Prepare for gasoline prices to hit $2.25 a litre by 2012 and for crude
oil to soar to $225 US a barrel as scant supply growth delivers us
into the "age of scarcity," says CIBC World Markets chief economist
Jeff Rubin.
"Our latest review of probable supply suggests oil production will
hardly grow at all, with average daily production between now and 2012
rising by barely more than a million barrels per day, Rubin said in
his report, The Age of Scarcity. "Despite the recent record jump in
oil prices, the outlook suggests oil prices will continue to rise
steadily over the next five years, almost doubling from current
levels."
He said there has been no growth in oil supply over the past two and
half years, contrary to popular misconception.
Whereas total output has grown to an estimated 86 million barrels a
day, the growth has been in related products known as natural-gas
liquids, such as butane, used in cigarette lighters. With many oil-
producing countries subsidizing prices, demand for oil and gasoline
has surged in the developing world as new affluence drives auto
purchases. With many oil-producing countries subsidizing prices,
demand for oil and gasoline has surged in the developing world as new
affluence drives auto purchases.
But those liquids - other than lightly used propane - are not
transportation fuels, which now account for half of the world's oil
use and more than 90 per cent of demand growth in recent years.
With many oil-producing countries subsidizing gasoline prices, demand
has surged in the developing world as new affluence drives auto
purchases.
But as prices soar in countries belonging to the Organization for
Economic Co-operation and Development, where consumers not only pay
full prices but excise taxes as well, demand is destined to fall.
"The point of the fact is that for every extra driver that gets a car
and goes on the road in those (developing) countries in the next five
to six years, somebody's having to get off the road in the OECD
countries," Rubin said.
That situation will only be exacerbated by major oil-producing
countries like Russia and Saudi Arabia consuming more oil themselves,
thus reducing supplies available for export.
By 2012, more oil will be consumed in the developing world than in the
developed world, "a virtually unthinkable prospect a little over a
decade ago, when consumption outside of the OECD measured little more
than half of the OECD's annual oil intake."
"The point is that the solution lies not with the supply curve, it
lies with the demand curve," Rubin said. "It's not about finding new
sources of energy supply, it's about consuming less energy, because
ultimately, that's what we're going to have to do."
Oil prices have spiked in recent weeks as the U.S. dollar fell and
supply fundamentals weakened. They eased $2.21, or 1.9 percent, to
$116.09 a barrel US on Thursday.
Gasoline prices have been similarly rising and averaged $1.24 a litre
for regular gas across Canada on Thursday, according to price-
monitoring site Gasbuddy.com.
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