Recently, Chevron‘s Chief Executive Officer John S. Watson spoke at the Center for Strategic and International Studies and addressed the issue of whether the current boom in the oil and gas industry could serve as an opportunity for sensible energy policy reforms by the federal government. His suggestions included reforming the federal tax code, increasing access to public lands, and more rational environmental policies.
In terms of environmental policies, Mr. Watson pointed out that these policies must be transparent and honest, discussing the controversial Renewable Fuel Standard which currently requires biofuels that can’t yet be produced. As far as the future of biofuels, he told the CSIS that, “We haven’t cracked the code yet, but we’re working on it. Renewables have their place, and they will grow. But right now, $500 billion of subsidies support them around the world. We have to make them affordable.” Mr. Watson also touched on carbon emissions on an international level, saying that wealthier economies might withstand the higher prices from carbon taxes by increasing efficiency, but this will not work with emerging economies, noting “[g]overnments want to feed and shelter their people, so their carbon use will grow.”
Mr. Watson also spoke optimistically about the energy industry as a whole, on a global scale. He said that right now, there are unprecedented opportunities to produce many different kinds of energy products, but it was crucial to have appropriate commercial terms and physical security. He said that Chevron’s key to working in countries around the world, in some cases for many decades, is sensitivity to the host government and to each country’s needs. He praised American companies like Chevron who are exploring and producing around the world, for their advanced technology and skills, but also for American values that Chevron tries to embody, such as environmental awareness, respect for the rule of law and transparency.
Mr. Watson discussed Chevron’s liquefied natural gas (LNG) production. Chevron has focused primarily on Australia in this area, and has invested $45 billion in two projects there. He is hopeful for future returns, although he acknowledged that these projects sometimes take 15 to 20 years to fully mature. He hopes to see more LNG exports, because LNG will likely replace coal in power generation, but infrastructure to transport LNG needs to be improved. He said, “It’s the right thing to do. We expect North American gas prices to rise a little, but it will be affordable over time.”
Mr. Watson’s pragmatic and thoughtful remarks are a welcome addition to the discussion of national energy policy. He makes sensible suggestions about ways the federal government could earn more revenue while supporting rational energy policies at the same time. Any practical discourse on this issue, backed up by real ideas and suggestions, is sorely needed in lieu of the partisan and alarmist bickering that has been taking place in Washington.
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