Food and Fuel America.com: New Report Predicts $150 a Barrel Oil

Monday, January 14, 2008

New Report Predicts $150 a Barrel Oil

A new report(pdf) predicts that surging demand in developing economies combined with accelerated depletion of existing supply and widespread delays in getting new oil fields up and running will see the global supply of oil fall as much as eight million barrels.

Mr. Jeff Rubin, Chief Strategist and Chief Economist at CIBC World Markets, predicts that major project delays and increasingly rapid depletion will result in a supply increase of only about three million barrels a day by 2012 - far below the 10 million barrels projected by the International Energy Agency.

Demand for oil in China, India, Russia and in the world's largest oil-producing countries themselves, are increasing the demand-supply gap that will push crude oil prices to as high as US$150 a barrel by 2012.

"Soaring rates of car ownership in countries like Russia and China have boosted fuel demand in both countries," says Mr. Rubin. "For example, gasoline, a key driver of rising oil use, is growing at over six per cent in both countries. But an even more important factor has been massive price subsidization in OPEC countries which has spurred extraordinary near-double-digit growth in oil demand.

This unchecked soaring demand means that oil-producing nations will not be able to add any additional exports to meet the surging demand.

In the U.S. alone, with soaring crude prices pushing the cost of gasoline to US$4.50 a gallon, Mr. Rubin expects American demand for oil to drop by 10 per cent or nearly two million barrels a day by 2012.

Source: CIBC World Markets

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