Gas prices are high

'Age of scarcity' will drive oil to $225 US a barrel: CIBC
John Morrissy , Canwest News Service
Published: Thursday, April 24, 2008

OTTAWA - Prepare for gasoline prices to hit $2.25 a litre by 2012 and for crude oil to soar to $225 US a barrel as scant supply growth delivers us into the "age of scarcity," says CIBC World Markets chief economist Jeff Rubin.

"Our latest review of probable supply suggests oil production will hardly grow at all, with average daily production between now and 2012 rising by barely more than a million barrels per day, Rubin said in his report, The Age of Scarcity. "Despite the recent record jump in oil prices, the outlook suggests oil prices will continue to rise steadily over the next five years, almost doubling from current levels."

He said there has been no growth in oil supply over the past two and half years, contrary to popular misconception. Whereas total output has grown to an estimated 86 million barrels a day, the growth has been in related products known as natural-gas liquids, such as butane, used in cigarette lighters.

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By 2012, more oil will be consumed in the developing world than in the developed world, "a virtually unthinkable prospect a little over a decade ago, when consumption outside of the OECD measured little more than half of the OECD's annual oil intake."

"The point is that the solution lies not with the supply curve, it lies with the demand curve," Rubin said. "It's not about finding new sources of energy supply, it's about consuming less energy, because ultimately, that's what we're going to have to do."

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