Thursday, April 24, 2008

CIBC Analyst Predicts Forced Transformation of Economy as Fuel costs Double in Five Years Oil prices, gasoline costs to double: CIBC report

Increasingly, mainstream analysts and oil industry watchers are predicting that we are about to embark on a fundamental shift in how we do business on the planet. Such views are no longer seen coming on from the 'fringe' forecasters.

In a new report, Jeff Rubin, chief economist with CIBC World Markets Inc. forecast a continued run-up in crude prices, despite a slowing world economy and slumping petroleum demand in United States, the world's leading oil consumer. He predicts that

...crude prices – now trading at above $116 (U.S.) a barrel - to average $150 by 2010, and more than $200 by 2012. That would translate into pump prices of $7 (U.S.) per gallon in the United States, and $2.25 per litre in Canada, double the current levels.
He points out that world oil production levels has essentially stagnated at about 85-million barrels per day over the last two years, while demand is escalating from the emerging powerhouse economies of India and China. He observes that “millions of new households will suddenly have straws to start sucking at the world's rapidly shrinking oil reserves”.

This, of course, comes at the same time as surging world food prices. The price of Thai rice has now topped $1,000 per ton, which is more than triple the price from the start of this year.

Of course, those with money will continue to be able drive their SUVs to buy their rice and meat, and snow peas imported from half a planet away, while increasing numbers go hungry. Quite the world we live in.


  1. I don't think the economy can sustain a $150 a barrel oil price. Take the US economy with a $13 trillion GDP. A $90 premium on the price of oil x 20 million barrels a day x 365 days a year amounts to $675 billion or 5.2% of their GDP. Oil may be a necessity but when it comes at the expense of 5% of the rest of the economy that's one big recession!

  2. Price will only stop rising when supply is able to match the demand. Increasing the supply side of this equation is seeming less likely, as world oil production has been stalled at about 85 mb/d for over three years . I would agree that a recession is likely what will start to constrain demand and begin an easing in prices.