Oil prices, gasoline costs to double: CIBC report

The close: Commodities beaten, Microsoft beats

RTGAM

Everything that was cold turned hot (and vice-versa) on Thursday after investors bet that the worst of the U.S. economic decline could be over. The new attitude could have to do with reports that the U.S. Federal Reserve is nearly done with its rate-cutting campaign, which is giving investors the feeling that the economy is nearing a turn - and, indeed, the previous rate cuts could be taking effect.

This sudden switch was bad news for the S[amp]amp;P/TSX composite index, among the best-performing indexes in the world this year and one of just a few that is above water. It closed at 13,966.33, down 103.47 points or 0.7 per cent.Investors ran away from what the benchmark index does best - provide exposure to commodities - and into the arms of previously beaten up stocks as they embraced riskier parts of the market.

The materials sub-index fell 3.5 per cent, partly a response to the fact that gold fell below $900 (U.S.) an ounce, well off its $1,000 level last month. The energy sub-index fell 2.9 per cent, with crude oil falling more than $2 a barrel, to $116.Potash Corp. of Saskatchewan Inc. fell 4.7 per cent, marking its second consecutive day of steep losses as it tumbles from a record high. EnCana Corp. fell 3.8 per cent, Canadian Natural Resources Ltd. fell 4.5 per cent and Goldcorp. Inc. fell 5.7 per cent.

Together, these four stocks alone accounted for 87 points of the index's 103-point dip.In the United States, the Dow Jones industrial average closed at 12,848.95, up 85.73 points or 0.7 per cent. Here, commodity producers, too, were thrown out the window as investors bought stocks that should benefit from a stronger - or at least more stable, economy. American International Group Inc. rose 7.1 per cent, General Motors Corp. rose 5.6 per cent and Citigroup Inc. rose 4.6 per cent.The broader S[amp]amp;P 500 closed at 1388.82, up 8.89 points or 0.6 per cent.

There, Ford Motor Co. surged 11.8 per cent, bond insurer MBIA Inc. rose 11.5 per cent and Apple Inc. rose 3.7 per cent.Microsoft Corp., which reported first-quarter results after trading ended, rose 1.1 per cent. It reported earnings, though down 11 per cent, that beat analyst expectations and also forecast higher than expected sales for the rest of the year.[amp]nbsp;Copyright 2001 The Globe and Mail

Oil prices, gasoline costs to double: CIBC report

SHAWN MCCARTHY
Thursday, April 24, 2008

OTTAWA — Crude oil prices will soar to more than $200 (U.S.) per barrel over the next five year – driving Canadian pump prices to $2.25 a litre and forcing a fundamental transformation in the North American economy, says Jeff Rubin, chief economist with CIBC World Markets Inc.
In a new report, Mr. Rubin forecast a continued run-up in crude prices, despite a slowing world economy and slumping petroleum demand in United States, the world's leading oil consumer.

He said he expects crude prices – now trading at above $116 (U.S.) a barrel - to average $150 by 2010, and more than $200 by 2012. That would translate into pump prices of $7 (U.S.) per gallon in the United States, and $2.25 per litre in Canada, double the current levels.

“Whether we are already at the peak of world oil production remains to be seen, but it increasingly clear that the outlook for oil supply signals a period of unprecedented scarcity,” the economist said.

World oil production has essentially stagnated at about 85-million barrels per day over the last two years, with growing demand met by increases in natural gas liquids, a fuel source that is used by the petrochemical industry but is of little use for transportation.

Mr. Rubin said he expects crude oil production to grow by about 1-million barrels per day over the next several years.
Meanwhile, growing demand in China, India, Russia and the Middle East will more than offset declines in the industrialized world.

“Millions of new households will suddenly have straws to start sucking at the world's rapidly shrinking oil reserves,” he wrote.

He said the sharply higher oil prices will prove devastating for the North America's industrial base, particularly the auto industry. But Canadians will benefit from the spinoffs, in terms of jobs, tax revenues and procurement, from the country's oil-rich provinces.

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