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Energy Market Predictions: Insights from Simmons & Company International

On October 27, 2005, Colin Welsh, CEO of Simmons & Company International, presented critical insights into the energy industry. He discussed trends such as falling demand amid rising costs, transient growth driven by China, and the implications of a potential peak in global energy production. Welsh warned of the ramifications of refinery capacity issues, predicting increased prices for refined products and higher investment in alternative energy sources. His analysis suggested that while commodity prices may remain elevated, the economic landscape could face challenges from rising transportation costs.

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Energy Market Predictions: Insights from Simmons & Company International

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  1. SIMMONS & COMPANY INTERNATIONAL E Investment Bankers to the nergy Industry Colin Welsh Chief Executive Officer Simmons & Company International Limited Thursday, 27 October 2005

  2. “Conventional Energy Wisdom” – Dec 2004 • Demand falls as energy costs rise • Demand increases are due to Chinese growth which cannot be sustained • There is no shortage of oil reserves, so why worry? • Oil prices will inevitably fall back to $18-$20 per barrel historic averages • Alternative energy sources will drive down the future price of oil

  3. Simmons View In 2004 • Demand is a “runaway train” • Global energy production may be close to peaking • There has been a paradigm shift in the pricing of energy (which the market has yet to recognise) • Potential for physical shortages

  4. Where Were We In Dec 04? WTI Oil Price, Spot And Forward

  5. Where To Next?

  6. Hurricanes Katrina & Rita

  7. U.S. Total Oil Demand U.S. Total Oil Production(Alaska & Lower States)

  8. China Imports and Production

  9. OPEC Spare Capacity vs. Worldwide Demand

  10. Quality of Important Crude Types U.S. Crack Spreads

  11. Conclusion • The principles of supply and demand dictate that lack of refinery capacity will result in an inability to satisfy the worlds increasing demands for refined products. • So we can expect significantly higher refined product prices – US gasoline prices have risen by 30%, but more significantly we can expect physical shortages. • That will be good news for investment in alternative energy and new technologies – unconventional oil, GTL, clean coal and natural gas. • But it may be bad news for the world economy as spiralling transportation costs drive inflation and dampens demand. • So predictions for next year:- • Continued high commodity prices, • Very high petrol, diesel and heating oil prices, • Record investment in the sector.

  12. E Investment Bankers nergy to the Industry SIMMONS & COMPANY INTERNATIONAL

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