Even after rocketing up to $85 per barrel in mid-October, global oil prices could very well hit $100 by the end of 2008, as soaring rates of oil consumption in the world's leading oil-producing nations cut into their export capacity.

This is the forecast of Jeff Rubin, Toronto-based chief economist for CIBC World Markets, speaking this fall before the sixth annual Association for the Study of Peak Oil & Gas conference in Cork, Ireland.

The CIBC economic guru told conference delegates that the daily export capacity of OPEC, Russia and Mexico will drop by 2.5 million barrels by the end of the decade.

"Domestic demand growth of as much as 5% per year in key oil-producing countries is already beginning to cannibalize exports, and will increasingly do so in the future as production [either] plateaus or declines in many of these countries," he says.

Rubin points out that OPEC members, together with independent producers Russia and Mexico, now consume more than 12 million barrels per day, surpassing Western Europe to become the second-largest oil market in the world.

"At current rates of domestic consumption, the future export capacity of OPEC, Russia and Mexico must increasingly be called into question."

Moreover, he believes this consumption trend is likely to result in a sharp escalation in world oil prices during the next few years. Specifically, he predicts recent $85 oil prices will reach as high as $100 by the end of 2008-and that with exports from OPEC, Russia and Mexico expected to decline during the next three years, global markets will seek greater reliance on higher-cost unconventional oil deposits.

In this context, the CIBC economist expects supply from Canada's oil sands will surpass deepwater production as the largest source of new oil exports by decade's end.

Western Canada's oil sands will likely become increasingly more coveted, he says, because they represent anywhere from 50% to 70% of the world's oil supply that's open to private investment-depending on one's view of the investment climate in Nigeria and Kazakhstan.

For most multinational firms, the world is rapidly shrinking, he says. "Increasingly, they are shut out of the backyards of all the state-owned oil patches and have to compete against those state firms in places still open to private investment.

"Canada remains one of the few places where there is still private access to strategically important reserves, in sharp contrast, for example, to the oil-sands deposits in Venezuela."

Nearly as bullish as Rubin in its oil-price outlook is the Raymond James & Associates energy-research team in Houston. In early October, it raised its fourth-quarter 2007 oil-price forecast from $70 to $80.

"Our analysis suggests that the supply/demand fundamentals for oil are tighter today than they were a year ago, even with a prospective slowdown in the global economy," says research director J. Marshall Adkins. He notes that West Texas Intermediate crude prices have remained above $60 for more than six months and above $70 for the entirety of September.

"We are looking at meaningful consecutive oil-inventory reductions this year and in 2008, despite conservative supply/demand assumptions."

Raymond James analyst John Freeman adds, "We believe that rising global demand, coupled with OPEC's production cuts and the increasing visibility of geopolitical risks, are likely to keep oil prices near $80 per barrel-if not higher-going forward."

Accordingly, the firm's researchers have increased their 2008 oil-price forecast from $70 to $80 and set their initial 2009 forecast at $85 per barrel.

Meanwhile, in the intermediate term, they believe the potential downside to oil will be limited to OPEC's de facto price floor, which they estimate to be in the range of $55 to $60 per barrel-at the very least.

Counterbalancing this downside, however, are the aforementioned geopolitical risks which will continue to unnerve the market, says Adkins. He notes, in particular, the possibility of further terrorism in Iraq and Saudi Arabia, instability in Nigeria and Venezuela, political turbulence in Russia, and nuclear tensions with Iran-all of which have helped raise concerns and prices during the past two years.

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