Gas Prices Could Skyrocket to $4.50 Per Gallon
By David Anderson
A new report by CIBC World Markets is predicting that gas prices could skyrocket to as high as $4.50 a gallon in the near future. A press release issued by the group described the reported content. The report claims that increased demand will create new pressures on the world's oil supply, leading to further increases in gas prices.
Increased demand for oil in the world's developing countries is expected to combine with diminishing supply to lead to increased gas prices. The report also noted that projects to develop the world's remaining unexploited oil fields are facing unexpected delays. By 2012 the oil supply could drop by as much as 8 million barrels a day below U.S. Department of Energy and International Energy Agency projections, the press release indicated.
CIBC conducted a study of close to 200 new oil projects that were supposed to begin production within the next half decade. It projected that most of these projects will experience delays, and that start times for production had been grossly underestimated in many cases.
Jeff Rubin, Chief Strategist and Chief Economist for CIBC World Markets, claimed that such delays will cause Canada and Venezuela to reduce oil production projections for 2012 by more than 700,000 barrels a day.
Depletion of existing oil fields is expected to increase to a rate of four percent, which could cut global oil production by a rate of up to 4 million barrels per day annually. "Even holding the current depletion rate constant over the next five years, we must produce nearly 20 million barrels per day of new oil just to offset what will be lost through depletion during this period," Rubin said.
The report also countered International Energy Agency projections that a supply increase of 10 million barrels per day could be realized by 2012. Instead, the report estimated that the increase would more likely lie at around 3 million barrels per day, due to project delays and the depletion of existing oil fields.
Increased demand for oil in countries like China, India, and Russia could push gas prices as high as $150 a barrel by 2012, according to Rubin. He also projected that oil consumption in OPEC nations would increase along with gas prices. Higher incomes produced by rising gas prices would lead consumers in OPEC nations to increase their own oil use, he explained.
By 2012, Rubin expects to see demand for oil to fall 10 percent, or about 2 million barrels per day, because of skyrocketing prices.