A response to Phyllis 20 on other Board

An excellent commentary on the dynamics of the supply situation! Please allow me to add some observations and comments as I perceive the supply/demand scenario and likely outcomes.

1. Demand curve relative to increased expense of fuel and changeover in automotive inventory.

It is my belief that over a protracted period of time, you are correct in your overall premise. However, this change over will require a longer time frame than contemplated. This will be due to the fact that large fuel inefficent vehicles are presently and at an increasing rate, a drag on the market. This results in depreciated value on trade in and likely, many who will continue to drive inefficent vehicles while they accumulate funds for a more efficent mode of transportation.

2. Inflation will be a further drag on automotive change over.

It is apparent that the United States intends to deal with its fiscal and monetary crises through inflating its economy and thereby paying off its debts in reduced in value US Dollars. This in turn will result in higher fuel prices as denominated in US Dollars. A further drag on the US economy!

3. Demand destruction.

Demand destruction is already taking place in the United States as people begin to rely on public transportation where available. Likely, public transportation will grow as municipalities and private companies find it a growing businesss premise.

4. Emerging market demographcs.

The reduction in US fuel demand will be absorbed by an increasing consumption in emerging economies.

5. US Legislative malfeasance.

This past week the US House of Representatives passed a law continuing the ban on exploration for oil & nat gas in all territorial waters except the already approved and significantly developed Gulf of Mexico. Additionally, the same legislation prevents development of known resource on Alaskas Eastern Slope. The estimates of available resource in these areas is 300 billion barrels to 1 trillion barrels. The only valid mechanism for reducing fuel prices is to increase the supply. Obviously, the US political structure is sadly lacking in recognition and commitment to addressing these issues.

All in all, a rather gloomy and short sighted and dispiriting policy for dealing with the economic and political realities of the 21st century!

BKM