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ENERGYENERGYYour World vs. Americas ViewYour World vs. Americas View

vs. Washingtons Realityvs. Washingtons Reality

Karen A. HarbertKaren A. Harbert

Executive Vice PresidentExecutive Vice President

Institute for 21Institute for 21stst Century EnergyCentury Energy

US Chamber of CommerceUS Chamber of Commerce

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The New Energy RealityThe New Energy RealityEnergy Security is central to our national and economicEnergy Security is central to our national and economic

securitysecurity

Demand to increase 50% by 2030Demand to increase 50% by 2030

70% in developing world70% in developing world

Electricity demand to increaseElectricity demand to increase100%100%

1.6 billion people without1.6 billion people without

electricityelectricity

$20 trillion of new investment by$20 trillion of new investment by2030 to meet rising demand2030 to meet rising demand

Environmental Sustainability -Environmental Sustainability -over 70% of the currentover 70% of the current

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The New Energy RealityThe New Energy RealityEnergy Security is central to our national and economicEnergy Security is central to our national and economic

securitysecurity

Access to reserves is limitedAccess to reserves is limited

2/3 of worlds reserves becoming2/3 of worlds reserves becominginaccessibleinaccessible

Rising importance of NOCsRising importance of NOCs Own 80% of reservesOwn 80% of reserves

Lack of investment in explorationLack of investment in exploration

Significant rise in project costsSignificant rise in project costs Resource NationalismResource Nationalism

Lack of qualified engineers/skilledLack of qualified engineers/skilled

laborlabor

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Global ChallengesGlobal Challenges

CHINACHINA

China relies on coal for 70% of theirChina relies on coal for 70% of theirenergy needs, building one coal-firedenergy needs, building one coal-firedplant a weekplant a week

By 2025, they could have 300 millionBy 2025, they could have 300 millioncars on the road, compared to 30cars on the road, compared to 30million todaymillion today

By 2030, energy-related CO2By 2030, energy-related CO2emissions from China are projected toemissions from China are projected toaccount for 26% of the world total andaccount for 26% of the world total and

48% of total coal-related emissions48% of total coal-related emissionsworldwideworldwide

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Global Challenges

INDIAINDIA

Hopes to maintain an annual GDP growthHopes to maintain an annual GDP growthrate of 8% over the next 25 years.rate of 8% over the next 25 years.

That level of growth would require India to atThat level of growth would require India to at

least triple its primary energy supply andleast triple its primary energy supply andquintuple its electrical capacityquintuple its electrical capacity

Indias demand for oil will grow at an averageIndias demand for oil will grow at an averagerate of 2.9% over the next 25 years, yet theyrate of 2.9% over the next 25 years, yet they

have only 0.4% of the worlds proven oilhave only 0.4% of the worlds proven oilreserves and domestic production isreserves and domestic production isexpected to remain constant or declineexpected to remain constant or decline

Oil consumption has increased sixfold overOil consumption has increased sixfold overthe past 25 yearsthe past 25 years

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Market SituationMarket Situation

Market fundamentals are driving prices upMarket fundamentals are driving prices up Economic growth boosting demandEconomic growth boosting demand OPEC production decisionsOPEC production decisions Low OPEC spare capacityLow OPEC spare capacity Moderating non-OPEC production growthModerating non-OPEC production growth Falling inventoriesFalling inventories Refining bottlenecksRefining bottlenecks

Geopolitical risksGeopolitical risks

Increased speculationIncreased speculation Decline of Dollar leads to investing inDecline of Dollar leads to investing in

commoditiescommodities

HIGH PRICES AND VOLATILITYHIGH PRICES AND VOLATILITY

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Market Players

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0

5

10

15

20

25

1960 1970 1980 1990 2000 2010 2020 2030

Dependence on imports of liquid fuels andother petroleum by 2030

Consumption

Domestic Supply

Net Imports

60%

54%

Annual Energy Outlook 2008

History Projections

million barrels per day

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Whats changing?

Real Economic Impact

Driving down 4.7%

Definition of the Problem

75% are mad

Whos to Blame

Energy is a Priority

Washington is paralyzed

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Where are we headed?

Pew Research Center

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Whats our Problem?

Pew Research Center

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Has the recent rise in gas and oil prices caused

you or your family any financial hardship, or

not?.

70% - June

75% - July

63% - September

Los Angeles Times/Bloomberg/CNNPolls

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Whos to Blame? Not Big Oil

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Whos to Blame?

The favorability rating ofCongress is at an all time low of9% (Rasmussen Reports, August

2008) All eyes are on the Nov. 4 election

Change of heart by HouseSpeaker Nancy Pelosi?

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Growing Support for OilGrowing Support for Oil

ExplorationExploration

75% support increased75% support increased

exploration to reduce ourexploration to reduce our

dependence on foreign oil; 77% ofdependence on foreign oil; 77% of

independents and 66% ofindependents and 66% ofDemocrats (July Fox News Poll)Democrats (July Fox News Poll)

73% favor more exploration (June73% favor more exploration (June

CNN)CNN) 68% (June LA Times)68% (June LA Times)

67% (June Rasmussen)67% (June Rasmussen)

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We are not running out of resources,We are not running out of resources,

just ACCESS to themjust ACCESS to them

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Views on Climate Change

The public views climate change as aserious problem but not as a planetaryemergency.

Public believes energy security moreimportant than addressing climate

change Technology can solve climate change. Public not willing to make great personal

sacrifices. Public wants a joint cooperative effort

between government, business and thecitizens to solve the challenge. U.S. politics are in flux no matter who the

leader is; many different approaches arebeing debated in Congress and

throughout federal agencies.

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Where should we be going on a newWhere should we be going on a new

U.S. Energy Strategy?U.S. Energy Strategy?

Increase and Diversify Supply

Increase Suppliers

Improve Energy Efficiency

Accelerate TechnologyDevelopment and Deployment

Increase use of alternative and

renewable sources of energy Improve Environmental

Stewardship

Modernize and protect critical

infrastructure

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Road AheadRoad Ahead

Huge Public Expectations for nextHuge Public Expectations for nextPresidentPresident

Public is ahead of policymakersPublic is ahead of policymakers

Growing desire to capitalize onGrowing desire to capitalize on

American resources, create AmericanAmerican resources, create American

jobsjobs

Energy Policy is a Political Football nowEnergy Policy is a Political Football now

what will change next year? what will change next year? Need better informed debateNeed better informed debate

There will be a robust investment inThere will be a robust investment in

technology and innovationtechnology and innovation