OIL INDUSTRY Exec foresees demand drop

The House OK'd legislation for refinery expansion.
KNIGHT RIDDER NEWSPAPERS
WASHINGTON -- Consumer preferences for higher-mileage vehicles may 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 Co. President John Hofmeister said Friday.
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 -- may be flawed.
Hofmeister said the growing consumer demand for cars and trucks that get better gas mileage may 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. Shell is the U.S. arm of Royal Dutch Shell, one of the world's largest private oil companies.
Refinery legislation
On Friday, 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. The measure is driven by concerns that the nation's refining capacity is insufficient.
Similar legislation will be debated soon in the Senate.
No new U.S. refineries have been built since 1976. U.S. refinery capacity stood at 17.9 million barrels per day in 1981 but stands near 17.1 million barrels per day now.
American refineries have been running flat out but have been unable to keep up with U.S. oil consumption, which is nearly 21 million barrels per day. Growing gasoline imports bridge the production gap.
Hurricane damages
Hurricanes Katrina and Rita damaged Gulf Coast refineries -- which account for about 47 percent of the nation's refining capacity -- and crippled about 15 percent of capacity.
Production and supply disruptions sent gasoline prices soaring to all-time highs in September, and lawmakers scurrying to propose emergency legislation that would spur building of more refineries to ease the nation's capacity crunch.
President Bush repeated Tuesday during a news conference that America needs more refineries, but he isn't saying just how many.
"Look, the Bush administration is not going to come up with a number. I can tell you what my view is, and I'd like to have another 10 percent of capacity today," Energy Secretary Samuel Bodman told Knight Ridder Newspapers when pressed for specifics on Wednesday.
"But that could come either abroad or could come here, but I would like to have something that, in a better world, would relieve some of the pressure on these facilities," he said.