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IF the
$100-per-barrel cost of oil sent the Arroyo
administration in such a frenzy that it called an energy
summit in only three weeks, imagine what the next
administration will do if oil actually hits $225 per
barrel after 2010.
According to a new study from Canada-based
investment-banking firm CIBC World Markets Inc., oil
prices will surge to $115 per barrel this year and
continue rising to $225 per barrel in 2012.
CIBC
chief strategist and chief economist Jeff Rubin said oil
prices will gradually increase to $130 per barrel in
2009, $150 per barrel by the time President Arroyo ends
her term and $190 per barrel by 2011.
“We have
reduced our estimates for net global-supply increases by
nearly 1 million barrels per day for the 2008 through
2010 period, and by over half a million barrels for the
two years after that, leading to a discernibly tighter
oil market than we had previously projected,” Rubin said
in the study.
“At the
same time, there is little evidence to suggest that
there is any compensating reduction in global demand
growth,” he added.
Rubin
also said oil production will increase by another
200,000 barrels per day in 2011 but will fall in 2012.
This will indicate more than a million-barrel increase
in global production between 2008 and the end of the
decade.
However,
he said these levels may only be a minimum of the demand
and is not an exact projection. Nonetheless, Rubin said
world oil markets will remain as tight over the next
five years as they have over the last two years.
“Whether, in fact, these levels will define ultimate
production peaks or not, cannot, of course, be known at
this time; but whether they do or do not define such
peaks, they indicate at a minimum that world oil markets
will remain as tight over the next five years as they
have over the last two years,” Rubin said.
The
aggregate crude demand remains robust owing to
burgeoning demand for crude oil in non-OECD countries,
major oil-producing countries, in particular, and in
developing countries, according to Rubin.
In fact,
by 2012, the increase in the world’s oil consumption
will exceed that OECD consumption. He noted that over a
decade ago, consumption outside OECD countries only
measured a little more than half of the OECD’s annual
oil demand.
Among
the factors contributing to this is the projected
increase in natural-gas liquids (NGL) and the increase
in the number of car manufacturers offering
significantly lower-priced automobiles.
Rubin
said that while the International Energy Agency (IEA)
estimates that current oil production is around 86
million barrels per day, over 9 percent of this daily
production is not oil but NGL.
These
hydrocarbons, he said, represented only about 4 percent
of total oil production back in the 1970s, but they are
likely to account for over 10 percent of total
production by 2012.
However,
Rubin said while NGLs like propane and butane are
valuable hydrocarbons, they will not be suitable
substitutes for oil.
Meanwhile, the entry of India-and China-based
car-manufacturing firms in the world market—Tata Motors
and Chery—which have significantly reduced car prices in
developing countries, will be a factor in the next few
years.
For Tata
Motors, the model Tata Nano is seen as a bestseller
since it only sells for $2,500, while Chery cars are now
sold in the Philippines for as low as P300,000.
With
very affordable rates, these two car companies are
making it possible for millions of Asians to afford
automobiles when they otherwise could not.
“It is
the savings necessary to buy a car, not the price of
gasoline, that poses the greatest obstacle to fuel
demand growth in those countries. But between rapidly
rising domestic incomes and rapidly falling car prices,
that obstacle is becoming more and more surmountable,”
Rubin said.
CIBC
World Markets is the wholesale and corporate banking arm
of CIBC, a leading North American financial institution.
CIBC World Markets provides a broad range of integrated
credit and capital-markets products, investment banking
and merchant banking to markets in key financial centers
around the world. |
