The consequences for federal restrictions on oil and gas exploration go beyond just higher gas prices, interfering with the basic free-market principle of allowing enterprise to meet demand by providing a supply, according to former Shell Oil CEO John Hofmeister.
Hofmeister, who is the founder and CEO of the recently-formed advocacy group Citizens for Affordable Energy [1], appeared on CNBC’s July 15 “Squawk Box.” He criticized government for 30 years of inaction.
“I think if you look at it in real time – looking at it in this month, next month, the following month, the answer is no – it’s not going to make any material difference [in energy prices],” Hofmeister said of proposals to lift restriction of offshore drilling.
“But let’s keep in mind – for 30 years we have been denying industry the ability to expand,” he said. “That is not a free market when you prevent industry from expanding. Today Americans are paying the price for 30 years of not wanting to develop our own natural resources.”
One of the criticisms of the oil and gas industry [2] has been that it isn’t utilizing leases it already holds, and members of Congress have used that as reason not to open up any more lands to the industry. But, Hofmeister pointed out, there is very little likelihood oil or gas exists in those areas.
“There are a couple of standard messages,” Hofmeister said. “One is, ‘We only have 3 percent of the world’s reserves, so why bother?’ Another is, we’re not using – the industry is not using the leases it has. Well, the industry is pursuing the leases it has. But to be blunt, the prospective nature of many of those leases is very low. And you don’t go drill oil where you know it doesn’t exist. And so, those leases may be turned back to the government.”
According to Hofmeister, the areas with the highest probability are restricted.
“But really, when you think about where is the most prospective future oil finds – it’s most likely the Outer Continental Shelf or federal lands that are off-limits,” Hofmeister said.
A Rasmussen Poll from June reported 67 percent of Americans support drilling offshore [3], but Democratic leaders in Congress oppose it. Hofmeister said he sees that as a disconnect between Congress and voters.
“It’s a mystery to me why people don’t want to take care of the voters that put them in office,” Hofmeister said. “[T]he point I’m trying to make and the reason I’ve moved out of the industry and moved into the not-for-profit, so keep in mind – what I’m doing next has nothing in it for me personally, financially. It has to do with doing what’s right in America.”
Doing what’s right, Hofmeister contends, is “listening to the citizens that are in great pain, making the tough political choices to go after more oil and gas” – in addition to exploring for alternative and renewable sources of energy.