CIBC's Rubin also sees oil above $100, and soon

First, Rubin joins research conducted by Goldman Sachs that argues that a continual rise in global demand for oil will push oil's price inexorably higher -- to levels that first exceed $90, then $100 by the end of 2008 at the latest, then higher. (Oil closed Thursday, October 4, 2007 up $1.55 to $81.44.)

Second, Rubin's analysis touches on a factor that much of the developed world has largely overlooked, namely: declining exports from major oil producers to meet rising domestic demand. The global oil market has largely factored-in rising consumption in the developing world, but the pressure that markets are likely to receive when producers like Russia, Mexico and Middle East nations keep more oil produced at home for use in their domestic market, has not been discussed as much in oil circles.

Rubin told The Associated Press that he sees Russia and Mexico cutting exports by about 3 million barrels per day over the next five years. The reduction's impact on the United States, a major importer of oil? A U.S. supply reduction of about 2 million barrels per day, Rubin said. Further, Rubin sees all Mexico oil exports to the U.S. ending by about 2012.

Hence, Rubin's analysis further supports the argument that oil's current elevated price is not a spike, and is not temporary: "Triple digit prices is not a spike," Rubin said. "Triple digit oil...is what is going to be required to maintain, let alone grow, world oil supplies. We're basically replacing low-cost oil with high-cost oil," he said.

And there are even more stark scenarios: these argue that given oil's vital commodity status -- currently oil is the essential energy source for much of the industrialized world -- oil's price continues to rise despite falling demand from a +$100 per barrel price, due to competition that breaks out among nations as shortages develop.

Rubin does see one silver lining to oil's climb beyond $100: the sky-high price will encourage the development of alternative sources of energy, as well as increased use of nuclear power and biofuels. Still, those potential alternate sources do not alter the reality of the era of elevated energy prices: that absent a major, sustained reduction in oil consumption, oil marches higher.