Footwear Distributors 050506

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Petroleum Issues Update www.api.org, www.gasolineandyou.org, www.naturalgasfacts.org Footwear Distributors and Retailers of America Bill Rozett Grassroots Coordinator energy API May 9, 2006

Introduction: 

Introduction Energy Consumption Marketplace pressures on supplies Fuel supply outlook What we can do about it NOAA

World Energy Consumption Quadrillion Btus: 

World Energy Consumption Quadrillion Btus Source: EIA

U.S. Energy Consumption Shares by Fuel Type – 2004: 

U.S. Energy Consumption Shares by Fuel Type – 2004 Source: EIA

U.S. Energy Consumption Shares by Fuel Type – 2025: 

U.S. Energy Consumption Shares by Fuel Type – 2025 Source: EIA

EIA Forecast from 2003 to 2025: 

Real Gross Domestic Product to increase by 92% Total Population to increase by 19% Total energy consumption to increase by 39% Petroleum demand to increase by 42% Natural gas demand to increase by 42% Coal demand to increase by 40% Electricity sales to increase by 49% Renewable energy supply to increase by 50% Nuclear energy to increase by 7% EIA Forecast from 2003 to 2025

EIA Forecast from 2003 to 2025: 

Energy efficiency (output per unit of energy) to improve 27% Net petroleum imports to provide 70% of demand Growth in petroleum demand is led by transportation, where efficiency improvements are more than offset by growing travel demand and petroleum’s market share increases slightly. Crude oil production falls by 19% Imports of crude oil grow by 65% Petroleum product imports increase by 80% Refinery capacity expands from 16.8 to 21.8 million barrels per day EIA Forecast from 2003 to 2025

Petroleum Product Sector Shares – 2004: 

Petroleum Product Sector Shares – 2004 Source: EIA

Marketplace Pressures: 

Marketplace Pressures International Limited Spare Capacity. Venezuela Uncertainty Iran Uncertainty Nigerian Uncertainty Iraq Uncertainty China Growth. India Growth Terrorism Speculation Domestic Natural Disasters. Domestic Production Infrastructure Strained Refinery Outages Boutique Fuels Ethanol Changeover ULSD. Strong Economic Growth Fuel Efficiency.

EIA estimates of world oil spare production capacity: 

EIA estimates of world oil spare production capacity Source: EIA Short Term Energy Outlook, April 2006 Forecast

EIA estimates of annual world oil demand growth: 

EIA estimates of annual world oil demand growth (Change from previous year) Source: EIA, Short Term Energy Outlook, 1998-2006 April 2006

China Demand Growth: 

China Demand Growth

Impact on Oil & Gas Operations from Katrina and Rita: 

Impact on Oil & Gas Operations from Katrina and Rita August 30 Gulf Oil & Gas Production 26% of U.S. oil 18% of U.S. gas Gulf Refineries 11% capacity shutdown 17% reduced runs (by 8/31) Pipelines No electricity to major crude and product pipelines feeding Northeast and Midwest Louisiana Offshore Oil Port (LOOP) Operations suspended 8.5% of crude imports lost May 5 Gulf Oil & Gas Production 6.3% of U.S. oil 340,000 bpd 2.6% of U.S. gas 1.4 bcf/d Gulf Refineries 4.7% shutdown or restarting (804,000bd) Pipelines Operating Louisiana Offshore Oil Port (LOOP) Operating $18-31 billion in OCS damages (EIA)

Crude production and prices before and after Katrina and Rita: 

Crude production and prices before and after Katrina and Rita

Fuel efficiency: 

Fuel efficiency Source: DOT

Ultra Low Sulfur Diesel ULSD to Replace Low Sulfur Diesel : 

Ultra Low Sulfur Diesel ULSD to Replace Low Sulfur Diesel Highway Diesel June 2006 – 80% of highway diesel is ULSD October 2006 – USLD at retail level Non-Road USLD Low sulfur diesel by 2007 June 2010 – ULSD for farm and construction 2012 – locomotive and marine ULSD www.cleandiesel.org www.2006fuels.org

Diesel, gasoline & crude oil prices: 

Diesel, gasoline & crude oil prices

What consumers are paying for: 

What consumers are paying for REFINING , DISTRIBUTION, RETAILING * PriceWaterhouseCoopers, based on 4Q-05 company reports filed with federal government EARNINGS (8.5%) * CRUDE OIL TAXES Source: EIA 55% 26% 19%

Number of refineries declines but capacity expands: 

Number of refineries declines but capacity expands 10 – 12 Refineries Equivalent

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Undiscovered Technically Recoverable Resources On Federal Lands Federal policy significantly constrains development of the abundant volumes of oil & natural gas resources beneath federal lands and coastal waters, raising costs to consumers. Lower 48, onshore 148 Tcf 7 Bbbl Atlantic Offshore 33 Tcf 4 Bbbl Gulf Offshore 244 Tcf 37 Bbbl Alaska Offshore 122 Tcf 26 Bbbl Onshore 69 Tcf 18 Bbbl 635 Tcf is enough natural gas to heat the 60 million homes using natural gas for 120 years. 102 Bbbl is enough oil to power 55 million cars for 30 years AND heat 24 million homes for 30 years. Total Natural gas 635 Tcf * Oil 102 Bbbl ** * Trillion cubic feet ** Billion barrels Sources: Minerals Management Service, U.S. Geological Survey, Bureau of Land Management, National Petroleum Council Pacific Offshore 21 Tcf 11 Bbbl

Fourth Quarter 2005 Earnings(cents per dollar of sales): 

Fourth Quarter 2005 Earnings (cents per dollar of sales)

What Can We Do Now?: 

What Can We Do Now? Be patient. Let market forces work Increase domestic production of oil and gas Open non-park, non-wilderness onshore areas to responsible energy development and reduce permitting delays Lift constraints on key offshore areas with high-resource potential Expand access to world natural gas supplies Develop infrastructure to deliver natural gas supplies to consumers Increase refiners’ flexibility Provide timely response to waiver requests in emergencies Streamline existing permit processes to expedite capacity expansions Clarify environmental requirements to streamline operations Increase conservation & energy efficiency

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Bill Rozett Grassroots Coordinator American Petroleum Institute rozett@api.org