Gasoline to hit $1 a litre:
Canadian Imperial Bank of Commerce report
Economists say oil production near peak, as demand
continues to rise
The Ottawa Citizen Friday, October 6, 2000
Gasoline prices will climb to a dollar a litre in
Canada over the next few years as world demand for oil
outstrips supplies of the increasingly precious liquid, a
major Canadian investment house is warning.
"After rising for 140 years, world oil production
is about to peak," according to a sobering new study
by economists at CIBC World Markets released yesterday.
"Today's tight oil markets are only destined to
get tighter," said Jeffrey Rubin, chief economist.
Even with the recent spike in energy prices, world
demand is still rising at a rate that will exceed supply.
"Much higher prices will be needed to constrain
demand below the global production ceiling," warns
the study, which criticizes moves to cushion consumers
against higher prices, such as the U.S. decision to dip
into its emergency reserves or the clamour here for cuts
in energy taxes.
"There are lots of reasons for cutting the overall
tax burden in Canada," it says. "But the cuts
should not be aimed at bolstering gasoline demand at a
time of growing scarcity."
"Not only will crude rise next year to $40 per
barrel, but it will continue to climb over the next three
to four years to as much as $50 per barrel," Mr.
That translates into a jump in gasoline prices to $1 a
litre from what is now somewhat more than 70 cents a litre
on average, he said.
"With only about two million barrels of spare OPEC
capacity left, the global economy is hurtling towards an
oil supply wall at alarming speed," the report says.
At the present rate of consumption, the report warns
that "demand will exhaust potential global supply of
around 80 million barrels a day in two years."
"When it does, oil prices will ... explode."
Higher prices will eventually cut consumption, and
global economic activity, which the report says will buy
some time to lower energy use.
The report argues that potential oil production has
peaked in all but a handful of Persian Gulf nations --
Saudi Arabia, Iran, Iraq, Kuwait, the United Arab Emirates
-- which have another decade or so before they, too, see
output start to slide.
"Even if OPEC is fully accommodative, global
demand at its current rate of growth would exhaust the
roughly 2.2 million barrels a day of spare capacity in
about two years," it says.
The upside is that the shortage of oil will spur
investment in alternative energy sources, Mr. Rubin said.
"The economy is a lot less energy dependent than
it was 20 years ago, about 30 to 35 per cent less,"
he said. "But I suspect that in the next 10 years
it's going to have to become another 30-per-cent less
"And maybe, that's not such a bad thing," he
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