Oil Prices WILL Double by 2012: Canadian Bank Study
Canadian Imperial Bank of Commerce (CIBC) released a brutal report on Thursday predicting that the oil is likely to hit 150 dollars (Canadian, US) a barrel by 2010 and soar to 225 dollars a barrel by 2012 as supply becomes increasingly tight.
According to the Canadian banks report: the International Energy Agency's current oil production estimates overstate supply by about nine percent, since it wrongly counts natural gas liquids -- which are not viable for transportation fuel -- in its numbers. This is something we've been pointing to over and over again here at the Gold & Energy Advisor for a few years.
The CIBC report notes accelerating depletion rates in many of the world's largest and most mature oil fields and estimates oil production will hardly grow at all, with average daily production between now and 2012 rising by barely a million barrels per day.
"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," according to the reports' author.
"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."
The CIBC report also notes that while production increases are at a virtual standstill, global demand continues to grow. You think? With the Chinese economy growing at approximately 10% per year and the United States cutting interest rates and boosting fiscal stimulus to prevent a severe recession, it's hard to imagine oil consumption not growing steadily over the next 4 years.
But even putting aside the possibility that United States will bounce back any slowdown in consumption in oil will be more than offset by demand growth in developing nations in both the CBIC's view and ours.
--------------------------------Advertisement---------------------------------
-------------------------------------------------------------------------------
One very interesting aspect in the report was the citing of the recent launch of Tata's 2,500-dollar car that will allow millions of people in India to soon own automobiles. With all these small autos crisscrossing India at 50 mph is going to mean a big boost in Indian oil demand. Throw in the rapid growth of car sales in Russia (up 60 percent), Brazil (up 30 percent in Brazil) and China (up 20 percent) and we have a massive amount of oil demand about to hit the world market.
The premise of $200 oil was further cited as an increasing likelihood by the President of OPEC yesterday. The comments made by Chakib Khelil, Algeria's energy minister who blamed record oil prices on the weak dollar and global political insecurity.
Quoted by El Moudjahid, Algeria's government newspaper:
"I don't think that an increase in production would help lower prices, because there is a balance between supply and demand and the stocks of gasoline in the United States have recorded a surplus and are at their highest level for five years."
Adding:
"The prices are high due to the recession in the United States and the economic crisis, which has touched several countries, a situation that has an effect on the value of the dollar. Each time the dollar falls 1 per cent, the price of the barrel rises by $4 and of course vice versa."
Repeat after me, transport fuel now accounts for half of the world's oil usage. Oil is heading much higher the next few years, even if there's a short term pull back. The oil and gold story are a long way from over. Gold $2,500 and $200 oil are very likely ahead. Don't miss the boat.
Best Wishes,
James DiGeorgia
Editor and Publisher
Please see risk disclosure link below.
