By Canadian Press –
TORONTO (CP) — Growing demand from the developing world and the United States will cause crude oil prices to almost double to $100 US a barrel by 2010, economists at CIBC World Markets suggest.
The report by Jeff Rubin and Peter Buchanan suggests that supply growth will lag consumption, pushing the price ever higher this decade.
”While demand forecasts are ratcheting up, those of supply growth are moving in the other direction,” the study released Tuesday said.
”Saudi Arabia, traditionally the backstop of global supply, is already experiencing rising water rates in its mother lode Ghawar field, an early indicator of depletion that has already resulted in falling production levels in neighbouring Oman.”
The report echoes a prediction last week by American investment firm Goldman Sachs that oil could hit $105 US a barrel.
The May contract for light sweet crude closed at $56.04 US a barrel on the New York Mercantile Exchange on Tuesday.
Goldman Sachs, a major trader in the energy markets, said oil markets ”may have entered the early stages of what we have referred to as a ‘super spike’ period _ a multi-year trading band of oil prices high enough to meaningfully reduce energy consumption.”
The CIBC report said exploding demand for oil in rapidly industrializing Asian economies has permanently ratcheted up global consumption growth.
”Even if energy demand growth slows in the U.S. and Europe and actually declines in Japan, world crude demand in unlikely to grow by less than 2.5 per cent per year without significant increases in crude prices,” the report said.
”The implications of current growth may soon become staggering relative to available supply growth,” it added, concluding that ”prices must ultimately ration demand.”
Source: Resource Investor