Ability of California to attract gasoline volumes from other markets December 2015 Trusted commercial intelligence

Trusted commercial intelligence 2 Los Angeles premium to source markets does not necessarily imply volumes will be drawn to California US dollars per gallon Source: EIA; Argus, Wood Mackenzie

Trusted commercial intelligence 3 Trade flows follow netback price signals with a 4-6 week lag Gasoline in-flows to PADD 5 Source: EIA; Argus, Wood Mackenzie

Trusted commercial intelligence 4 Global gasoline supply/demand balance is tightening due to historically strong demand growth Global gasoline demand growth (thousand barrels per day) Source: IEA, Wood Mackenzie

Trusted commercial intelligence 5 Recent USWC gasoline stock days of coverage declined faster than USEC, another coastal import market Gasoline days of coverage Source: EIA; Wood Mackenzie

Trusted commercial intelligence 6  Price differentials are not enough to indicate when volumes might flow towards California  After accounting for the costs of reaching California, the import opportunity window is fairly limited  Days of coverage have declined, which is consistent with meeting the loss in supply from Torrance  Attracting gasoline from other markets is challenged given the strength of global gasoline demand, which likely continues in California’s supply response to the Torrance upset is consistent with microeconomic principles Key takeaways

Trusted commercial intelligence 7 Harold “Skip” York  Skip York is the Vice President of Integrated Energy in Wood Mackenzie’s America’s Research Team responsible for cross-segment integration of petroleum market issues for North America. With over 20 years of worldwide experience across the energy value chain, he has deep expertise in petroleum market economics and price- setting mechanisms including valuing non-fungible crudes across a number markets and leveraging technologies for competitive advantage. He is a frequent guest on news networks, such as, Bloomberg and CNBC and contributes a blog on He can be followed on  Specializing in strategy and commercial optimization his recent focus is the implication of logistic and refining constraints on market-clearing dynamics and prices for the spectrum of North American crude oils from US tight oil to Canadian oil sands.  Prior to joining Wood Mackenzie, Skip worked for ExxonMobil in a variety of strategic planning assignments. He held roles as the global expert on joint venture negotiation best practices, managing new business development downstream opportunities in Asia Pacific, and leading research teams on studies of the economic impact of large-scale oil investments on the economy of Russia. He also has consulted for clients at McKinsey & Company and Charles River Associates.  Skip holds a PhD Economics from the University of Virginia, as well as, a Masters of Science and Bachelor of Science also in Economics from the University of Wyoming. Vice President – Integrated Energy E T

Trusted commercial intelligence 8 Disclaimer  This report has been prepared by Wood Mackenzie Limited. The report is intended solely for the benefit of delegates attending this forum and its contents and conclusions are confidential and may not be disclosed to any other persons or companies without Wood Mackenzie’s prior written permission.  The opinions expressed in this report are those of Wood Mackenzie. They have been arrived at following careful consideration and enquiry but we do not guarantee their fairness, completeness or accuracy. The opinions, as of this date, are subject to change. We do not accept any liability for your reliance upon them. Strictly Private & Confidential

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