2005 - A Volatile Year for Energy Prices:
2005 - A Volatile Year for Energy Prices WTI crude oil price ranged from a low of $47 in January to over $66 per barrel
Crude peaked in September, when back-to-back hurricanes in the US gulf coast shut in as much as 25% of US domestic production
Little spare production capacity exists as global demand grew 1.2 MBD in 2005
Average global refining capacity utilization continued to increase in 2005
Jet fuel and heating oil margins over crude oil were above their 5 year monthly range the entire year
Motor gasoline prices spiked after Katrina & Rita to all-time highs; margins over crude oil well above their 5 year range
US remains net importer of motor gasoline (500 KBD 2005)
Natural gas price ranged from $6 to near $14 per MBTU
Over 560 BCF of production lost due to hurricanes in 2005
Variable operating cost for most chemicals now two to three times historical, even at current natural gas price
Despite a significant drop in January ’06, prices remain above 5 year range
Chemical feedstock volatility increased versus historic:
Function of energy price volatility, plus…
Due to uncertainty, lower inventories held to cover unplanned outages and demand surges
More competition for capacity and refining molecules that have historically been spare Data Source is EIA, Platt’s, and OPIS USGC CG C3=, ¢/lb NA Spot Natural Gas (Henry Hub), $/MBTU
New 2006 Fuel Standards Reduce Refining Flexibility:
New 2006 Fuel Standards Reduce Refining Flexibility Further volatility likely as each refiner re-optimizes its capacity Data Source is EIA, Platt’s, and OPIS
Conclusions:
Conclusions 2005 a volatile year for Energy prices due to multiple factors
Global crude oil demand will remain close to capacity in 2006; geopolitical issues in key crude oil producing countries of Iraq, Iran, Venezuela, and Nigeria increase uncertainty
“New” U.S. motor fuels issues for 2006 add constraints
Limit refining flexibility as refiners re-optimize capacity
Reduce import fuel capability
Requires rebalancing of key octane streams
Long term pricing forecasts are impossible; understanding key industry drivers provides context to managing volatility impacts
ExxonMobil remains committed to utilizing integrated, multi-site petrochemical capabilities to minimize customer impacts from upstream changes
Frequent Communication Critical to Planning Our Business Together
BACKUP:
BACKUP
WTI Crude Oil Detailed Price History:
WTI Crude Oil Detailed Price History Data Source is EIA, Platt’s, and OPIS
Slide7:
World Oil Demand Data Source is EIA, Platt’s, and OPIS
USGC CG Propylene Monthly Price Variability:
USGC CG Propylene Monthly Price Variability Data Source is CMAI