1. Crude Oil: Should export policy be liberalized? Presented at: Conference of Western Attorneys General Energy Exports Summit Jamie Webster May 2015

2. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 1 st Tipping Point: return of Libyan production brought fundamentals back into focus 2 Contango (upward sloping forward curve) indicates loose market Backwardation (downward sloping forward curve) indicates tight market

3. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 2 nd Tipping Point: Saudi Arabia stepped back from being the market balancer to guard market share 3 OPEC’s roll-over of production reflects a willingness to incur short-term pain to let market find the weak producers.

4. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 4 US Crude Production Outlook Great Revival creating a surge of production reversing decades of decline Most growth is Light Tight Oil (LTO, a light sweet crude quality). Base case peak of 11.2 million B/D and Potential case peak of 14.3 million B/D Up from 9.2 million B/D currently and 5.0 million B/D in 2008 Forecast Assumes Free Trade

5. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 5 Trade Impacts Export of crude oil would significantly improve petroleum trade. Average reduction of $67B and $93B for Base and Potential cases, respectively Enhanced energy security Export trade destinations Europe (displacing Africa and Russia) Asia (reduce Middle East production)

6. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 6 Refining Constraint for LTO Tier 1 – Displace light sweet crude imports ($2 – 4/Barrel) ($1 – 2/Barrel) ($0.5 – 1.0/Barrel) ($8 – 18+/Barrel)

7. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 7 The system is stretching to accommodate

8. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. What is the crude oil supply chain? A vast and interconnected network of labor, commodities, technologies, and information services Symbiotic relationship – supply chain has aided in technology and productivity gains Creates high multiplier affect 8

9. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. Job gains are present in nearly every congressional district due in large part to supply chain 9

10. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 10 Gasoline Price Response to Additional Production

11. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 11 Gasoline Price US gasoline prices most directly influenced by global price. Lower gasoline price as result of free trade (8-12 cents per gallon). Diesel provides similar results. Consumer fuel savings of $265-$418 billion over 2016-2030.

12. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. Saudi production management Potential for a historic shift in oil market to a real free market US unconventional has features to allow this to occur High oil prices Low oil prices Broad OPEC cut IEA stock release Demand increases/conventional production slowdown Demand decreases (OECD ) Global slowdown Saudi production management IEA stock release Demand increases/conventional production slowdown Demand decreases (OECD?) Global slowdown Broad OPEC cut Shale oil production change Shale oil more responsive to price than historic production Current/historic oil market balancers Future oil market balancers Abandoned for now 12

13. © 2015, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 13