Brace for $1.75-a-litre gas if storms ravage Gulf, CIBC's Rubin says

Toronto economist Jeff Rubin, who has predicted that oil will hit $200 US a barrel by 2010, says drivers should brace for gasoline to spike to $1.75 Cdn a litre this year as storms threaten oil production in the Gulf of Mexico.

CIBC World Markets, where Rubin is chief economist and chief strategist, issued a statement Friday quoting him as saying that tropical storm Gustav is "tracking another potentially lethal swath through America's energy heartland" three years after hurricanes Katrina and Rita upset production there.

'America’s one and only source of production growth could be shut down again and the price impacts would be severe.'—Economist Jeff Rubin

"And with both oil and gasoline inventories much lower than when Katrina and Rita hit, the price consequences could be even worse this time. Any replays of the 2005 storm season could see gasoline prices soar to $1.75 per litre," he said.

In a commentary posted on the firm's website, Rubin added:

"Whether Gustav ultimately lives up to its hurricane billings and sidelines production like Rita and Katrina remains to be seen, but its very presence in the rig-dotted region underscores the vulnerability of U.S. domestic crude supply to climate change.

"Just as America has come to rely more and more on Gulf production to offset steadily declining production from Alaska and the lower 48 states, the frequency of high grade storms (class 3 to 5 hurricanes) in the region has nearly doubled in recent years. America’s one and only source of production growth could be shut down again and the price impacts would be severe."

CIBC World Markets is an arm of Canadian Imperial Bank of Commerce.

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