PowerPoint Presentation


	S“Golden Age” or “Golden Moment” – Refining margins in most parts of the world improved since 2000, albeit not smoothly. This year, refining margins are up significantly in all regions – over 100% increase from 2003 as of this presentation. The question was recently posed, has the refining business finally reached the “golden age” when it will earn good returns, or are 2004 margins just the result of a somewhat broader and higher price spike that will be a “golden moment”?

	SSome analysts have attributed this year’s high refinery margins to high refinery utilizations. We disagree with that assessment. While high utilizations are contributing to the higher margins, we find that the general state of the world petroleum market as represented by low inventories, high demand, and little surplus crude oil production capacity are the major drivers. Inventories have stayed low with high crude oil and product prices because demand has been high and crude production has only increased slowly.

	SWhile it is unlikely that refining margins will remain at the high level for the first half of 2004, the low surplus capacity of crude oil production is likely to last a while. Refinery utilizations are likely to continue to rise, and for the U.S., the need for increasing product imports in the face of tighter product specifications will mean higher prices to attract those import volumes