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Shell's message: conserve and produce on Astini News

Improving energy conservation and developing additional supplies are the key to relieving high crude prices that are driving up the cost of gasoline, Shell Oil Co. President Marvin Odum said Friday.

Odum, the top U.S. executive for Netherlands-based Royal Dutch Shell, spoke with the Chronicle during an appearance at the Shell-sponsored EcoMarathon. At the annual event in Houston, teams of high school and college students compete to build the most environmentally friendly vehicles.

Much of the public debate over gasoline prices has involved oil company taxes and what measures the government can take to control prices at the pump, but Odum suggested other matters are more significant.

"We think all the focus on that is actually the wrong discussion," Odum said. "The world oil price is set outside of these companies. The question that high gasoline prices in the U.S. ought to raise is how do we impact the amount we use and how do we impact the amount we make ourselves - that is exactly where the conversation ought to go."

Odum said that long-term price solutions will come from conservation, such as vehicle fuel efficiency standards, and from further development of U.S. energy resources, including expanded exploration in the Gulf of Mexico and the Arctic.

Long-term problem

Crude priced at more than $100 a barrel may seem beneficial to the companies that sell it, Odum said, but moderation in price would be of longer-term benefit.

"The idea of prices going high to the point they start to impact the economic recovery, or they start to destroy demand for the product, is not a good thing," Odum said.

Energy revolution?

Turning to an opposite price issue, Odum said the low price of natural gas might cause some short-term pain for Shell but could fuel a manufacturing revolution in the U.S.

Natural gas was down 2.3 cents to $2.13 per million British thermal units in trading Friday on the New York Mercantile Exchange - its lowest close in more than 10 years.

"We have gone from the standpoint of thinking we were going to import to keep our systems going to being able to export, if we choose to do so, we have discovered so much," Odum said.

Odum said that an important next step should be to develop a national energy plan, to better guide how natural gas could supplement oil as a transportation fuel.

That use is limited now by lack of natural gas fueling infrastructure and by shortages of pipeline, storage and refining capacity.

Communication crucial

Shell received regulatory approval earlier this week for its oil response drilling plans for Alaska's Beaufort Sea, which Odum said means drilling could begin as early as July. Earlier this year, regulators approved Shell's drilling plan for the Chukchi Sea.

Before it can begin drilling, however, the company will need permits for specific wells and an air emissions permit.

"We have seen a steady stream of approval of permits," said Odum. "We attribute this to a lot of hard work and a lot of communication back and forth with the regulators on what we want to do and how we propose to do it in partnership with the regulators."

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