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Canola Council of Canada March 21, 2007 Westin Bear Mountain Victoria

Oil Prices: Key To Biodiesel Profitability “It ain’t right, but it’s true!” James L. Williams WTRG Economics. Canola Council of Canada March 21, 2007 Westin Bear Mountain Victoria. Market Linkage Biodiesel Diesel Heating Oil Crude Oil. Food or Fuel Historical Precedence

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Canola Council of Canada March 21, 2007 Westin Bear Mountain Victoria

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  1. Oil Prices: Key To Biodiesel Profitability“It ain’t right, but it’s true!” James L. WilliamsWTRG Economics Canola Council of CanadaMarch 21, 2007 Westin Bear Mountain Victoria

  2. Market Linkage • Biodiesel • Diesel • Heating Oil • Crude Oil

  3. Food or Fuel • Historical Precedence • Cowboys Fed Their Horses • Current issue • Mike’s decision

  4. Beer: Now Cheaper Than Gas

  5. Factors in Oil Prices • Production (Economy & Policy) • Consumption (Economy & Policy) • Stocks • Production Capacity

  6. Politics, Geopolitics & Nature • Supply Interruptions • Wars • Natural disasters • Consumer Policies • Taxes • CAFE • Import duties / restrictions • Price controls • Producer / OPEC Policies • Quotas • Embargos • Taxes

  7. Prices have little impact on short term consumption.Government policy and the economy dominate.

  8. Distillate = Diesel & Heating Oil

  9. Residual Fuel: Bunker Fuel, Power Generation & Heating

  10. Do high prices cause recessions or do recessions cause low prices?

  11. World Production: Doesn’t Make Sense

  12. Non-OPEC Production: Slow Response to Price Changes

  13. Iraq / Iran War Revolution

  14. CoalitionInvades Kuwait InvadedGulf War Iraq / Iran War

  15. Kuwait InvadedGulf War

  16. SwingProducer Iraq / Iran War

  17. Historically Oil Price Inversely Related to Stocks Inventory Price Relationship went off track in the last 3-4 years

  18. Lower Capacity Higher Production

  19. Low Spare Capacity Increases Risk

  20. OPECCapacity, Production & Spare Capacity

  21. Future • Excess Production Capacity • Saudi Arabia • Russia • China • Venezuela • Recession • Alternate fuels • Conservation

  22. Product Markets • Gasoline • MTBE to Ethanol • Distillates • Heating Oil • Diesel • Ultra Low Sulfur

  23. Risk • Capacity • Russia • Mexico • Iran • Nigeria • Iraq • Venezuela • Hurricanes • Economy

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