1. Organization of the Petroleum Exporting Countries 1 Oil and the fuel price: the link to market stability Mohammed Barkindo Acting for the Secretary General Dubai, United Arab Emirates 14–16 March 2006 30 th World Congress of the International Road Transport Union

2. Organization of the Petroleum Exporting Countries 2 Exceptionally high world GDP growth at 5.1% in 2004 This led to highest growth in oil demand since 1976 GDP & oil demand growth

3. Organization of the Petroleum Exporting Countries 3 Main contributors to world oil demand growth by region (2003-2006) Exceptionally high levels of growth in oil demand from large emerging economies in Asia, especially China & India. Strong growth in North America –U.S.A. as well.

4. Organization of the Petroleum Exporting Countries 4 OPEC crude oil production: Response to strong demand growth, mb/d OPEC significantly increased its production & maintained high level of output to ensure that market needs are met.

5. Organization of the Petroleum Exporting Countries 5 Medium term — OPEC expansions up to 2010 Upstream: global supply in excess of expected demand OPEC accelerated expansion plans with upstream capital investments ($100 billion +) Estimated non-OPEC supply & demand growth, to keep OPEC crude requirements in the 31-33 mb/d range in 2010; capacity expected 38 mb/d. Source: OPEC. mb/d 22 26 30 34 38 42 46 50 2004200520062007200820092010 22 26 30 34 38 42 46 50 CrudeNGLEstimated required OPEC crude

6. Organization of the Petroleum Exporting Countries 6 Reasonable level of spare capacity “…The timing and size of capacity expansion in Member Countries… should be such that a reasonable level of spare capacity is available.” The OPEC Long-Term Strategy

7. Organization of the Petroleum Exporting Countries 7 Fair & stable prices “…there is a need to support fair and stable prices, sustainability of supply, and security of demand.” The OPEC Long-Term Strategy

8. Organization of the Petroleum Exporting Countries 8 OPEC Objectives “The Organization shall devise ways and means of ensuring the stabilisation of (oil) prices in international markets, with a view to eliminating harmful and unnecessary fluctuations” “Due regard shall be given at all times to the interests of the producing nations and to the necessity of securing: a steady income to the producing countries; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on their capital to those investing in the petroleum industry” The OPEC Statute was first adopted in 1961.

9. Organization of the Petroleum Exporting Countries 9 Oil Demand Outlook, mb/d Oil demand increases by 30 mb/d by 2025, or 1.5 mb/d annually Four-fifths of the increase in demand comes from developing countries Transportation continues to be the dominant source of growth (~60 %) Many uncertainties: GDP, technology, policy

10. Organization of the Petroleum Exporting Countries 10 Taxation of oil products Diesel prices & taxes, December 2005

11. Organization of the Petroleum Exporting Countries 11 There is considerable uncertainty over how much oil OPEC will need to produce, (mb/d) Significant uncertainties with substantial downside risks. Considerable implications on the scale & timing of investments!

12. Organization of the Petroleum Exporting Countries 12 Cumulative OPEC investment requirements: how much is needed to provide market stability? If OPEC balances the market, the huge uncertainties in future oil demand translate into huge uncertainties and risks for future OPEC investment.

13. Organization of the Petroleum Exporting Countries 13 Incremental world oil demand vs crude & refining capacity expansion Sources: Capacity estimates based on published reports by different sources as well as Secretariat assessment 0.0 0.5 1.0 1.5 2.0 2.5 3.0 200520062007200820092010 mb/d 0.0 0.5 1.0 1.5 2.0 2.5 3.0 mb/d HeavyMedium LightDemand (reference) Demand (tight market)Refining Capacity Tightness in the downstream sector could be expected to remain a potential source of volatility; timely investment in the refining sector is needed!

14. Organization of the Petroleum Exporting Countries 14 Downstream investment “…the primary responsibility for downstream investment remains with major consuming countries and international oil companies.” The OPEC Long-Term Strategy

15. Organization of the Petroleum Exporting Countries 15 Important issues in the transportation sector Transportation sector to remain major source of oil demand growth for the foreseeable future Vehicle ownership set to rise globally, particularly in DCs Limited impact of fuel substitution in road transport Gasoline & diesel expected to retain its dominant share Continued significant quality improvements for environmental friendlier oil products used in transportation OPEC Workshop on Modelling Fuel Demand in the Transportation Sector, Vienna, January 2006

16. Organization of the Petroleum Exporting Countries 16 Promotion of the development of technologies “OPEC also calls for the promotion of the development of technologies that address climate change concerns. One promising example is that of carbon dioxide capture and storage technology...” The OPEC Long-Term Strategy

17. Organization of the Petroleum Exporting Countries 17 Enhanced & more in-depth Dialogue “Dialogue… should be widened and deepened to cover more issues of mutual concern, such as security of demand and supply…” The OPEC Long-Term Strategy

18. Organization of the Petroleum Exporting Countries 18 www.opec.org Thank you