CIBC World Markets has just released a stunning yet detailed economic analysis of near-term oil prices and impacts. The PDF has some excellent figures I will convert to JPEGs.
The two key pieces are “Getting off the Road–Adjusting to $7 per Gallon Gas in America” and “Oil and Growth–That 70s show Re-Run“. Main points:
- “That additional 200,000 barrels per day pledged from Saudi Arabia is a pittance compared to the four million barrels per day this year that depletion will hive off world production. What little increase in production Saudi is capable of will probably all be gobbled up by that country’s own voracious appetite for energy.”
- China’s recent oil subsidy drop? Another yawner: “Most North Americans would gladly line up at the pumps for China’s now $3.25 a gallon gas.”
- “The only supply response to date has been yet another round of cost overruns and lengthy project delays running the gamut from Canadian oil sands to deepwater Gulf of Mexico wells.”
- “With the basic laws of supply and demand no longer operative in crude oil markets,” CIBC is”compelled to once again raise our target prices for oil” to “an average price of $200 per barrel by 2010.” That “should translate into a near-$7 per gallon pump price within two years, a 70% increase from today’s already record levels.”
- “Higher oil prices spell stagflation for the US economy next year” and beyond. The report has a good analysis of why “The US economy has managed to avoid feeling the full brunt of oil prices over the last few years, but 2009 will be the year that its luck runs out.”
The analysis seems very solid and suggests the only thing that can “save” us from near-$7 gas by 2010 is a major global recession, but even that would only be a temporary respite. The implications for Detroit is staggering: