PEAK OIL: MYTH VS. REALITY Presentation to DENVER WORLD OIL CONFERENCE November 10, 2005 By

1. PEAK OIL: MYTH VS. REALITY Presentation to DENVER WORLD OIL CONFERENCE November 10, 2005 By Henry Groppe

2. PEAK OIL: MYTH VS. REALITY Major Myths and Misperceptions • There can be meaningful discussion of future oil supply and demand unrelated to its price. • The future of oil can be forecast as a straight line extrapolation of trends most recently experienced. • Reliable oil production forecasts can be derived from reserve data. • Geologists’, companies’ and governments’ forecasts of the timing, cost and volume of oil production from major new resource discoveries and developments are reliable. • Exploitation of lower grade oil resources, i.e. – Canadian oil sands and heavy oil, Venezuela Orinoco heavy oil, Western U.S. oil shale, will replace depletion of conventional oil and grow world oil production. •   World oil production is on the verge of precipitous decline signaling the end of the economic world as we know it. •  World oil production will grow fifty percent during the next twenty-five years at a reasonable price through the application of continually improving technology and support continuing growth in world oil consumption.   1

3. Reality • World crude oil production is peaking. • Depletion is real. • Exploration is a rational process. • Production will decline irreversibly. • Liquids from the growing international natural gas industry will supplement crude oil supplies. • High prices are required to constrain consumption. There is no such thing as scarcity and no such thing as surplus. There is only price. • Transportation is the dominant growing use for oil. • High cost oil will be replaced with cheaper natural gas and other substitutes in stationary fuel use in developing economies as occurred in OECD countries in the last oil crisis. • The world oil industry will continue to operate essentially at capacity with permanent major price volatility. 2

4. WORLD CRUDE OIL PRODUCTION Million Barrels Per Day $/Barrel Actual Forecast Production (Left Scale) Arabian Light Price (Right Scale) 3

5. NON-OPEC CRUDE OIL PRODUCTION Million Barrels Per Day (Excluding Eastern Europe) Actual Forecast United States Norway & UK Canada Mexico China 4

6. EASTERN EUROPE PETROLEUM PRODUCTION, CONSUMPTION & EXPORTS Million Barrels Per Day Production Actual Forecast Expectation with no collapse of Soviet Union Deliveries 6.3 6.1 Net Exports 5

7. OPEC CRUDE OIL PRODUCTION Million Barrels Per Day Actual Forecast Iraq Saudi Arabia Kuwait UAE Other OPEC* * Excludes Ecuador & Gabon who withdrew from OPEC in 1993 & 1996 respectively and Indonesia which will soon be a net importer. 6

8. WORLD PETROLEUM PRODUCTION Million Barrels Per Day Actual Forecast EIA 78.5 79.0 Other * 76.1 65.8 67.9 NGL ** 62.7 55.9 OPEC Crude Oil 40.4 36.0 Eastern Europe Crude Oil 25.5 29.8 Other Non-OPEC Crude Oil * alcohols, coal liquefaction, and gas to liquids ** condensate, natural gasoline, butanes, propane, and ethane 7

9. WORLD PETROLEUM DELIVERIES Million Barrels Per Day Actual Forecast 82.5 81.7 65.9 57.5 37.6 Rest of World United States 20.4 18.9 15.1 15.2 Western Europe 8.6 8.9 6.2 Japan, Canada, Australia & New Zealand Includes crude oil, other liquids and processing gain 8

10. WORLD OIL USE BY SECTOR Million Barrels Per Day Transportation 51% Industrial & Power 39% Residential & Commercial 10% 9

11. MUNICIPAL POLICIES FOR A HIGH OIL PRICE ENVIRONMENT Improve transportation efficiency and mobility. In particular, improve options and costs for low income employees who are automobile dependent for transportation to places of work. Continue enhancing the environment for inner city and close in living. 10