1. EIA Outlook for U.S. Heating Fuels State Heating Oil and Propane Program Conference North Falmouth, Massachusetts Laurie Falter Industry Economist Energy Information Administration August 7, 2006

2. Over the next year… Tight upstream and downstream refining capacity means there will be little slack in the supply lines if there is a supply disruption. As a result, geopolitical concerns (Iran, Nigeria, Israel-Lebanon, Venezuela, Iraq) will continue to worry the market. At this early juncture, it appears that fuel supplies should remain adequate for the coming winter, but prices will be high. Global and domestic demand will remain strong, continuing to grow despite high prices.

3. Crude Oil Prices Likely to Remain Above $70 Through 2006 Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006.

4. U.S. Crude Inventories Expected to be on High End of Normal Range, but with Lower Forward Cover Sources: EIA, Short-Term Energy Outlook, July 2006 History Million Barrels

5. Crude Oil Outlook Conclusions U.S. and global oil inventories look high, but on a forward cover basis, they are not as robust. WTI prices expected to stay strong due to fundamentals and limited spare capacity There is potential for price spikes due to supply disruptions caused by events such as hurricane damage or geopolitical strife. U.S. Gulf Coast infrastructure is still recovering from Hurricanes Katrina and Rita, with some capacity still off-line.

6. Winter Crude Oil and Distillate Price Outlook Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006. Residential Heating Oil Wholesale Distillate Crude Oil (WTI)

7. Distillate Winter Demand Expected to Continue to Grow Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006.

8. Distillate Production Ramps Up Ahead of Peak Demand Season Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006.

9. Strong Crack Spreads Encourage High Refinery Production Source: EIA calculations from Reuters spot prices.

10. Distillate Net Imports Should Be About Average Range This Winter Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006.

11. Trans-Atlantic Arbitrage Usually Opens for Distillates by November Source: EIA calculations from Reuters spot prices.

12. Distillate Stocks Expected to be in Normal Range This Winter, But Forward Cover Will Decline Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006. ActualForecast Forward Cover NOTE: Colored band is the normal inventory range.

13. New England Heating Oil Inventories are Above Average through the End of July Monthly Source: Energy Information Administration. Weekly

14. Central Atlantic Heating Oil Inventories are also Above Average Monthly Source: Energy Information Administration. Weekly

15. Consumer Prices and Expenditures – Heating Oil (Northeast) 2003- 2004 2004- 2005 2005- 2006 2006- 2007 Actual Forecast (est.) Consumption (gals.) 642 589633 Average Price$1.46$1.93$2.44$2.50 Expenditures$935$1,237$1,438$1,580 Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006.

16. Heating Oil Outlook Conclusion Distillate stocks are expected to be on the high end of the normal range this winter. However, demand is expected to be strong, given normal temperatures, and forward cover will fall sooner and lower this year than the past year. Residential heating oil prices are expected to be about 6 cents per gallon higher this year than last year. Higher expected consumption and prices will boost expenditures by over $140 per household this winter.

17. Crude Oil, Natural Gas, and Propane Price Outlook Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006. Residential Propane Natural Gas (Wellhead) Crude Oil (WTI)

18. U.S. Propane Stocks Expected to Remain in the Lower Half of the Average Range This Winter ActualForecast Source: EIA Short Term Energy Outlook, July 2006 NOTE: Colored band is the normal inventory range.

19. East Coast Propane Stocks Expected to be Relatively Comfortable this Winter ActualForecast NOTE: Colored band is the normal inventory range. Source: EIA Short Term Energy Outlook, July 2006

20. Midwest Propane Stocks Expected to be at or Above the Average Range this Winter ActualForecast NOTE: Colored band is the normal inventory range. Source: EIA Short Term Energy Outlook, July 2006

21. Gulf Coast Propane Stocks Expected to Remain Low this Winter ActualForecast NOTE: Colored band is the normal inventory range. Source: EIA Short Term Energy Outlook, July 2006

22. Consumer Prices and Expenditures – Propane (Midwest) 2003- 2004 2004- 2005 2005- 2006 2006- 2007 Actual Forecast (est.) Consumption (gals.) 796787749807 Average Price$1.20$1.42$1.67$1.73 Expenditures$951$1,114$1,247$1,395 Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006.

23. Propane Outlook Conclusion U.S. inventories likely to remain in the middle of the historic average range, although regionally the situation is mixed Propane prices are expected to be about 6 cents/gallon higher this winter Residential consumption is expected to be somewhat higher than last winter, given normal temperatures Higher expected consumption and prices will boost expenditures by almost $150 per household this winter.

24. Crude Oil and Gasoline Price Outlook Regular Gasoline Wholesale Gasoline Crude Oil (WTI) Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006.

25. U.S. Gasoline Inventories Are Typical, But Demand Growth Puts Forward Cover Relatively Lower Source: EIA, Short Term Energy Outlook, July 2006.Source: EIA, Short Term Energy Outlook, July.

26. Gasoline Outlook Conclusion U.S. inventories are expected to be on the high end of the historic average range, with forward cover about the same as last winter Gasoline prices should soften this winter when demand is normally lower Strong crude oil prices will put a floor under gasoline prices

27. Laurie Falter Energy Information Administration Office of Oil & Gas, Petroleum Division Laurie.Falter@eia.doe.gov (202) 586-1805 http://www.eia.doe.gov/