Gas Prices: Up, Up and Away
ROMANS: Welcome back to AMERICAN MORNING. Right now gas prices are nearing an all-time high and frankly they show no signs of slowing down. Every day this month they've been up. Read it and weep. The national average for a gallon of regular unleaded gas is now $3.81. That's up $0.25 in a month and nearly a dollar since a year ago. In some come cities it's already over $4. Where will it go? We got the right man to ask among other things, and let's talk to him, Marvin Odum is the president of Shell Oil Company and joins us live from Houston this morning. Welcome to the program.</s>MARVIN ODUM, PRESIDENT, SHELL OIL: Good to see you, Christine.</s>ROMANS: All right. So is it going to cost me 51 bucks to fill up the minivan in the next few weeks or is this the worst? Tell me why oil prices which keep going up and gas prices which keep going up are up so much. You run an oil company. Why are they up so much?</s>ODUM: That's an interesting question because there's adequate supply of oil in the market, so that actually hasn't changed very much, how much supply relative to the demand. What's happening with the price is that those that buy volumes of oil around the world are looking at all the risks that they see. They see the disruption in the Middle East. They think about, you know, with economies in the Far East recovering and more demand in the near future, they're accounting for that risk in the price. So that's what we're seeing. And what we have to do is find ways to address the longer term picture for oil and other types of energy so that we can be sure we meet demand. That will bring it back to a normal price.</s>ROMANS: So addressing that, is that relying less on foreign oil, is that energy efficiency? Is that new kinds of technologies? How do you address that?</s>ODUM: Well, it's yes, yes, yes, and yes. So I mean in the near term, meaning when I say near term, because I have to define my time scale, I'm talking about several decades.</s>ROMANS: Right.</s>ODUM: I mean there's going to be a tremendous amount of oil needed around the world, much more than we have today. I mean, think about energy demand around this globe, potentially doubling between now and the middle of the century, so oil will be a big part of that well into the future. But so will natural gas. And if you think about North America, the natural gas that's been found over the last couple of years has actually completely changed the energy picture and the energy security, if you will, for the United States. It's a huge opportunity for us.</s>ROMANS: We talk about some of the big fast growing middle classes in Brazil, Russia, India, China, all of these big countries, they're all going to be consuming more even as the U.S. is still the biggest consumer of oil. So oil is still the biggest game in town but you're talking about some of these other energy streams, if you will. I know you guys are involved in this eco-marathon going on right now. Tell me about that. Because this is interesting, this is where you're getting these teams of kids basically to go as far as they can on the least amount of oil. Tell me about it.</s>ODUM: Right. So this actually goes back to your first question. This is one way to address that over time, because we're going to need significant efficiency gains in energy usage as we go forward. And so what we do is we sponsor this event called the Shell Eco Marathon where we bring together literally in this case today, nearly a thousand students who have designed, built and now will actually race their vehicles in a controlled setting to see how far they can go on a certain quantity of fuel. And we leave the boundaries pretty wide open here because this is all about innovation and coming up with new ideas to be more efficient. So they can use gasoline, they can use diesel. We have cars that can use solar, hydrogen, plug-in hybrids, they have all different types of models. What we're looking for, though, are those innovative breakthroughs that can ultimately be applied to the larger transportation system.</s>ROMANS: Let me ask you a little bit -- we're talking about budgets lately and how we're going to get our fiscal house in order. President Obama has said he wants to end subsidies for oil companies. It's something that liberals and progressives say a lot, that if the government could save billions of dollars a year in an industry that makes an awful lot of money, meaning the energy industry seems to make money whether oil prices are going up or going down, and have made a trillion dollars over the past decade and a half or so, what about oil industry subsidies -- subsidies for big oil, is this the right place to be looking for federal revenue?</s>ODUM: Well, I think as someone who follows business like you do, you know that we go through pretty steep business cycles where times are good and times are not so good. So we see that same cycle as consumers do and other businesses do. But I think the way to look at this is, just making sure that there's adequate supply there in the market and doing everything we can to make sure that it's there. On the subsidy question, I think this is where we need to have a serious conversation of where does the revenue flow from this industry come from as it goes into the government and where it really comes from? The big money comes from royalties and bonuses that we pay as we buy new leases. So let me give you an example. In Alaska where we bought a number of leases to drill offshore, we have some independent studies there that show that pursuing those projects would create something on the order of 50,000 jobs in the U.S. and it would result in something like 140 or more billion dollars of revenue flow into the federal government. So finding ways to develop more of our own energy --</s>ROMANS: Right.</s>ODUM: -- producing our own oil and gas is the way to get more revenue into the government.</s>ROMANS: I tell you though the top five oil companies turning combined profit of a trillion dollars since 2000 and this -- in this political climate it's going to be hard to convince taxpayers that they should be -- that the energy industry shouldn't be sharing some of the belt tightening. Are you prepared for that fight? There's going to be a political fight over this.</s>ODUM: Well, I think certainly we look at that. I mean we get asked this question and we face this question all around the world. And actually how capital gets allocated around the world for investment has a lot to do with one of the overall economics of a certain country looks like and part of that is tax rate and other revenues of the government. But think about what we do with the money that we bring in. I mean Shell is investing on the order of $25 to $27 billion a year in new energy projects. Energy that the world is going to need. So that revenue cycle where the cash comes in and gets reinvested is critically important.</s>ROMANS: Marvin Odum, let's leave it there. President of Shell Oil Company, thanks so much for your time this morning. Very early in Houston, thank you, sir. Kiran and Ali.</s>VELSHI: Just ahead on AMERICAN MORNING, the badly damaged nuclear power plant in Japan is now ordered to pay up. How much people who were forced to flee, how much are they going to get?</s>CHETRY: Also, the last place you want to be if you spend the entire spring sneezing. Some of the worst cities for allergy sufferers. We'll break them down, coming up. Forty-three minutes past the hour.