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Jamie Webster May 2015

Crude Oil: Should export policy be liberalized? Presented at: Conference of Western Attorneys General Energy Exports Summit. Jamie Webster May 2015. 1 st Tipping Point: return of Libyan production brought fundamentals back into focus.

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Jamie Webster May 2015

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  1. Crude Oil: Should export policy be liberalized?Presented at:Conference of Western Attorneys GeneralEnergy Exports Summit Jamie Webster May 2015

  2. 1st Tipping Point: return of Libyan production brought fundamentals back into focus Contango (upward sloping forward curve) indicates loose market Backwardation (downward sloping forward curve) indicates tight market

  3. 2nd Tipping Point: Saudi Arabia stepped back from being the market balancer to guard market share OPEC’s roll-over of production reflects a willingness to incur short-term pain to let market find the weak producers.

  4. US Crude Production Outlook Forecast Assumes Free Trade • Great Revival creating a surge of production reversing decades of decline • Most growth is Light Tight Oil (LTO, a light sweet crude quality). • Base case peak of 11.2 million B/D and Potential case peak of 14.3 million B/D • Up from 9.2 million B/D currently and 5.0 million B/D in 2008

  5. Trade Impacts • Export of crude oil would significantly improve petroleum trade. • Average reduction of $67B and $93B for Base and Potential cases, respectively • Enhanced energy security • Export trade destinations • Europe (displacing Africa and Russia) • Asia (reduce Middle East production)

  6. Refining Constraint for LTO ($2 – 4/Barrel) ($8 – 18+/Barrel) ($1 – 2/Barrel) Tier 1 – Displace light sweet crude imports ($0.5 – 1.0/Barrel)

  7. The system is stretching to accommodate

  8. What is the crude oil supply chain? • A vast and interconnected network of labor, commodities, technologies, and information services • Symbiotic relationship – supply chain has aided in technology and productivity gains • Creates high multiplier affect

  9. Job gains are present in nearly every congressional district due in large part to supply chain

  10. Gasoline Price Response to Additional Production

  11. Gasoline Price • US gasoline prices most directly influenced by global price. • Lower gasoline price as result of free trade (8-12 cents per gallon). • Diesel provides similar results. • Consumer fuel savings of $265-$418 billion over 2016-2030.

  12. Potential for a historic shift in oil market to a real free marketUS unconventional has features to allow this to occur High oil prices Global slowdown Global slowdown IEAstock release Demand decreases (OECD) IEAstock release Demand decreases (OECD?) Saudi production management Saudi production management Abandoned for now Shale oil more responsive to price than historic production Broad OPEC cut Broad OPEC cut Shale oil production change Demand increases/conventional production slowdown Demand increases/conventional production slowdown Current/historic oil market balancers Future oil market balancers Low oil prices

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