1. Beyond The Gas Pump Energy From Oil & Gas Oil at $100 a barrel

2. Historical Energy Use by Type of Fuel (%) SPE 77506 – World Energy Beyond 2050, Arlie Skov

3. Significant Global Energy Events OPEC Sets 55 percent Minimum Tax Rate (1970) U.S. Institutes Price Controls (1971) Arab Oil Embargo Against U.S. (1973) EPCA Authorizes Strategic Petroleum Reserve (1975) Windfall Profits Tax (1980) Iran/Iraq War – Oil Prices Doubled (1978-1980) World Oil Glut - $29 BBL Oil – U.S. Synfuels Shutdown (1983) Chernobyl Nuclear Accident (1986) Alaska’s Prudhoe Bay Production Peaks (1988) Iraq Invades Kuwait – Prices Soar ($36 BBL) (1990) Clean Air Act – Changes Gasoline & Diesel Fuels (1990) U.S. Imports More Oil & Refined Product Than It Produces (1993) Asian Financial Crisis – Oil Prices Plummet (1997-1998) German Government/Utilities Agree to Phase Out of Nuclear Power (2000) U.S. Petroleum Consumption – All Time High (19.7 Million BPD) (2001) Terrorist Attacks on the U.S. (2001) 1970 2001 1983

4. Recent Global Energy Events Foreign Oil Dependence Rises to 65 percent (2004) Northeast Blackout Leaves 50 Million People in the Dark Natural Gas Prices Triple from 1990 Levels Oil Passes $50/Barrel Gasoline Exceeds $3/Gallon Hurricanes Damage Oil/Gas Rigs Venezuela Moves to Nationalize Resources Oil Breaks $75/Barrel Nigeria Kidnaps Oil Workers Experts State Oil Production May Have Peaked Iran Threatens Nuclear Capabilities Chad Orders Chevron to Leave BP Forced to Repair Pipeline Leaks China Extends Credit to Oil Nations Iran, Russia, Others Discuss Gas OPEC Texas Utilities Cancel 8 of 11 Coal Plants Oil Breaks $83/Barrel $100.00 bbl OIL FEB. 2008 2004 2007 2005

5. U.S Energy Supply Sources

6. World Energy Supply

7. Renewable Energy Wood 35%, Hydro, Wind 45%& Grain 15%

8. Distribution of proved (oil) reserves 1986, 1996 and 2006

9. Just Over The Horizon… Forecasting Oil & Gas Supply WSJ 7-10-07, “The industrialized world’s energy watchdog added to rising concerns in some quarters that oil and natural gas production won’t keep up with the world’s growing thirst for energy in coming years, highlighting worries over supplies and prices.” (Referencing the recently published International Energy Agency “Oil Market Report” )

10. A Significant Challenge A SURGE: The surge in demand is expected to arise from rapid economic growth in such fast- developing countries as China and India, as well as mounting consumption in the U.S., the world's biggest energy market.” –Comments from the National Petroleum Council’s Draft Report, “Facing Hard Truths about Energy”, Bhushan Bahree, The Wall Street Journal 7-17-07

11. “Our Energy Future” Significant Issues of Interest/Importance Enhancing The World’s Standard of Living Alternative Fuels / Sources & Economics Environmental Impact Issues Consumption - Improving Energy Efficiency Fueling The World’s Economic Growth Supply Challenge – Fueling Economic Growth Geo-politics

12. Commodities – Price & Value Commodity Savy?? NYMEX Closing Prices 2/16/2008 –West Texas Intermediate Crude ($/bbl) –Natural Gas ($/Mcf) Volumes –1 Barrel = 42 gallons = 672 cups –1 Mcf = 1000 Std. Cubic Feet @ Standard Temp (60F), Pressure (1atm) Just for fun! –Grande Latte @ $3.50 (est. = 2 cups) –1 Barrel “Latte” = 672/2 *$3.50 = $1176 –1 Barrel of WTI = $99.15, 1 cup of WTI = $0.14 –Energy contained in 1 cup of crude oil? Assume avg. Car Mileage 25 mpg... Equivalent of 1.6 miles/cup Oil = $99.15/bbl Gas = $6.38/mcf

13. Chemical Composition of Hydrocarbons Crude Oil 84-87%11-14%0.06-2%0.1-2%0.1-2% Natural Gas 65 – 80% 1-25%0-0.2%1-15%0% CarbonHydrogenSulfurNitrogenOxygen

14. Petroleum Products Gasoline - 19.5 gallons A Barrel of Crude Oil Provides: Fuel Oil - 9.2 gallons Jet Fuel - 4.1 gallons Asphalt - 2.3 gallons Kerosene - 0.2 gallons Lubricants - 0.5 gallons Petrochemicals, other products - 6.2 gallons One Barrel = 42 gallons American Petroleum Institute, 2008

15. Petroleum Products Raw Natural Gas Components - Example Source: Midstream Primer: Oil & Gas Investor, July 2007 Oil & Gas Investor, July 2007

16. Petrochemical Products Detergents - CosmeticsDetergents - Cosmetics Fertilizers - Weed KillersFertilizers - Weed Killers Medicine - Antiseptics - AnestheticsMedicine - Antiseptics - Anesthetics Plastics - Synthetic FibersPlastics - Synthetic Fibers Synthetic RubberSynthetic Rubber Rust PreventativesRust Preventatives Liquid Petroleum GasLiquid Petroleum Gas American Petroleum Institute, 2008 More Than 3,000 Products

17. Historical Oil Prices – 2007 $ Real Oil Prices* Source:BP

18. Why High Oil Prices? Driven by: –OPEC behaviour post 1999 –Strong demand growth 2004 –Low spare capacity –Geopolitics –Energy as a financial commodity Mb/d World Oil Consumption Growth Source:BP

19. OPEC Production

21. Supply & Demand Airline tickets Stocks Real Estate I-Phone In a free market – commodity prices are driven by the balance between supply and demand – For hydrocarbon fuels (oil and gas) the price equation is becoming evermore dominated by “supply” related challenges.

22. Oil & Gas Supply –Where did my last gallon of gas come from? –OPEC The politics of oil Control by NOC’s –Geopolitics US –Exploration –Refinery Capacity Weather

23. World Energy Consumption BP Statistical Review of World Energy – December 2007

24. Oil Consumption BP Statistical Review of World Energy – Jan. 2008

25. Major oil trade movements BP Statistical Review of World Energy – Jan 2008

26. Proved oil reserves at end 2006 BP Statistical Review of World Energy Dec. 2007

27. Remaining Oil?? BP Statistical Review of World Energy Dec. 2007

28. Proved Natural Gas Reserves BP Statistical Review of World Energy – Dec. 2007

29. Proved Coal Reserves 2006 BP Statistical Review of World Energy –Dec. 2007

30. Demand Challenge One Example - Fuel Economy Overall fuel economy for cars and light trucks peaked at 22.1 mpg in 1987. Fell to 20.8 mpg in 2004. Avg. weight of vehicles has increased from 3200 lbs. to 4066 lbs. Federal tax on gasoline = 18.4 cents/gallon State tax varies (New York 60.8 to Alaska 26.4) About 70% of new vehicles purchased in US have 6 cylinders + 89% of vehicles in Europe have 4 cylinders or less (average fuel economy is 35 mpg) Wall Street Journal – “Fuel Economy Back in The Saddle”

31. A Sampling of What’s “Cool” About Oil & Gas Technology (eg. Deepwater – Jack) Co2 Flooding – Increasing Recoverable Oil Meeting the world’s needs SuppliesEfficiencyEnvironment Career Opportunities

32. Houston Chronicle Jan 2008

33. Oil production by area

34. Oil consumption by area

35. Oil product consumption – by region

36. OECD total commercial oil stocks

37. Implications for U.S. and World Livestock, Poultry & Food Costs U.S. supplies 2/3 of world corn exports, 20- 25% of wheat & 35-40% of cotton exports Cost of livestock & poultry feed will increase Large increase in variability of feed & food costs Food aid impacts? Accelerated ag expansion into areas with fragile eco systems Shift livestock industries from U.S. to South America? Rural employment implications in U.S.

38. Ethanol Economics – new plants U. of Minn. 2007 costs $0.10/gal. increase in ethanol price raises break-even Corn price $0.28/bu. $1.00/bu. rise in corn price increases cost/gal. $0.36/gal.

39. Impact of Higher Crude Oil Price Increased crude oil price by $10/barrel over the projection Margins on ethanol plants increase New incentive to invest in added capacity for ethanol production Eventually, a new equilibrium reached where there is no incentive to invest in or exit the ethanol industry Will demand for ethanol be enough? –E-10 market will saturate around 15 billion gallons –Drop in ethanol price will eventually encourage increase in demand for the flex-fuel cars

40. Projected Ethanol Production

41. Projected Brazilian Ethanol Production

42. Wholesale Gasoline and Ethanol Prices

43. Projected U.S. Ethanol Production

44. Major Countries with Ethanol Fuels U.S. – likely production of 14-15 bil. gal. from corn in 3.5-5 years Brazil –89 new ethanol plants to be built, 2007-2011 – 2% biodiesel mandate by 2008 & 5% by 2013 EU-27 – 5.75% of motor fuel to be renewable by 2010, 10% in 2020 Canada – 5% ethanol mandate by 2010, 2% biodiesel by 2012 Biodiesel– Competition for crop land

45. International Impacts U.S. ethanol plants under construction to use 58 mil. tons of corn (doubling use) –3.5 times the volume of Japan imports of U.S. corn –130% of 2006 EU corn crop –70% of global corn exports Strong negative impacts on animal & ag. Higher food costs ahead Major risk-management challenges in Ag. & bioenergy

46. Total 11,693 mil. Bu.

47. State Avg. Ethanol Rack Prices Dec 12, 2007 Iowa: 2.13 Ill.: 2.21 Ks.: 2.34 Minn.: 2.15 Mo.: 2.34 N. Dk.: 2.23 Nebr.: 2.35 S. Dk.: 2.27 Wisc.: 2.21

49. Need for Both Ethanol and Animal Agriculture 100 million gallon ethanol plant –37 million bushels of corn –80 workers directly employed 37 millionbucornDirect jobs Farrow-finish800 Or Wean-finish242 Or Beeffeedlot278 Source: Dr. John Lawrence, Head of ISU Beef Center

51. Projected U.S. Biodiesel Production

52. U.S. Meat, Egg, and Dairy Price Changes BaselineScenario Percentage Change Beef Retail Price ($/pound)4.524.622.2% Pork Retail Price ($/pound)3.303.351.5% Broiler Retail Price ($/pound)1.962.002.0% Turkey Retail Price ($/pound)1.261.303.2% Egg Retail Price ($/dozen)1.631.683.1%

53. Farm to Retail Food Price Spread Food Farm Value Share of Retail Food Price Food Eggs53 Canned Corn 22 Beef49Sugar27 Chicken48 Wheat Flour 19 Milk34Bread5 Pork31 Corn Flakes 4 Orange Juice 33 Corn Syrup 3

54. Proved Reserves North America5.0% So. & Cen. America8.6 Europe & Eurasia12.0 Middle East61.5 Africa9.7 Asia Pacific3.4

55. What Would You Do If You Were Asked To Comment on What Does All This Mean? Airlines, Homebuilder, Refiner, Farmer, Military, Automobile Industry, Appliances, Real Estate, Accountant, Marketing, CEO, Homemaker, Concerned Citizen.