September 18, 2007
Falling OPEC exports will drive prices to US$100 per barrel in 2008, says Canadian oil economist
Cork, Ireland – Oil prices are likely to hit US$100 per barrel by the end of 2008, as soaring rates of domestic oil consumption in the world’s leading oil producing nations cuts into their export capacity, says CIBC World Markets chief economist Jeff Rubin.
Rubin’s comments were made at the sixth annual Association for the Study of Peak Oil & Gas conference in Cork, Ireland. He told delegates that the export capacity of OPEC, Russia and Mexico will drop by 2.5 million barrels per day by the end of the decade.
“Domestic demand growth of as much as five per cent per year in key oil-producing countries is already beginning to cannibalize exports and will increasingly do so in the future, as production plateaus or declines in many of these countries,” Rubin says. “OPEC members together with independent producers Russia and Mexico consume over 12 million barrels per day, surpassing Western Europe to become the second-largest oil market in the world.”
Rubin says that these trends will result in today’s US$80 barrel of oil to reach as high as US$100 by the end of 2008, although consumers in many major oil-producing countries pay nothing near the global price for crude. He finds that highly-subsidized gasoline prices are often a significant factor in surging rates of domestic oil consumption, with many countries pricing oil as little as US$10 per barrel.
Rubin says that with exports from OPEC, Russia and Mexico expected to decline by seven per cent over the next three years, markets will seek greater reliance on unconventional, higher-cost deposits. He expects that Canadian oil sands will surpass deep water wells as the single largest source of new oil exports by the end of the decade.