many.

 

U.S. government and international agencies forecast that global oil consumption will grow from today's 83.4 million barrels a day to 120 million barrels a day by 2025. Without new or expanded refineries, America could become even more dependent on gasoline imports at a time when developed and developing nations across the globe also need more gasoline.

 

But Hofmeister questions the long-term demand forecasts, pointing to the recent bout of record-high oil and gasoline prices that he thinks could mark a turning point.

 

"That really shifts the attention of the automotive industry to look for more fuel-efficient alternatives," Hofmeister said.

 

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