The author John Hofmeister, former President of the Shell Oil Company, provides the reader with a rare insider’s view of the operations, relationships, motivations, and the politics of the U.S. energy industry. He concisely illustrates the current state of not only the oil business, but of the general energy sector as well as the current and future challenges this sector faces. As these challenges are detailed to the reader, it becomes apparent that the “we” in the title represents the energy consuming public, politicians, alternative energy providers, and even the oil companies themselves.
The majority of the author’s points are dependent on his assumption that the U.S. will continue to increase its consumption of energy in the future as the population grows, information technology increases its presence in daily life, and citizens continue to demand higher standards of living. From this assumption, he focuses on the challenges that oil and other energy companies face as they attempt to produce enough energy to meet the increasing demand.
These challenges are detailed through current and historic energy events and policy. For instance, one event/policy frequently discussed throughout the book is the current battle between fossil fuels and alternative energy. Due to the large number of stakeholders involved, many of the challenges confronting the energy industry are reflected in this battle. Basically, with global warming and renewed focus on the environment, many in the public and in politics are seeking to fund and increase the presence of clean energy, while increasingly restricting and even removing fossil fuel sources from the system. The problem with this plan is that approximately 93% of the U.S. current energy supply is derived from fossil fuels, while alternatives account for approximately 2% of current energy supply.
One must wonder why the U.S. is in a situation where the main source of energy is being limited and reduced, while funding for alternatives is increasing even though - as Hofmeister writes - they are not currently able to fully replace fossil fuels or meet additional energy demand. The author provides the following challenges that not only explain a few of the current U.S. energy policy’s characteristics, but also must be overcome to correct the existing policy:
- Both the public and the politicians appear to understand only part of the U.S. energy story. Hofmeister believes that these two groups’ actions on energy policy result from significant misinformation. He blames this misinformation on the large oil companies for not properly reaching out and educating both the politicians and the public. Instead of explaining their stances and actions, the oil companies tend to be very defensive when publicly questioned.
- The two main political parties in congress each appear to support an extreme energy policy. The left is focused on removing carbon based fuels completely and replacing them with alternatives, while the right appears focused on drilling and developing as much of the U.S. energy reserves as possible without consideration for the environment. Hofmeister believes the answer to the energy problem is between the two extremes, which will be hard to achieve as each controlling party normally spends its time reversing significant portions of the policy from the previous controlling party.
- There are nearly 26 subcommittees in congress deciding daily on U.S. energy policy, making it hard for a coordinated and effective energy policy to be implemented.
- Oil and energy companies are very competitive. Furthermore, anti-trust regulations and scrutiny make it nearly impossible for these companies to work together and address industry level obstacles.
- As they strive for reelection, politicians seek near-term oriented results and policy that satisfy their electorate. Meanwhile, energy executives are considering corporate actions five to 20 years down the road. As a result, the two different parties have trouble communicating on energy policy as they are both looking at energy policy from different perspectives and timelines.
- Each individual source of energy lobbies congress for legislation that positively affects its future. Yet, such a system pits the various sources of energy against each other, when in reality, the author believes, they should be working together for the benefit of the sector as a whole and not the benefit of one source.
- The public and politicians seem to be unaware of the trade-offs that come with alternative energy sources as well as the harm they can do to the environment. The author does not believe “clean” energy exists. Regardless, he provides an excellent summary of each energy source’s benefits, drawbacks, and limitations.
- In order for the U.S. to use energy more efficiently the country must better utilize its land management within cities and living areas.
These are just a few of the challenges and issues confronting the energy industry that Hofmeister discusses. While delving deeper into the U.S. energy sector’s challenges, he provides the reader with his solution to these challenges and steps that must be taken to meet future energy demand. Although this book should be read by anyone who is interested in the U.S. energy sector from an insiders’ perspective, Hofmeister’s work greatly benefits those investors who are either new to the U.S. energy sector, or those who do not have a strong grasp on the politics and relationships behind the sector. While not an entirely objective writing, the piece provides enough insights to offset any of the author’s biases.
Disclosure: No positions