On June 6, Chevron CEO David O'Reilly spoke to the Commonwealth Club at the Fairmont Hotel in San Francisco about energy security, energy policy, and alternative energy sources.
"America is at a crossroads when it comes to energy," the Chevron head told more than 100 members of the Commonwealth Club.
Using California as an example, O'Reilly said that in 1910, California accounted for 25 percent of the world's oil production. By 1985, California produced only 60 percent of the oil it consumed and the rest came from Alaska. By 2005, 40 percent of California's oil was imported.
"Energy security policy has to include an open discussion of increased access to domestic energy supplies." O'Reilly shared findings in the Gulf of Mexico and estimated that the "high end" of Gulf of Mexico oil reserved "is equivalent of 50 percent of America's current oil reserve."
Deflecting environmental concerns, Mr. O'Reilly said that "Advances that we made in technology has enabled energy production and environmental protection to co-exist." He said that Hurricane Katrina struck a refinery condensed area yet there was no environmental contamination incidence. He further advocated that "21st Century (energy) policies should reflect these capabilities."
On energy efficiency, Mr. O'Reilly said that "Energy efficiency is the cheapest and most plentiful of energy that we have. California is a proven energy leader in energy efficiency." He quoted a new study by McKinsey & Company that by using existing technology, the world could effectively reduce energy use by 30 percent by the year 2020 without compromising economic growth.
Talking about new energy sources, O'Reilly confirmed that Chevron supports the national goal of E10 or 10 percent of ethanol on average per gallon of gasoline.
"E10 can be accommodated without having to redesign engines. It can be accommodated to a large extent in the existing distribution system. It's economically and technologically achievable by the time the next generation of bio-fuel is developed."
He is against any aggressive plans. "Getting beyond E10 will be a challenge," the Chevron CEO said. "That will impact the price of corn product ranging from cereal to meat to poultry. Increasing production of ethanol will further strain the food supply and food prices. So the real problem and real challenge of bio-fuel is to develop technology where non-food resources are used to make ethanol. This will liberate us from the food versus fuel debate."
In May this year, the Rome-based U.N. Food and Agriculture Organization also concluded that bio-fuels like ethanol can help reduce global warming and create jobs for the rural poor, but the benefits may be offset by serious environmental problems and increased food prices for the hungry.
Talking about the climate change, O'Reilly praised that "California is at the forefront of the climate change debate and has set up an ambitious goal of reducing greenhouse gas emissions." However, he warned: "Ultimately, we cannot solve this problem at the state and local level. Meaningful advances in the discussion of climate change require a national framework that is rational, cost effective, and flexible." He suggested that voluntary reduction of greenhouse gas emissions could place the State at a competitive disadvantage.
Mr. O'Reilly was not thrilled by California's slow process in approving refinery expansion projects. Chevron's Richmond Refinery filed an application to expand refinery capacity two years ago. It has yet to receive the environment impact report. Even if it gets approval from the State, an additional three years are needed to build the facility. The entire process will take more than five years. "California seems to welcome the benefits of affordable and reliable energy without necessarily having to take the hard steps necessary to secure it."
Outside of the Fairmont Hotel, a group of protesters had large displays of banners and passed out pamphlets on the oil contamination that Chevron subsidiary Texaco left in the Ecuadorian Amazon. It demanded that Chevron compensate local communities for health and environmental impacts.
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