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The Balancing Act: Perspectives of the Global and Domestic Oil Markets Frederick J. Lawrence Vice President - Economics and International Affairs Slide 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 Slide 3 Slide 4 Where is the incremental demand coming from by region? Slide 5 Demand is breaking out and were en route to 90 Mmb/d QUARTERLY AVERAGEYEARLY AVERAGE Slide 6 China Growth Spurt Slide 7 China will continue to be a big part of the demand story. Slide 8 Dont discount growth in the rest of Asia especially India Slide 9 UN Perspectives on Sustainability Slide 10 Global Population Surge Slide 11 Demand Bites Slide 12 Projected Global Petroleum Demand Slide 13 Proved Oil Reserves Not Created Equal Slide 14 Supply is also adapting to a new threshold but can it be maintained? Slide 15 Comparative Oil Production Slide 16 OPEC is building capacity and trying to manage production based on demand. Slide 17 Non-OPEC has captured market share but sustainability in question. Slide 18 Former Soviet Union Dominates Non-OPEC Supply Gain Slide 19 Pragmatic Oil Diplomacy Slide 20 Projected Source of Global Conventional Oil Supply Slide 21 The Wrong Cow is Getting Fat Slide 22 U.S. Energy Shares (2003) Slide 23 U.S. Petroleum Balance Slide 24 U.S. Petroleum Consumption Slide 25 U.S. Import Sensitivity by Region (2003) Slide 26 Domestic Crude Production Slide 27 Where Does Our Energy Come From? 2003 Wells Drilled = Gas = CBM = Horizontal = Oil = Dry Slide 28 Where is Our Energy Used? Slide 29 Vermont Energy where a woodchuck could chop wood Slide 30 Producing 18 Quads of Energy Per Year Biomass Slide 31 Percentage of US Congressmen from Selected States Voting for Energy Issues Slide 32 Volatility at Work (1986-2004) Slide 33 Slide 34 U.S. Oil Deficit Slide 35 Refinery Situation Slide 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