Oil isn't the only game at Shell

A Shell Oil executive says the push for more ethanol doesn't necessarily have to involve claiming more corn production for fuel.
John Hofmeister
David Joles, Star Tribune
Oil Co. is betting on the success of ethanol, but not on corn as the chief resource for making it. Instead, Shell is investing in research on making the gasoline additive from wood chips, straw and municipal waste, John Hofmeister, the company's president, said Tuesday on a visit to Minneapolis. One day, he said, ethanol could replace 5 percent to 10 percent of all gasoline consumed in the United States. Corn-fed ethanol plants are springing up across Minnesota and the nation -- raising hopes for a future of renewable energy, but more immediately raising the price of corn. And Hofmeister, on a 50-city speaking tour, said Shell is wary of contributing to an increase in corn prices in the process of pursuing alternative fuel. Ø
"Last year, Shell was investigated by 48 attorneys general on price gouging," he said. "We're already accused of high gas prices. Please, let's don't also accuse us of high food prices."
The run-up in corn prices, while good news for growers, has raised alarms among food processors. Corn is a staple of cereals and baked goods and corn syrup is used as a sweetener in everything from snack foods to soda.
The corn-based ethanol already in use has cost more than a gallon of gasoline for nine of the last 11 months, Hofmeister noted in an interview before his speech to the Minneapolis Regional Chamber of Commerce. "And that's after government ethanol subsidies of 51 cents a gallon," he added.
To Shell's researchers, making ethanol out of wood chips, straw and garbage -- stuff no one wants -- makes more sense than tapping a commodity that already has a long line of customers.
"We're not against corn-based ethanol," he said. "In fact, we're one of the world's largest distributors of corn- and sugar-based ethanol. But we do believe that, over time, there will not be sufficient supply."
Hofmeister acknowledged that Shell's gamble on alternative fuels is a small one. This year, the company's capital spending budget totals more than $19 billion, with only about $200 million going to alternative fuel research. What's more, Shell's research on alternative energy is spread wide -- from wind and solar power to hydrogen fuel cells plus efforts to transform coal into natural gas and to extract oil from tar sands and shale stone.
Why doesn't the company spend more money on such research?
It's not that it fears going out of business in a decade or two, Hofmeister said. For generations to come, he said, fossil fuels will provide the bulk of the world's energy.
But advancing new technology is a slow process, with scientific breakthroughs having to be balanced against public demand that alternative fuels be priced near, if not below, the cost of oil, Hofmeister said.
His 50-city swing comes at a time when he admits the oil industry has "zero credibility with many Americans," but while he still drums for the government to allow more drilling offshore and on government lands, he adds that Shell is in agreement with public sentiment on one issue: The company has broken ranks with some others in the oil industry and no longer questions the need for curbing greenhouse gas emissions.
"For Shell, the debate is over on global warming," he said.