“In terms of affordability, availability and scalability – methanol and ethanol are the best prospects to [displace oil in transportation] quickly.”
– John Hofmeister, quoted in John Holeywell, “Q&A: He Ran Shell Oil Co. – and He Thinks We Use Too Much Crude,” Houston Chronicle, September 19, 2014.
Milton Friedman once opined: “The two greatest enemies of free enterprise in the United States … have been, on the one hand, my fellow intellectuals and, on the other hand, the business corporations of this country.”
Enter T. Boone Pickens, crony capitalist extraordinaire. Enter John Hofmeister, former president of Shell Oil Co. (2005–2008), the Houston-based U.S. subsidiary of Royal Dutch Shell. [1]
Hofmeister maliciously titled his signature book, Why We Hate the Oil Companies: Straight from an Energy Insider. “We”… ? John, are you speaking for yourself?
His old pitch was all-of-the-above national energy planning (but not drill, baby, drill) with a Federal Energy Board to, somehow, separate energy from politics. [2] His new pitch, as advisory board member of the Fuel Freedom Foundation, is anti-oil and pro biomass and natural gas alternatives.
Hofmeister was interviewed by Ryan Holeywell of the Houston Chronicle in a piece subtitled: “Ex-president of company says in film that America has an addiction to oil enabled by those with vested interests in gasoline.” Hofmeister, forever the publicity seeker, is featured in a new documentary, Pump, described by Holeywell as follows:
The film’s premise is that America is addicted to oil, and that the addiction is fueled by corporations and policymakers with a vested interest in ensuring that gasoline remains the country’s transportation fuel of choice – even though there are viable alternatives, to blend with gasoline or substitute for it. They include ethanol – pure alcohol usually made from corn or sugarcane but also from non-food organic material; methanol, a fuel and chemical building block derived from natural gas and some renewable sources; compressed natural gas; and liquefied natural gas.
In the interview, Hofmeister reaffirms the film’s theme:
Today, when it comes to transportation, there are only three defined legal fuels [by EPA]: gasoline, diesel and ethanol. What we’re trying to promote is methanol as a legal fuel. Methanol sells wholesale for a little over $1 a gallon and can be blended with gasoline, so you’re looking at transportation fuel for under $2 per gallon.
Methanol Follies
Methanol? California tried that during Jerry Brown’s first go-around to abject failure. Remembers California energy expert Tom Tanton (via email to author):
Methanol for transportation was one of the early forays by government into energy market manipulation in California. ‘Alternative fueled’ vehicles seemed like such a good idea, just after the oil embargo, that government had to become involved, lest the market not solve the issue on its own. At least that was the thought of the power elite.
In any event, attempts to force feed methanol vehicles through financial incentives and coercion were too much too soon. Inevitably, issues of fuel system corrosion brought about by methanol’s affinity for water, inefficient methanol production techniques, lack of drivers’ acceptance (more frequent refueling owing to methanol’s lower energy density) and the effective resolution of the embargo all but eliminated the reasons for the programs.
And, at the time most methanol was made from natural gas which was in short supply. Of course, other alternatives quickly took methanol’s place as the favorite.
Tanton concludes:
Nearly forty years after the doomed methanol program, the central tenet lives on…government intervention and picking winners. You’d think by now, we’d have learned that the answer lies in less government intervention and a focus on actual performance metrics rather than specific technologies or fuels.
And with domestic oil and natural gas at all time highs, due to market innovations like hydrofracturing, the drive for alternative fuels seems like a solution in search of a problem…and THAT’s the problem.”
Conclusion
In an interview earlier this year with CNN Politics, Hofmeister complained about being “extorted” by pay-to-play political giving. He continued:
We talk about corruption in Third World countries. In this case, the corrupters have written a law to make it legal to the corruptees. And I consider that atrocious in the name of democracy.
But if Hofmeister really wants to demonetize politics, then he needs to depoliticize business. End cronyism. He can start with ethanol and methanol—and with himself.
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[1] A political scientist by training, Hofmeister (bio here) was named president of Houston-based Shell Oil Company in March 2005 after serving as Group Human Resource Director of the Shell Group in The Hague, The Netherlands. How a HR/PR/policy wonk gets to the head a technical company in a technical industry (not unlike Ken Lay of Enron) is a reflection of the mixed economy, not free-market, consumer-driven capitalism.
[2] In Hofmeister ’s words (Why We Hate…” p. 198): “[T]he nation should … implement deliberate, sound energy supply strategies based on the sources the Federal Energy Resources Board recommends, considering availability, affordability, and environmental sustainability…. A comprehensive and coherent energy supply plan would be created to take into account the nation’s short-, medium-, and long-term energy and environmental future, defined in the years and decades of energy time.”