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					IEA Expert Roundtable
on Oil Price Formation
Monday 17 March 2008

International Energy Agency
9 rue de la Fédération
PARIS 15, France

            IEA Expert Roundtable on Oil Price Formation


With oil prices having recently hit $100 a barrel and trading near record nominal and inflation-
adjusted highs, the market is continually questioning whether current oil prices are justified by
market fundamentals. In particular, following the large flows of money into hedge funds and
commodity index funds since 2003, there is concern that the oil price no longer retains its role as
the best leading indicator of market conditions.
Considerable work has already gone into understanding the role of funds and fundamentals in oil
price formation, but the debate is often polarised. The purpose of this Roundtable, held under the
Chatham House Rule, is to get together world-renowned oil analysts and experts in an attempt to
improve the understanding of the issues and identify further work. Rather than replicating the
many conferences that have been held on this subject, the aim is to debate the arguments and
come up with new ideas and new approaches.


Session 1
Four analysts set the scene by giving differing perspectives on the oil market: for and against the
money flows, oil’s evolving eras and a fundamental perspective. The ensuing discussion will seek
to debate the merits of these arguments; identify areas that have not been discussed; what factors
are driving the oil price and whether current price levels reflect market conditions.
Session 2
Building on the discussion from Session 1, the afternoon will look at new data on hedge funds and
discuss the gaps in our understanding of the broader oil market. More data naturally provide
more information, but potentially at a cost. We have to try to identify where there are data gaps
and, crucially, where filling those gaps would provide a real improvement in market understanding.

Next Steps

The IEA Secretariat will pull together a summary document, incorporating as far as possible the
many different strands of argument that are likely to emerge during the meeting, gaps in our
understanding and to identify where more work is needed.

                 IEA Expert Roundtable on Oil Price Formation
    Monday 17 March

   08.45    Registration
   09.00    Opening and Welcome
               Mr. Didier Houssin – Director of the Office of Oil Markets and Emergency Preparedness,
               International Energy Agency
            Chairman: Mr. Lawrence Eagles, Head of the Oil Industry and Markets Division, International Energy Agency

            Funds or Fundamentals
   09.10          Prof. Robert Weiner, Professor of International Business, Public Policy and Public
                  Administration and International Affairs, George Washington University – Assessing
                  the Impact of Non-Commercial Traders
   09.30          Dr Philip K. Verleger, Jr., Economist, PK Verleger LLC – The Index Fund Effect
   09.50          Mr. John Brunton, Head of Global Analysis, Energy, Transportation and Industrial
                  Platform, Cargill International S.A. – The Three Stages of Oil Market Evolution
   10.10          Mr. Mark Lewis, Managing Director, EMC-(Energy Market Consultants (UK) Ltd./FACTS) -
                  Fundamental Driving Forces of the Oil Market
    10.30 - 10.50   -    Coffee

   11.40    Discussion:
             •   What drives the price of oil? - Assessing the arguments presented, alternative views;
             •   Are oil prices reflecting current supply and demand conditions or future expectations?
             •   What other factors play a role in price formation – benchmarks, spare capacity, investment etc.?
             •   Do current tightness in oil service sector, rising F&D costs, the restriction of access to resources and
                 the changing fiscal terms justify the rise in the oil price?
             •   Modelling a dynamic market: is it realistic to break down oil prices into their constituent parts?
             •   Weaknesses in our understanding.

    13.00   -    Buffet Lunch [IEA]

            Data Availability
   14.00        Dr. Jeff Harris – Chief Economist, Commodity Futures Trading Commission (CFTC) –
                Index Funds and Data Dissemination
   14.40    Discussion
             •   Has the economic influence of speculators changed?
             •   What are the areas of data deficiency – financial or physical?
             •   What are the cost and benefits of more data?
             •   What additional work needs to be carried out?

    16.30   -    Close

IEA Expert Roundtable on Oil Price Formation ❖ Paris ❖ Monday 17 March 2008                                                 3
                                 Speaker Synopsis

              IEA Expert Roundtable on Oil Price Formation

                   Prof. Robert Weiner - George Washington University
                   Assessing the Impact of Non-Commercial Traders

    Prof. Weiner will present his analysis of data from the CFTC and US exchanges. Outlining the
    methodology he has used for this analysis, he will discuss the concept of herding and why it is
    important when considering the impact of fund and speculative activity on prices before describing the
    data he has used and the limitations of the analysis.

                   Dr. Philip K. Verleger, Jr. - PK Verleger LLC
                   The Index Fund Effect

    Dr. Verleger will outline his perspective of how the cash from pension funds promoted inventory
    accumulation and how that may have led to higher prices, because OPEC refused to compensate for
    increased demand by boosting production.

                   Mr. John Brunton - Cargill International S.A.
                   The Three Stages of Oil Market Evolution

    Mr. Brunton will summarise how the oil market has evolved since the beginning of the decade and the
    inter-relationships between funds and fundamentals

                   Mr. Mark Lewis - Energy Market Consultants (UK) Ltd./FACTS
                   Fundamental Driving Forces of the Oil Market

    Mr.Lewis will discuss the physical supply, demand and investment issues that have influenced the oil
    market since 2003.

                   Dr. Jeff Harris - Commodity Futures Trading Commission (CFTC)
                   Index Funds and Data Dissemination

    Dr. Harris will discuss the trial publication of index fund data for non-oil commodities, and its
    implications, along with broader issues for data dissemination.

4                               IEA Expert Roundtable on Oil Price Formation ❖ Paris ❖ Monday 17 March 2008
        Practical Information
                              Hotels Close to the IEA
                              How to Get to the IEA
                    Public Transport Information
                              Coach Services from the Airports
                                  RER (Réseau Express Régional)

   For information/advice on transfer details/hotels, please contact:
Anne Mayne
                                    +33 1 40 57 65 96
International Energy Agency
                                    +33 1 40 57 65 99
9 rue de la Fédération
Paris XV

Brid Deely
                                    +33 1 40 57 67 31
International Energy Agency
                                    +33 1 40 57 65 99
9 rue de la Fédération
Paris XV
                                            Hotels Close to the IEA

    Prices approximate   – Please ensure you request the OECD/IEA RATE (where applicable)
    Paris 15th Arrondissement

                Hotel                                 Contact Details                         Room Rates (* Special OECD/IEA

    Hotel Paris Hilton                     +33 (0)1 44 38 56 00                             Room: €249 (exclusive of breakfast)
    18 avenue de Suffren                   +33 (0)1 45 78 91 42                             Room: €269 (inclusive of breakfast)
    75015 PARIS                  

    Hotel Mercure Suffren****              +33 (0)1 45 78 50 00                             * Room: €135 -€195 (Special OECD
                                           +33 (0)1 44 38 56 10                             Online Rate, inclusive of breakfast)
    20 rue Jean Rey
    75015 PARIS                                                            See separate attachment:
                                        WEB                                  (OECD Rate Online Booking Instructions)

    Hotel Mercure Tour                     +33 (0)1 45 78 90 90                             Room: €210
    Eiffel***                              +33 (0)1 45 78 95 55                             Breakfast: €15
    64 boulevard de Grenelle     
    75015 PARIS                         WEB

    Hotel Europe***                        +33 (0)1 47 34 07 44                             * Single Room: €95
                                           +33 (0)1 45 66 47 13                             (excluding breakfast)
    103 boulevard de Grenelle
    75015 PARIS                  

    Hotel Campanile                        +33 (0)1 45 78 61 33                             * Room: €71
    30 rue Saint-Charles                   +33 (0)1 45 79 41 13                             Breakfast: €8
    75015 PARIS                  

    Paris 16th Arrondissement

                Hotel                                 Contact Details                         Room Rates (* Special OECD/IEA

    Hotel Passy Eiffel***                  +33 (0)1 45 25 55 66                             Room: €140-€175
    10 rue de Passy                        +33 (0)1 42 88 89 86                             Breakfast: €11
    75016 PARIS                            ___ @___

    Hotel Gavarni**                        +33 (0)1 45 24 52 82                             Single Room: €135-165
                                           +33 (0)1 42 88 89 86                             (excluding breakfast)
    5 rue Gavarni
    75016 PARIS                  

    Hotel Regina Passy                     +33 (0)1 55 74 75 75                             Double Room: €149
    6 rue de la Tour                       +33 (0)1 40 50 70 62                             Breakfast: €10 - €15
    75116 PARIS                  

6                                        IEA Expert Roundtable on Oil Price Formation ❖ Paris ❖ Monday 17 March 2008
          Practical Information
                    How to Get to the IEA

International Energy Agency, 9 rue de la Fédération – PARIS 15
               Telephone (IEA Reception): 01 40 57 65 00
    [Métro: Bir-Hakeim (Line 6) RER C: Champs de Mars, Tour Eiffel] Bus: 42, 82

                                                          Energy Agency
                                            Public Transport Information

    Coach Services from the Airports
    Two companies (Cars Air France and Roissybus) operate good services from the airport to the centre of Paris.

       Air France Coaches

    RER (Réseau Express Régional)
    Central Paris is easiily accessible from both Charles de Gaulle and Orly Airports using the RER (Réseau Express

    The IEA can be reached by using RER C (Champs de Mars, Tour Eiffel).

    Lines 42 and 82 stop nearby the IEA.

    There are ample taxis available at airports and train stations; a taxi rank is always close by in central Paris.

    The closest metro stop to the IEA is on Line 6, Bir-Hakeim.

8                                          IEA Expert Roundtable on Oil Price Formation ❖ Paris ❖ Monday 17 March 2008
  Oil Market Report - Contacts

  Editorial Enquiries
  Lawrence Eagles                                                 +33 (0*)1 40 57 65 90
  Editor/Head of the Oil Industry and Markets Division  

  Eduardo Lopez                                                   +33 (0*)1 40 57 65 93
  Oil Demand Analysis                                   

  David Fyfe                                                      +33 (0*)1 40 57 65 94
  Oil Supply Analysis                                   

  Julius Walker                                                   +33 (0*)1 40 57 65 22
  Prices/OECD Stocks                                    

  David Martin                                                    +33 (0*)1 40 57 65 95

  Toril Bosoni                                                    +33 (0*)1 40 57 66 36
  Oil Demand Analysis                                   

  James Ryder                                                     +33 (0*)1 40 57 66 18

  Anne Mayne                                                      +33 (0*)1 40 57 65 96
  Editorial Assistant                                             anne.mayne

  Editorial Enquiries Fax:                                    (+33) 0*1 40 57 65 99

  Media Enquiries

  IEA Press Office                                                +33 (0*) 40 57 65 54
                                                                            * 0 only within France

     Subscription and Delivery Enquiries
     Oil Market Report Subscriptions
     International Energy Agency
     BP 586-75726 PARIS Cedex 15, France

International Energy Agency, 9 rue de la Fédération, 75739 PARIS Cedex 15, France
 Oil Industry and Markets Division – Direct Fax Line: +33 (0*)1 40 57 65 99 –   (* 0 only within France)

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         systems of IEA countries? How are their emergency structures organised? How prepared is the IEA to deal with an oil
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         World Energy Outlook 2007 – China and India Insights
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         Natural Gas Market Review 2007
         Natural gas heats our homes, powers our factories, and increasingly generates electricity, safely and cleanly. Over
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         • What aspects of OECD gas markets need to be improved to deliver greater security and efficiency?
         • What are the risks of increasing reliance on imports from Russia and the Middle East?
         • Are strategic stocks of natural gas - similar to emergency oil stocks - a viable safety net to a supply disruption?
         • Will there be enough investment in pipeline gas or will more need to be spent on LNG?
         • What are the impacts of gas security on oil markets and power generation security?
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         The Natural Gas Market Review 2007, the second issue in a new IEA publications series, addresses key questions in this
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         Energy Use in the New Millennium
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         clean energy and sustainable development as key global challenges. They agreed that we must transform the way we
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