There may be no end in sight for high prices at the pumps, with CIBC's top economist predicting gas prices will keep rising, hitting $2.25 per litre by 2012.
The price of a barrel of oil -- one of the driving factors for fluctuating fuel prices, is expected to hit US$150 by 2010 and US$225 by 2012.
Jeff Rubin, CIBC's chief strategist and chief economist, said in a news release Thursday that prices will hit $1.40 per litre in Canada this summer before spiking even higher in following years.
Rubin explained that while natural gas production has increased since 2005, oil production has remained static since in the past two years, despite increasing demand.
He said that's a big part of why oil prices have doubled in the same two-year period.
"In light of these developments we have re-examined our projected supply increases," Rubin said.
"The distinction turns out to be critical. Roughly 50 per cent of the increase in expected production is likely to come from natural gas liquids, leaving only small marginal gains in petroleum supply over the next two years."
Crude oil prices remained high on the New York Mercantile Exchange Thursday. Light, sweet crude delivery for June closed at US116.06 per barrel, just shy of Tuesday's record high of $119.90.
Here are some of the average gas prices across Canada (per litre) on Thursday:
- Newfoundland: $1.32
- Halifax: $1.26
- Montreal: $1.35
- Toronto: $1.21
- Edmonton: $1.17
- Vancouver: $1.27
Liberal MP Dan McTeague has been watching gas prices in Canada for years. He told 麻豆影视 he believes there could be a break coming as early as Thursday night.
"With a growing move towards international recession, it will reduce demand," he said.
But Rubin suggests a possible drop in demand would be swallowed up by the gap between natural gas production and oil production, which he expects to widen as the geography of oil and natural gas production continues to change.
While natural gas production only represented four per cent of total oil production in the 1970s, it is predicted to climb to over 10 per cent by 2012.
Meanwhile, output from many of the largest oil fields that produce the lions share of the world's petroleum, is slowing.
Typically, as an oil reservoir depletes, pressure falls and dissolved natural gas is released, forming an expanding "cap" over many mature oil fields, CIBC explains.
As a result, Rubin predicts the oil production outlook is more grim than many believe. He said current oil supply estimates by the International Energy Agency are about 9 per cent higher than they should be, since they factor in natural gas which can't be used as an oil substitute.
"Whether we have already seen the peak in world oil production remains to be seen, but it is increasingly clear that the outlook for oil supply signals a period of unprecedented scarcity," adds Rubin.
"Despite the recent record jump in oil prices, oil prices will continue to rise steadily over the next five years, almost doubling from current levels."
