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Shell Oil President Questions Need for New Refineries

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 Company President John Hofmeister told Knight-Ridder.

Shell Oil Company is the US arm of Royal Dutch Shell, and responsible for oil and natural gas production, product refining and marketing and petrochemical manufacturing.

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.

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. (Earlier post.)

[...] 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.

It might be easy to dismiss Hofmeister’s comments as self-serving; if production does not increase, but demand does, then gasoline prices will continue to rise. However, the higher prices rise, the greater the likelihood of radical changes in consumer behavior.

If, on the other hand, new refineries are built, but due to constraints in oil supply prices continue to rise anyway, and demand correspondingly drops, then the oil companies would once again be moved to consolidation—i.e., cutting out some of the excess capacity that they had just invested in to build.

From the company’s point of view, in other words, investing in new refineries only makes sense if (a) demand continues to grow unabated and (b) supplies of low-cost oil to feed those refineries will be plentiful. Shell may have its opinions about (a), but it has data about (b).

Not that Shell or any other company would pass up a low-risk deal—which is what the House bill is trying to serve up.



Unless Shell doesn't feel it will get "it's share" of the government handout on refineries, I can't figure out any reason for them to come out and question the need for new refineries.


Which is more profitable: the hand out from the government or the profits from high priced gas? Building more refineries is not in the best interest for the oil companies. Of course, the oil companies could take the hand out from the government and then come up with another excuse why they can not build new refineries. Gotta keep those billion dollar profits coming in.

Having more refineries does not garantee a reduction of gas prices? It just means there will be more gas to burn.


There is the possiblity that a new refinery would be more energy efficient and cleaner than the old refineries now operating in the US. It's hard to believe that this technology hasn't improved in the last 20 years. Take the money, free land, or whatever build new and better and close the old and inefficient. At the very least a new refinery would have lower maintanence costs.


They are just playing hard to get to try and milk some more money. The fact is the oil companies havnt wanted to waste money on new refineries for a long time because the bottom line is what they have now can be forced to cover thier needs till the end of oil. The other bottom line tho is that it left us open to disaster.

Harvey D

Shell's forcast makes a lot of sense. Higher prices for OIL + foreseeable tax increases (to come closer to those in Europe) could persuate most users to buy more efficient diesels, hybrids and plug-in hybrids to convince national car manufacturers to built more efficient vehicles (cars, VUS, and light-trucks)in the future. The same could happen to heating oil and diesel oil consumption. Domestic thermo-pumps and hybrid trucks and buses could reduce the consumption by 40%. The only good reason to build a new refinery should be to replace an old inneffcient polluting unit. The OIL companies make enough profits to pay for this type of replacement without government subsidies. What is needed is not to relax but strengthen, streamline and rigorously apply refinery high standards. Less OIL & GAS consumption means less pollution and less OIL imports or zero imports within 10 to 15 years. Who doesn't want that? Are additional refineries realy required or will we have surplus refineries to clean up within 5 to 7 years? Could Shell be correct?

Harvey D

Here are a few stats to support Shell's assumption that more refineries in the USA may not be required. Americans and Canadians are by far the biggest users of OIL and Gasoline per capita in the whole world and it is certainly where the introduction of more efficient vehicles while have the biggest effects. If we were to reduce our per capita gasoline consumption to Europe's level, the USA would have a 68% surplus refinery capacity and USA OIL imports could be reduced about 66%. (see stats below)

Gasoline estimated 2004 consumption gallons/per capital

1. USA.......465
2. Canada....329
3. Germany...150
4. Japan.....118
5. Europ.....105
6. Russia.... 55
7. China..... 13
8. India..... 8

PS: 465 gallons of gasoline per person per year in the USA may be too much?

OIL estimated 2004 consumption metric tons/per capita.

1. USA.....3 Tons
2. Canada..3 Tons
3. Japan...2 Tons
4. Europe..1.6 Tons
5. UK......1.4 Tons
6. Lat Am..0.6 Ton
7. East Eu.0.55 Ton
8. Chine...0.15 Ton
9. India...0.10 Ton

PS: Americans and Canadian are certainly big OIL users. It may be about time to convert to hybrid-electric cars to reduce our OIL consumption to 2 Tons per person per year.


Hey Harvey,

Just curious, where did you get those statistics?




Wow, americans really like to burn oil.

i got a link here to support harvey's claim of usa consumption:


European consumption figures are due in part to a highly urbanized population, small countries and lots and lots of rail and bus transport.  The USA has lots of rural area, is very large and has little potential for rail and bus outside of urban areas (suburbia isn't suitable).  In other words, we're not going to reduce per-capita consumption to European levels short of a wholesale collapse.

Bringing per-mile consumption down to (or even below) current European levels is a much more feasible goal in the short to medium term.  Just getting rid of the mega-SUV's would do a lot.


Just what we need... the Government Forcing private comanies to build what the government wants. lame. If people wanted hybrids (or if they were cost effective) they would sell better.

The government's place is not to force private auto companies to sell what the government wants them to sell.

Harvey D

Attention Tripp:
The gasoline, diesel and oil yearly consomption per capital was obtained from national statistics web sites. There may be slight differences between the gross and net consumption in some cases. For USA, the yearly gasoline consomption per capital from 1994 to 2004 varied between 448 and 470 gallons, with 2003 being the worst year at 470 gallons per person. The high consumption per mile per vehicle (specially VUS and 4x4 trucks) seems to be the main reason followed by the distances travelled. Replacing VUS, light trucks and large cars with Hybrids or Plug-in Hybrids could reduce the gasonline consumption by half or more. The use of hybrid buses, hybrid large trucks, electric heat pumps and electric furnaces for dosestic heating could also reduce the consumption of heating/diesel OIL by half. Those two measures could reduce the total OIL consumption in USA and Canada from 3 Metric Ton per year per persons to less than 2 Tons. Clean WIND and SOLAR power could easily supply the extra electricity required. Benefits for the US economy would be simply outstanding but a bit less so for Canada being a net OIL and gas exporter, specially to the USA. However, dirty OIL exports could be replaced by clean WIND power exports for many years to come. People on both sides of the border would be better off.


Peak oil and global warming dictate that it is absurd to provide more refined gasoline. As usual, it is cheaper to conserve than to build additional capacity. Shifting capacity, however, away from the gulf might make sense.

Drive by a refinery sometime. How people can live near refineries is beyond me. And this bill promises to actually relax some of the air pollution standards that are in place. If they're going to build them, suggest they all be built on Bush's ranch. That's the least he can do for America.

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