• With: John Hofmeister

    This is a rush transcript from "Your World," December 27, 2013. This copy may not be in its final form and may be updated.

    ERIC BOLLING, GUEST HOST: U.S. daily oil production is surging, now on track for its biggest one-year jump ever.

    And, as the nation gets closer to energy independence, John Hofmeister says bring on the pipeline and bring it now. John is the former president of Shell Oil.

    You were talking about the Keystone pipeline, right, John?

    JOHN HOFMEISTER, FORMER CEO, SHELL: The Keystone XL.

    We have been waiting five years for a decision, Eric. I would think that one or two years, you could understand, but five years for a decision from the president, who has to make the decision, and the person who really wants to build infrastructure? We have been hearing about infrastructure build-out for years. Why can't we make a decision on the Keystone XL pipeline, except it is tied up in politics, unfortunately?

    BOLLING: John, I spent 18 years in the oil business, as you well know.

    Here's my issue, though. We're -- we are producing more oil than we ever have before. We are on our way to energy independence, thanks to national gas, thanks to fracking and whatnot. But will bringing more Canadian oil into America do a darn thing for our price of gasoline?

    HOFMEISTER: No, because oil is traded globally. And whether it's produced in Canada or produced in Saudi Arabia, it is sold to the bigger world out there. And that kind of sets the price, except that the more you have energy independence regionally, the more you can take advantage of offsets on price.

    So, OPEC might try to set a global price, but there are regional differences. For example, West Texas Intermediate is about $10, $11 cheaper than Brent crude oil. And so that is a way in which the more local we can produce our natural resources, the more affordable they become over time.

    BOLLING: Yes, John, I'm trying to be fair and balanced here, because -- and I kind of know better. Here's my problem.

    So all this oil is going to come in, this Canadian oil. It's going to go through the various parts of America. It's going to end up in the Houston area, in the metropolitan area, where a lot of the refining capacity for America sits.

    And is there enough refining capacity in that area to handle any more oil? And the reason why I ask that is, are we just going to end up with the oil glut with the inability to refine it?

    HOFMEISTER: No, I don't think so.

    When I was still Shell president, I signed a doubling of the capacity of, for example, a refinery in East Texas, in Port Arthur, Texas, to go from, say, 300,000 barrels a day to over 600,000 barrels a day.

    Other refineries, Valero, et cetera, have also increased their capacity, in anticipation of the pipeline. The reason you are not hearing about refinery expansions is they were done five years ago, Eric, to take up the proposed XL pipeline at that time. So the capacity is still there.

    BOLLING: But, John, is that accurate, though? If there is refining capacity and we're having more and more oil available, why are we still paying $3.25, $3.30 over here on the corner of 48th street for a gallon of gas?

    HOFMEISTER: Well, the reason is that we have got this OPEC price ceiling that gets set, and everything is gauged off of that.

    Now, it is a good question, but as long as we are solely dependent upon oil and we don't have substitute fuels, for example, natural gas as a transportation fuel, if we could have other than oil to enter the blend of fuels that we choose from...

    BOLLING: Right.

    HOFMEISTER: ... you could see a dramatic decrease in the price of oil.

    BOLLING: Hof, Hof, I got to leave it there.

    HOFMEISTER: OK.

    BOLLING: John Hofmeister, always great talking to you, sir. Thank you very much.

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