1. $100 $150 ? Next Stop for Oil Prices: $100 or $150? Macroeconomic Advisers Quarterly Meeting June 2008 John Cook, Director EIA Petroleum Division June 11, 2008

2. WTI Crude Oil Prices: 2001-2009 Source: EIA Short-Term Energy Outlook, June 2008.

3. WTI Futures Curves: The Deferred Price Has Also Increased in Recent Years Source: New York Mercantile Exchange. 12/2/2002 12/1/2003 12/1/2004 12/1/2005 6/2/2008 8/1/2006 8/1/2007

4. World Oil Consumption Growth Expected to Accelerate in 2008-2009. Source: Energy Information Administration, Short-Term Energy Outlook June 2008.

5. The Global Oil Market Balance is Expected to Loosen Slightly in 2009. Source: Energy Information Administration, Short-Term Energy Outlook June 2008.

6. Estimates of Non-OPEC Supply Growth have been Continually Too Optimistic in Recent Years Sources: December editions of IEA’s Oil Market Report. Estimate 1 Year Ahead Estimate End of Current Year

7. Brazil, Former Soviet Union countries, and the U.S. Expected to Lead Non-OPEC Supply Growth. Source: Energy Information Administration, Short-Term Energy Outlook June 2008.

8. OPEC Spare Capacity has Remained Low, with Most OPEC Countries Producing at Capacity. Source: Energy Information Administration, Short-Term Energy Outlook June 2008.

9. OECD Commercial Stocks: from Record Highs to Near-Normal Levels Source: Energy Information Administration, Short-Term Energy Outlook June 2008.

10. OECD Total Commercial Oil Stocks: About Average Levels This Year Source: International Energy Agency database, May 2008.

11. U.S. Crude Inventories Expected to be in the Middle of the Normal Range Sources: EIA, Short-Term Energy Outlook, June 2008. History

12. OECD European Commercial Crude Oil Stocks: About Average (Absolute Levels) Source: International Energy Agency database, May 2008.

13. OECD Pacific Commercial Crude Oil Stocks: Below Average (Absolute Levels) Source: International Energy Agency database, May 2008.

14. As Spare Capacity Increases in 2009, OECD Days Supply Will Remain Flat Sources: WTI: Reuters; OECD Days Supply: International Energy Agency and U.S. Energy Information Administration estimates; World Excess Production Capacity: U.S. Energy Information Administration estimates.

15. Typical Economic Relationship Between Surplus Production Capacity and Price Source: Reuters WTI; EIA Calculations Note: MMB/D is million barrels per day

16. Modeling Crude Price with Fundamentals Source: EIA

17. 1980s U.S. Refining Capacity Surplus Disappeared in Last Half of 1990s Gross Inputs Operable Capacity Source: U.S. Energy Information Administration.

18. Seasonal Crude Use Tight in Early Winter Source: IEA 10 Year Average Monthly Variations from Annual Average

19. U.S. Four-Week Average Finished Gasoline Demand Has Shown Negative Growth This Year Source: EIA Weekly Petroleum Status Report.

20. U.S. Four-Week Average Total Gasoline Imports Were Lower Than Last Year in March and April Source: EIA Weekly Petroleum Status Report.

21. U.S. Gasoline Inventories are in the Average Range for This Time of Year Source: EIA, Short Term Energy Outlook, June 2008.

22. Crude Oil and U.S. Gasoline Price Outlook Regular Gasoline Wholesale Gasoline Crude Oil (WTI) Sources: History: EIA; Projections: Short-Term Energy Outlook, June 2008.

23. U.S. Four-Week Average Total Distillate Demand Growth Has Also Been Negative Source: EIA Weekly Petroleum Status Report.

24. U.S. Four-Week Average Total Distillate Imports Are Lower This Year Than the Past 2 Years Source: EIA Weekly Petroleum Status Report.

25. Distillate Stocks Are Currently at the Bottom of the Average Range Sources: History: EIA; Projections: Short-Term Energy Outlook, June 2008. Actual Forecast NOTE: Colored band is the normal inventory range.

26. New York Heating Oil - Gasoline Price Spread January 2000-present Source: Reuters Weekly Average Spot Prices NYH No. 2 Heating Oil - NYH Conv. Regular Gasoline

27. European Distillate Demand Continues to Grow Source: International Energy Agency database, May 2008.

28. OECD European Commercial Distillate Stocks: Above Average (Absolute Levels) Source: International Energy Agency database, May 2008.

29. Europe – New York Heating Oil Price Spread January 2000-present Source: Reuters Weekly Average Spot Prices ARA Gasoil- NYH Heating Oil

30. Chinese Oil Demand Shows Strong Yearly Growth in Recent Years Source: International Energy Agency database, May 2008. Forecast

31. Much of China’s Oil Demand Growth in Last 2 Years Has Come From Gasoline and Diesel Source: BP World Statistics 2007.

32. OECD Pacific Commercial Distillate Stocks: Below Average (Absolute Levels) Source: International Energy Agency database, May 2008.

33. Singapore – Gulf Coast Heating Oil Price Spread January 2000-present Source: Reuters Weekly Average Spot Prices Singapore Gasoil -Gulf Coast No. 2 Heating Oil

34. 2008 First Quarter U.S. Distillate Exports Unusually High

35. U.S. Distillate Price Outlook Sources: History: EIA; Projections: Short-Term Energy Outlook, June 2008. Crude Oil On-Highway Diesel Wholesale Diesel

36. Conclusion: $100 or $150? The crude outlook remains relatively tight with little supply or demand relief in the very short term. –Non OPEC supply lagging demand increases – but supplies on the horizon next year –OPEC unwillingness to increase production –Inventories indicating tight balances currently –But demand is shifting While evidence indicates room still exists for more increases, factors are evolving to move prices back some. (Demand slowing in developed countries, price subsidies being lifted) Watch distillate demand...