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10959CIBC World Markets report projecting trend to abandonment of private cars

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  • Christopher Miller
    Jun 27, 2008
      A June 26 report by Jeff Rubin of CIBC Wolrd Markets predicts a trend
      to North Americans abandoning cars in favour of public transit in
      large numbers, via Treehugger and the Wall Street Journal.

      The original report in PDF version:


      The online Wall Street Journal article:

      June 26, 2008, 11:12 am
      Oil Shock: Analyst Predicts $7 Gas, “Mass Exodus” of U.S. Cars
      Posted by Keith Johnson
      Oil at $135? That was just the opening skirmish in the “peak oil”
      wars. The latest smart money? $200 oil in 2010, with gasoline at $7 a
      gallon. And that is going to turn Americans into car-shunning
      Europeans once and for all—poor Americans, at least.

      That’s the latest gloomy forecast from Jeff Rubin at Canadian
      brokerage CIBC World Markets, who just afew months ago figured $200
      oil would be a thing of the distant future—like 2012.

      Attention-grabber (CIBC)
      Mr. Rubin laughs off recent attempts to take the steam out of global
      oil markets. Saudi production promises of 200,000 barrels a day
      doesn’t dent the 4 million barrel-per-day decline from aging fields
      every year, for starters. And it will just be “gobbled up” by
      increasing domestic consumption in Saudi Arabia, like other oil-
      producing countries that subsidize fuel.

      So what about China’s flirtation with market reality by unwinding some
      fuel subsidies? No luck in curbing demand or prices, either. Not only
      does China’s recent move translate into $3.25 a gallon gas—still a
      steal, relatively speaking—it’s given fresh legs to beleaguered
      Chinese refiners who’ve been operating in the red, thanks to Chinese
      price controls. So now they are producing even more gasoline and
      fueling even more cars than they were before. The upshot?

      Over the next four years, we are likely to witness the greatest mass
      exodus of vehicles off America’s highways in history. By 2012, there
      should be some 10 million fewer vehicles on American roadways than
      there are today—a decline that dwarfs all previous adjustments
      including those during the two OPEC oil shocks.

      And who will be parking their cars? The 57 million American households
      that have both cars and access to something resembling public transit.
      Gasoline at $7 begins to approach prices Europeans have paid for
      years, meaning that chunk of America “will start to act more and more
      like Europeans,” Mr. Rubin says. Not soccer moms in a minivan—soccer
      fans, searching for tokens:

      Our analysis suggests that about half of the number of cars coming off
      the road in the next four years will be from low income households who
      have access to public transit. At their current driving habits,
      filling up the tank will have risen from about 7% of their income to
      20%, an increase that will see many start taking the bus.

      Gas prices already appear to be reshaping suburbia. But what Mr. Rubin
      is predicting is a far bigger shock to the American system. Europe has
      had decades to develop a society based on expensive energy. What will
      happen if Americans suddenly are forced to shoulder European-style
      energy prices — but without the European-style society to cope with

      Permalink | Trackback URL: http://blogs.wsj.com/environmentalcapital/2008/06/26/oil-shock-analyst-predicts-7-gas-mass-exodus-of-us-cars/trackback/

      Christopher Miller
      Montreal QC Canada

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