If you think oil costs a lot now, just wait a couple years. Jeff Rubin, chief economist of CIBC World Markets, a major financial institution, predicts oil will hit $150 a barrel within four years, possibly sooner, according to the Toronto Star.
Why? In a nutshell, the other experts expect too much supply from so-called "mega projects," too much political stability from the world's oil-producing nations and too much fair weather. Their expectations are too optimistic.
Rubin argues that costly delays will continue to mark the development of newly tapped oil reserves, like oil sands, oil shale and new deep-water deposits. He argues that violence is likely to disrupt supply, or spark fears enough to drive up the cost. And he argues that extreme weather will interrupt the flow of oil from important regions.
In other words, a combination of scenarios that a Peak Oil analyst would embrace namely, moving toward reserves that are expensive to exploit because the cheap and easy crude is being depleted and confounding political and environment circumstances that upset the flow of the remaining cheap stuff. We call that political peak oil. Rubin, it should be noted, embraces the peak oil theory, and believes we've already hit the peak.
Certainly, 2007 demonstrated that each of these scenarios is as likely as smooth sailing on the world oil markets. Mexican oil supply was disrupted by hurricanes. Nigerian oil was disrupted by violence. Kurdish Iraqi oil was disrupted by the threat of Turkish military action.
"Don't think of today's prices as a spike. Don't think of them as a temporary aberration," Rubin told the Star. "Think of them as the beginning of a new era."
Whether or not Rubin is right, it might be wise to hedge our bets. If cheap oil is out, then alternative and clean-burning alternatives need to be developed quickly.
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