1. The Balancing Act: Perspectives of the Global and Domestic Oil Markets Frederick J. Lawrence Vice President - Economics and International Affairs

2. Alien Vs. Predator Demand appears to be driving Fundamentals in a Tight Market – is it Sustainable? Global Economy, Asia Growth Components & More? World demand up an estimated 2.7 Mmb/d (3.4%) US demand up 460,000 b/d (2.4%) & China demand up an estimated 860,000 b/d (16.5%) in 2004. + Supply Reacts to Demand and Price but hitting Capacity limitations OPEC & Non-OPEC Potential – Market Share vs. Reserves Spare Capacity & Just in Time Behavior – narrow the gap Energy Security, Interdependence & Diversification – growing connectivity between foreign and domestic policy = INCREASED VOLATILITY & FEAR FACTOR

4. Where is the incremental demand coming from by region?

5. Demand is breaking out and were en route to 90 Mmb/d QUARTERLY AVERAGEYEARLY AVERAGE

6. China – Growth Spurt

7. China will continue to be a big part of the demand story.

8. Dont discount growth in the rest of Asia – especially India

9. UN Perspectives on Sustainability

10. Global Population Surge

11. Demand Bites

12. Projected Global Petroleum Demand

13. Proved Oil Reserves – Not Created Equal

14. Supply is also adapting to a new threshold but can it be maintained?

15. Comparative Oil Production

16. OPEC is building capacity and trying to manage production based on demand.

17. Non-OPEC has captured market share but sustainability in question.

18. Former Soviet Union Dominates Non-OPEC Supply Gain

19. Pragmatic Oil Diplomacy

20. Projected Source of Global Conventional Oil Supply

21. The Wrong Cow is Getting Fat

22. U.S. Energy Shares (2003)

23. U.S. Petroleum Balance

24. U.S. Petroleum Consumption

25. U.S. Import Sensitivity by Region (2003)

26. Domestic Crude Production

27. Where Does Our Energy Come From? 2003 Wells Drilled = Gas = CBM = Horizontal = Oil = Dry

28. Where is Our Energy Used?

29. Vermont Energy – where a woodchuck could chop wood

30. Producing 18 Quads of Energy Per Year Biomass

31. Percentage of US Congressmen from Selected States Voting for Energy Issues

32. Volatility at Work (1986-2004)

34. U.S. Oil Deficit

35. Refinery Situation

36. Demand calls shots until proven differently Market volatility looks sustainable Integrative solutions needed There will be a sequel Demand calls shots until proven differently Market volatility looks sustainable Integrative solutions needed There will be a sequel Conclusion