1. 1 The Fuel Price Dilemma Oil Price Developments: the Supply and Demand Balance presented by Mr. Mohammad Alipour-Jeddi Head, Petroleum Market Analysis Department Organization of the Petroleum Exporting Countries IRU General Assembly Geneva 5 November 2004

2. 2 OPEC Reference Basket Price (US$ / b)

3. 3 World economic growth in percent (%) and values (billion US$) Level of GDP in PPP terms (base 1995)

4. 4 World oil demand growth (%) * Estimated ** Projected

5. 5 Major contributors to the growth in oil demand * Estimated, ** Projected

6. 6 China has became the second largest oil consumer Oil demand, mb/d Oil demand, barrels per capita per year

7. 7 World oil supply year-on-year change (mb/d) * Estimated, ** Projected

8. 8 Where Non-OPEC supply comes from y ear-on-year change (mb/d) Russia * Estimated, ** Projected

9. 9 OPEC crude oil production, 2003-2004 (based on secondary sources, mb/d) Quota for OPEC-10

10. 10 OPEC Reference Basket v.s WTI (US$/b) 2004

11. 11 Inventories are an indicator of prices (in a balanced market) “a-b” Non-OPEC Supply (b) Demand (a) OPEC Production + Stock Change Downward pressure on prices Upward pressure on prices Higher than typical Lower than typical

12. 12 OECD Commercial Oil Stocks are on the rise (mb)

13. 13 US commercial crude oil stocks vs. WTI (weekly, 1994 – 2004) US commercial crude oil stocks vs. WTI (weekly, 1994 – 2004) Recent observed stocks-price relationship does not fit into historical trend.

14. 14 What Other Factors Might Be Affecting the Prices Limited spare capacity in OPEC Refinery bottlenecks Need for more light sweet crudes Political tensions/unexpected events Speculators

15. 15 OPEC crude oil production (based on secondary sources) & spare capacity OPEC crude oil production (based on secondary sources) & spare capacity

16. 16 Increasing tightness in world refinery capacity

17. 17 Widening price differentials (US $/b)

18. 18 Possible factors affecting prices Supply/demand balance (Stocks change) Refinery capacity constraints Need for more light sweet crudes Market Fundamentals Political tensions/unexpected events Speculators amplify the weight of each factor

19. 19 Looking to the future Global economic growth:  China is also expected to grow at a lower pace of 7.7% in 2005 compared to 9.1% in 2004.  The world economy is expected to grow by 4.1% in 2005 compared to 4.9% estimated for 2004. Oil demand growth:  Due to lower economic growth and the possible effect that price levels could have on consumption, demand in 2005 is projected to increase by 1.6 mb/d vs. 2.6 mb/d in 2005.  Strong incremental demand in China is projected to slow down in 2005. World oil supply:  Non-OPEC supply is expected to grow at 1.2 mb/d, with half of this increase coming from FSU (Russia).

20. 20 Looking to the future Fundamentals should be sufficient to ease pressure on prices. However, tightening capacity in downstream will be a major factor supporting high crude values. For this reason, timely investment in the downstream sector is needed to loosen capacity constraints, especially to increase refiners’ flexibility in processing heavy crudes. In addition to geopolitical factors, speculative activity in the futures markets will continue to have an increasing impact on oil prices and should be addressed.

21. 21 World energy mix (%)

22. 22 Annual global growth in oil demand by sector ( million barrels of oil equivalent a day)

23. 23 Unleaded gasoline prices and taxes (August 2004)

24. 24