Slide 14 of 25

Notes:

• This figure shows how light and heavy products were moving relative to crude oil. The top line is the 3-2-1 spread that captures the margins of gasoline and distillate over crude oil. The bottom line is the comparison of residual fuel oil price to crude oil. The product prices are compared against refiners’ average crude oil acquisition cost so as to minimize any light or heavy crude oil bias in the chart.

• The light-heavy product difference in the 1986 to 1991 period expanded because of movement both from the light and heavy product sides.

• A growing economy prior to the Gulf War helped support light product prices, so light product prices (gasoline and distillate) rose relative to crude oil during the late 1980’s, while the price of residual fuel fell relative to crude oil (i.e., became less desirable, expanding in a negative direction).