Slide 18 of 25

Notes:

• The turnaround in the light-heavy crude oil differential in 1995 seems to have been due mainly to light West African crudes finding a new market in Asia. The quality price difference had dropped so low in 1994 that Asia found it economical to import West African crude oils. Thus, demand for the light crude oils increased, raising their price relative to the heavy crude oils.

• Rising crude oil prices also contributed to the turnaround in 1996 -- recalling that light crude prices generally move more than heavy.

• The small differential and an outlook for increasing prices spurred new interest in heavy oil production, which also tended to push the differential up.