Slide 12 of 15

Notes:

• The current high prices in the Northeast should prompt increased production. Regional stocks will shift to areas of highest need, production from East Coast and Gulf Coast refineries will increase (capacity is available as the utilization indicates), and if the problem persists, imports from Europe might be drawn to U.S.

• But there are several caveats as to the quickness of the price response:
  • Colder weather would quickly use up additional supply moving into the area, postponing relief for the price spike
  • Further refinery problems and/or long delays in current East Coast refinery recoveries would slow new supply from arriving.

• As of January 31, distillate spot prices had dropped back to 82 cents, which still provides attractive refinery margins, but illustrates the quick price changes that can take place in this market. The sudden price movements down as well as up can make refiners reticent to increase production without being able to lock in some profit.

• Furthermore, even if production increases quickly, it will take a little time for volumes to arrive in the regions where needed.

• Do we have capacity for increased production?