$1.50-a-litre gasoline on the way, CIBC says
Last Updated: Thursday, January 10, 2008 | 11:11 AM ET
CBC News
A growing gap between oil supply and demand will drive gasoline prices in Canada to $1.50 a litre "in the near future," according to a report Thursday by CIBC World Markets.
The investment bank says increasing demand in developing countries, depletion in existing oilfields and delays in putting new fields into production will constrain supply growth over the next five years.
Gasoline now averages $1.07 a litre, according to a national pump price survey
(CBC)
These factors will result in oil supplies increasing by only three million barrels a day by 2012, far below the 10-million-barrel-a-day estimate from the International Energy Agency.
That's a recipe for $150 US-a-barrel oil within five years, said CIBC World Markets chief economist Jeff Rubin. Oil is about $94 US a barrel now.
"Soaring rates of car ownership in countries like Russia and China have boosted fuel demand in both countries," Rubin said.
"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," he said.
CIBC World Markets came up with its supply estimates after looking at almost 200 new oil projects scheduled to come on stream by 2012. The investment bank said its review found that project operators are invariably too optimistic about when production will actually start.
The report notes that almost all of the increase in global oil production has been because of unconventional supply, like offshore oilfields and oilsands — sources that are prone to major delays.
"Where we're expecting to get our oil supply growth in the next four to five years are very problematic sources from an environmental standpoint, from an operational standpoint and a cost standpoint," Rubin told CBC News.
Gasoline at $1.50 a litre would be quite a shock to Canadian drivers. That's well above current levels. The national pump price averaged about $1.07 as of Tuesday, according to the consulting firm MJ Ervin & Associates.
The record high for regular gas was an average of $1.26 a litre, set in September 2005, in the aftermath of Hurricane Katrina.
