2015 JET FUEL PRICE FORECAST2015 JET FUEL PRICE FORECAST

“The prospects for airlines are dependant on economic recovery. There is littleto indicate an early end to the downturn. It will be a grim 2009. And whileprospects may improve towards the end of the year, expecting a significantrecovery in 2010 would require more optimism than realism. Combined withan industry debt of US$170 billion, the pressure on the industry balance sheetis extreme…we are structurally sick.”

Giovanni Bisignani, IATA Director General

AirlinesAirlines

2015 JET FUEL PRICE FORECAST2015 JET FUEL PRICE FORECAST

Oil CompaniesOil Companies

“Expectations are that the worst of the recession is over, but who can be sure ofthat? The global economy is on a sugar high because of the stimulusspending.” If the recession lags, oil prices could plummet again, discouragingoil companies from investing in exploration and new drilling and discouraginggovernments from introducing new alternative-energy programs.”

Edward Chow, senior fellow in the Energy and NationalSecurity Program at the Center for Strategic and InternationalStudies in Washington.

2015 JET FUEL PRICE FORECAST2015 JET FUEL PRICE FORECAST

The FutureThe Future

“The markets for renewable energy are the fastest growing energymarkets in the world today. Successfully promoting renewables over theperiod to 2030 will prove less expensive than “business as usual” withinany realistic range of real discount rates. The G8 should give priority toefforts to trigger a step change in renewable energy markets.”

G8 Renewable Energy Task Force

2015 JET FUEL PRICE FORECAST2015 JET FUEL PRICE FORECAST Fundamentals Fundamentals

Plenty of Crude Plenty of Crude –– But Shrinking Refiners But Shrinking Refiners

Profit Centered Refiners - Show Me The Money Profit Centered Refiners - Show Me The Money

Longer Supply Lines - New Export Refineries Longer Supply Lines - New Export Refineries

More Product Competition More Product Competition –– Alternative Fuels Alternative Fuels

Geopolitical Geopolitical

Reduced Airline Demand Reduced Airline Demand –– Fuel Efficiency Fuel Efficiency

More Reliance as

U.S. 2nd Largest

Oil Importer,Mexico, Production

Down 30%

2015 JET FUEL FORECAST2015 JET FUEL FORECAST Financials Financials –– Euro vs. Dollar Euro vs. Dollar

€ $/BL

2015 JET FUEL FORECAST2015 JET FUEL FORECAST Financials Financials –– Crack Spreads & Volatility Crack Spreads & Volatility

$/BL

2015 JET FUEL FORECAST2015 JET FUEL FORECAST Financials Financials –– Airline Profits Airline Profits

Less Capacity Less Capacity

Consolidation Consolidation

Ancillary Revenues Ancillary Revenues

Economic Recovery Economic Recovery

C/Gal Billion $

2015 JET FUEL FORECAST2015 JET FUEL FORECAST Financials Financials –– Oil Company Refining Margins Oil Company Refining Margins

Less Capacity Less Capacity

Consolidation Consolidation

Climate Change Legislation Climate Change Legislation

Taxes and Penalties Taxes and Penalties

$/BL

FIVE MAJOR TRENDSFIVE MAJOR TRENDS

Major Market Consolidation Major Market Consolidation

Government InterventionGovernment Intervention

Jet Fuel Infrastructure Crisis Jet Fuel Infrastructure Crisis

Alternative Jet FuelsAlternative Jet Fuels

Emerging MarketsEmerging Markets

MAJOR MARKET CONSOLIDATIONMAJOR MARKET CONSOLIDATION

Less Competition, Reduced Flexibility, Higher PricesLess Competition, Reduced Flexibility, Higher Prices

Monopoly Marketers Monopoly Marketers –– Larger But Fewer Larger But Fewer

Merchant Refiners Merchant Refiners –– ““Pure PlayPure Play””

Downstream Distress Downstream Distress –– Margin Pressures Margin Pressures

No Capital InvestmentsNo Capital Investments

MONOPOLY MARKETERS 1990MONOPOLY MARKETERS 1990

MONOPOLY MARKETERS 2009MONOPOLY MARKETERS 2009

MERCHANT REFINERS MERCHANT REFINERS –– ““PURE PLAYPURE PLAY””

“We are a 'pure-play' refiner without the obligation tosupply retail outlets or the cost of supporting a retailbrand. As a result, we are free to supply our productsinto the distribution channel or market that we believewill maximize profit.”

“Our goal is to be the leading independent refiner andsupplier of unbranded petroleum products in Europeand to be an industry leader in returning value to ourshareholders.”

Petroplus Website

MERCHANT REFINERS MERCHANT REFINERS –– ““PURE PLAYPURE PLAY””

MERCHANT REFINERS MERCHANT REFINERS –– MARGIN PRESSURES MARGIN PRESSURES

The Largest independent refiner in the U.S., said it isshutting down “unprofitable” units at its 182,000 b/dDelaware City facility until market conditions improve.

Valero reiterated that it would keep its refinery inAruba off line and release 700 contract workers. TheSan Antonio company also said a shutdown of units atits Corpus Christi, Texas refinery would continue.

Valero the world’s largest independent refiner with 16plants in the U.S. Canada and Caribbean refining 2million barrels per day lost $250 million in the secondquarter of ’09.

Global Refining could drop below 80% capacity.“Clearly, there is huge overhang of capacity.” BillKlesse, Valero CEO

GOVERNMENT INTERVENTIONGOVERNMENT INTERVENTION

“The new climate change legislation in the U.S. House, if passed,will be bad for refiners. I could see 25% of U.S. refining capacitydropping out due to the cost of compliance and the current profitpicture. That will lead to higher petroleum product prices”

It began [this week] with the White House's announcement that it willimpose the first-ever limits on greenhouse gas emissions from cars andtrucks. It ended with a House committee approving a comprehensiveenergy and global warming bill - an important first step on legislationthat seeks to reduce America's dependence on foreign oil, reverseemissions of carbon dioxide and create millions of clean energy jobs.

The New York Times (5/22/09), "Leadership Long Delayed"

Thomas O’Malley, Petroplus CEO

GOVERNMENT INTERVENTIONGOVERNMENT INTERVENTIONTaxesTaxes

Environmental MandatesEnvironmental Mandates

Alternative Fuels IncentivesAlternative Fuels Incentives

No Capital InvestmentsNo Capital Investments

O2 and Carbon FootprintO2 and Carbon Footprint

Airline and AirportAirline and Airport

Oil Windfall ProfitOil Windfall Profit

Efficiency RequirementsEfficiency Requirements

Climate Change and EmissionsClimate Change and Emissions

Tax IncentivesTax Incentives

No Incentives, Penalties Instead No Incentives, Penalties Instead –– Why Invest? Why Invest?

JET FUEL INFRASTRUCTUREJET FUEL INFRASTRUCTUREAccidents and IncidentsAccidents and Incidents

Pipelines and AllocationsPipelines and Allocations

Capital RequirementsCapital Requirements

ManagementManagement

BuncefieldBuncefield

Spills and ContaminationSpills and Contamination

SydneySydney

CanadaCanada

Who Pays Who Pays –– Tight Credit Tight Credit

Experience LackingExperience Lacking

Product and Price CompetitionProduct and Price Competition

ALTERNATIVE JET FUELSALTERNATIVE JET FUELSPromise or PanaceaPromise or Panacea

Resources, Governments, Media Rushing InResources, Governments, Media Rushing InMoney and Resources for 10% of DemandMoney and Resources for 10% of Demand

Global Warming Global Warming –– The True Religion The True Religion

The Real Impact The Real Impact –– Higher Prices? Higher Prices?

EMERGING MARKETSEMERGING MARKETS

Have the BRICHave the BRIC’’S Arrived?S Arrived?

Brazil, Russia, India, ChinaBrazil, Russia, India, China

New Oil Finds in BrazilNew Oil Finds in Brazil

Russia Passes Saudi as WorldRussia Passes Saudi as World’’s Largest Exporters Largest Exporter

China Now WorldChina Now World’’s Second Largest Energy Users Second Largest Energy User

India Building Large Export RefineriesIndia Building Large Export Refineries

FORECAST THROUGH 2015FORECAST THROUGH 2015

Factors That Argue For Price StabilityFactors That Argue For Price Stability

OPEC and Russia OverproductionOPEC and Russia Overproduction

Western Markets Oil Demand Peak in 2008Western Markets Oil Demand Peak in 2008

Energy Conservation and Alternative FuelsEnergy Conservation and Alternative Fuels

Airline Capacity Reductions and Efficiency GainsAirline Capacity Reductions and Efficiency Gains

Year Over Year Jet Fuel Demand Down 8 Year Over Year Jet Fuel Demand Down 8 –– 15% 15%

FORECAST THROUGH 2015FORECAST THROUGH 2015

Factors That Argue For Increased Price VolatilityFactors That Argue For Increased Price Volatility

Geopolitical CrisesGeopolitical Crises

Major Oil Companies Shed Downstream AssetsMajor Oil Companies Shed Downstream Assets

Growing Refinery Control of Growing Refinery Control of ““Pure PlayPure Play”” Refiners Refiners

Government Taxes and Climate Change MandatesGovernment Taxes and Climate Change Mandates

Competition From Alternative FuelsCompetition From Alternative Fuels

OPEC - Jet Fuel Demand 8 m/b/d 25% Higher in 2020OPEC - Jet Fuel Demand 8 m/b/d 25% Higher in 2020

Oil Infrastructure Capital Investments IgnoredOil Infrastructure Capital Investments Ignored

FORECAST THROUGH 2015FORECAST THROUGH 2015

AirlinesAirlines

Oil CompaniesOil Companies

MarketsMarkets

PricesPrices

Airline Set Up For Lengthy Period Of ProfitsConsolidation, Higher Yields, Efficiencies, Ancillary Revenues

Upstream/Downstream, Merchant Refiners, Mandates & MarginsOil Companies Enter Volatile Period

Economic Recovery Promises Widespread Growth

Airline Pricing Power, Higher Jet Fuel Prices, Regional Volatility