A new report by Jeff Rubin and Peter Buchanan at CIBC World Markets predicts that oil will hit $100 per barrel by the end of 2008.
It echoes a recent report published on The Oil Drum that found oil exporting countries past their production peaks are reducing their exports faster than their depletion rates so they can meet domestic demand.
The authors also note that while rising oil prices have cooled demand in industrialized countries, most of the demand growth is coming from the oil producing countries themselves.
The resilience of world crude demand to the doubling in prices in the last three years has economists scratching their heads about the apparent lack of price sensitivity in world crude demand.
Pointing out that inside oil exporting countries, cheap domestic gasoline prices are "considered a political birthright," Rubin and Buchanan argue that without price signals, domestic consumption inside OPEC, Russia and Mexico will continue to go up even as national output peaks and goes into decline.
With consumption growth in the Middle East quintuple the advanced economies' pace, OPEC's future export capacity must be increasingly called into question. Particularly now that the cartel no longer seems to be able to raise production. ...
While OPEC production may be close to a peak, domestic demand for oil in OPEC member countries has nowhere to go but up. At current internal consumption rates, the cartel's exportable surplus will decline steadily over the balance of the decade - even if new production offsets the mounting toll taken from depletion. With domestic production more or less constant over the balance of the decade, internal demand growth will reduce exports by about 1 million barrels per day between now and the end of the decade.
The report also notes that opportunities to offset export declines from OPEC are limited. Mexico is past past its production peak, while Russian production will grow only modestly, even as consumption continues to rise in those countries as well. Similarly, Iraq is too unstable to maintain reliably, let alone grow, its oil production.
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