NEW YORK, Aug 29, 2008 /PRNewswire-FirstCall via COMTEX/ -- CIBC (CM: TSX; NYSE) - With Tropical Storm Gustav bearing down on the Gulf of Mexico and most weather agencies calling for an active hurricane season, American motorists should brace for gasoline to spike to $5 per gallon as storms threaten to shut down oil production in the region, predicts a new report from CIBC World Markets.
The report notes that oil production in the rig-dotted Gulf, which has been seen as America's best hope for greater energy self-sufficiency, will be increasingly threatened by severe storms that continue to grow in frequency and strength in the region.
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While Mr. Rubin acknowledges that the supply disruptions, and attendant price hikes, will be temporary, he sees lasting impacts from hurricane damage on future supply growth. "Protracted multi-year delays to marquee projects like BP's Thunder Horse have meant that new production has grown at a fraction of earlier projections for the region and has lagged well behind rapid double-digit depletion rates that are characteristic of offshore fields.
"The net result has been a multi-year, and now likely irreversible, decline in oil production from the region. Already down some 300,000 barrels per day from its pre-Katrina peak, Gulf of Mexico production is likely to lose another 200,000 barrels over the next five years. Instead of ramping up production to over 2 million barrels per day as once dreamed by the Departments of the Interior and Energy, Gulf of Mexico production is likely to fall to a low of a million barrels per day by 2013 - almost a third lower than the region's production prior to the 2005 storm season."
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