IEA Expert Roundtable on Oil Price Formation

<strong>IEA</strong> <strong>Expert</strong> <strong>Roundtable</strong>
on Oil Price Formation
Monday 17 March 2008
International Energy Agency
9 rue de la Fédération
PARIS 15, France

Introduction
<strong>IEA</strong> <strong>Expert</strong> <strong>Roundtable</strong> on Oil Price Formation
Background
With oil prices having recently hit $100 a barrel and trading near record nominal and inflationadjusted
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 <strong>Roundtable</strong>, 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.
Outline
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 <strong>IEA</strong> 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.

Programme
Monday 17 March
08.45 Registration
<strong>IEA</strong> <strong>Expert</strong> <strong>Roundtable</strong> on Oil Price Formation
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 [<strong>IEA</strong>]
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
<strong>IEA</strong> <strong>Expert</strong> <strong>Roundtable</strong> on Oil Price Formation ❖ Paris ❖ Monday 17 March 2008 3

Speaker Synopsis
<strong>IEA</strong> <strong>Expert</strong> <strong>Roundtable</strong> 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 <strong>IEA</strong> <strong>Expert</strong> <strong>Roundtable</strong> on Oil Price Formation ❖ Paris ❖ Monday 17 March 2008

Practical Information
Hotels Close to the <strong>IEA</strong>
How to Get to the <strong>IEA</strong>
Public Transport Information
Coach Services from the Airports
RER (Réseau Express Régional)
Bus
Taxi
Metro
For information/advice on transfer details/hotels, please contact:
Anne Mayne
International Energy Agency
9 rue de la Fédération
Paris XV
Brid Deely
International Energy Agency
9 rue de la Fédération
Paris XV
+33 1 40 57 65 96
+33 1 40 57 65 99
anne.mayne@iea.org
+33 1 40 57 67 31
+33 1 40 57 65 99
bridget.deely@iea.org

Hotels Close to the <strong>IEA</strong>
Prices approximate – Please ensure you request the OECD/<strong>IEA</strong> RATE (where applicable)
Paris 15th Arrondissement
Hotel
Hotel Paris Hilton
18 avenue de Suffren
75015 PARIS
Contact Details
+33 (0)1 44 38 56 00
+33 (0)1 45 78 91 42
reservation.paris@hilton.com
WEB www.hilton.com
Room Rates (* Special OECD/<strong>IEA</strong>
Rates)
Room: €249 (exclusive of breakfast)
Room: €269 (inclusive of breakfast)
Hotel Mercure Suffren****
20 rue Jean Rey
75015 PARIS
+33 (0)1 45 78 50 00
+33 (0)1 44 38 56 10
H2175@accor.com
WEB www.mercure.com
* Room: €135 -€195 (Special OECD
Online Rate, inclusive of breakfast)
See separate attachment:
(OECD Rate Online Booking Instructions)
Hotel Mercure Tour
Eiffel***
64 boulevard de Grenelle
75015 PARIS
+33 (0)1 45 78 90 90
+33 (0)1 45 78 95 55
hotel@mercuretoureiffel.com
WEB www.mercuretoureiffel.com
Room: €210
Breakfast: €15
Hotel Europe***
103 boulevard de Grenelle
75015 PARIS
+33 (0)1 47 34 07 44
+33 (0)1 45 66 47 13
contact@europehotelparis.com
WEB www.europehotelparis.com
* Single Room: €95
(excluding breakfast)
Hotel Campanile
30 rue Saint-Charles
75015 PARIS
+33 (0)1 45 78 61 33
+33 (0)1 45 79 41 13
paris.toureiffel@campanile.fr
WEB www.campanile.com/hotel/en/hotel-012521.htm
* Room: €71
Breakfast: €8
Paris 16th Arrondissement
Hotel
Hotel Passy Eiffel***
10 rue de Passy
75016 PARIS
Contact Details
+33 (0)1 45 25 55 66
+33 (0)1 42 88 89 86
___ @___
WEB www.passyeiffel.com
Room Rates (* Special OECD/<strong>IEA</strong>
Rates)
Room: €140-€175
Breakfast: €11
Hotel Gavarni**
5 rue Gavarni
75016 PARIS
+33 (0)1 45 24 52 82
+33 (0)1 42 88 89 86
reservation@gavarni.com
WEB www.gavarni.com
Single Room: €135-165
(excluding breakfast)
Hotel Regina Passy
6 rue de la Tour
75116 PARIS
+33 (0)1 55 74 75 75
+33 (0)1 40 50 70 62
regina@gofornet.com
WEB www.hotel-paris-passy.com
Double Room: €149
Breakfast: €10 - €15
6 <strong>IEA</strong> <strong>Expert</strong> <strong>Roundtable</strong> on Oil Price Formation ❖ Paris ❖ Monday 17 March 2008

Practical Information
How to Get to the <strong>IEA</strong>
International Energy Agency, 9 rue de la Fédération – PARIS 15
Telephone (<strong>IEA</strong> Reception): 01 40 57 65 00
[Métro: Bir-Hakeim (Line 6) RER C: Champs de Mars, Tour Eiffel] Bus: 42, 82
International
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
Régional).
The <strong>IEA</strong> can be reached by using RER C (Champs de Mars, Tour Eiffel).
Bus
Lines 42 and 82 stop nearby the <strong>IEA</strong>.
Taxi
There are ample taxis available at airports and train stations; a taxi rank is always close by in central Paris.
Metro
The closest metro stop to the <strong>IEA</strong> is on Line 6, Bir-Hakeim.
8 <strong>IEA</strong> <strong>Expert</strong> <strong>Roundtable</strong> 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 lawrence.eagles@iea.org
Eduardo Lopez +33 (0*)1 40 57 65 93
Oil Demand Analysis
eduardo.lopez@iea.org
David Fyfe +33 (0*)1 40 57 65 94
Oil Supply Analysis
david.fyfe@iea.org
Julius Walker +33 (0*)1 40 57 65 22
Prices/OECD Stocks
julius.walker@iea.org
David Martin +33 (0*)1 40 57 65 95
Refining
david.martin@iea.org
Toril Bosoni +33 (0*)1 40 57 66 36
Oil Demand Analysis
toril.bosoni@iea.org
James Ryder +33 (0*)1 40 57 66 18
Stocks/Freight/Trade
james.ryder@iea.org
Anne Mayne +33 (0*)1 40 57 65 96
Editorial Assistant
anne.mayne @iea.org
Editorial Enquiries Fax: (+33) 0*1 40 57 65 99
Media Enquiries
<strong>IEA</strong> Press Office +33 (0*) 40 57 65 54
ieapressoffice@iea.org
* 0 only within France
Subscription and Delivery Enquiries
Oil Market Report Subscriptions
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BP 586-75726 PARIS Cedex 15, France
e-mail: OMRSubscriptions@iea.org
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Oil Industry and Markets Division – Direct Fax Line: +33 (0*)1 40 57 65 99 – (* 0 only within France)
www.iea.org

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