In Churchill Falls, N.L., drivers were shelling out $1.40 a litre for gas on Thursday, while filling stations in Montreal were charging $1.35. (CBC)

The price of gas will surge to $1.40 this summer and more than $2.25 by 2012 as oil supplies continue to deplete, a Canadian economist projected Thursday.

Jeff Rubin, chief strategist and chief economist at CIBC World Markets in Toronto, said the International Energy Agency's oil production projections are overstated. He noted that oil production has not increased in two years, straining supply.

"Whether we have already seen the peak in world oil production remains to be seen, but it is increasingly clear that the outlook for oil supply signals a period of unprecedented scarcity," Rubin said in a statement.

"Despite the recent record jump in oil prices, oil prices will continue to rise steadily over the next five years, almost doubling from current levels."

National average climbs to $1.23

The national average price of a litre of gas reached $1.23 Thursday, according to gasbuddy.com. In Churchill Falls, N.L., drivers were shelling out $1.40, while filling stations in Montreal were charging $1.35.

A growing car economy in regions including Russia, Brazil and China has boosted demand for oil, Rubin said. Moreover, India's mini-car the Nano, which is set to sell for about $2,500, is expected to significantly bump up demand for gasoline.

Rubin said higher gasoline prices will have as much impact on the types of vehicles Canadians drive as the OPEC oil shocks did in the 1970s.

"Hybrid cars are very quickly going to go from marketing fluff … to the bread and butter of car companies," he told CBC News.

'Somebody is taking a big bite out of my personal income and it's wrong.'—Leonard Oakley, commuter

The price hikes are pinching Canadian commuters. Statistics Canada estimates the work commute of 55 per cent of Canadians is, on average, about 60 minutes for a round trip.

Leonard Oakley of Elderbank, N.S., says gas — which hovers around $1.30 — is eating up about one-quarter of his paycheque.

"Somebody is taking a big bite out of my personal income and it's wrong," he said. "I'd make almost the same amount of money staying at home and being on unemployment for the year."

If pump prices continue to increase, many consumers may leave the suburbs for the city, said Hugh Millward, a geography professor at Halifax's St. Mary's University.

"For those people who live well out into rural areas and are commuting long distances, it's bound to affect them in the pocket and some of them will have to move back into the city," he said.