Canadians should brace for $1.50 gallon gas prices in the near future as global oil supply will increasingly have trouble keeping pace with demand, forecasts a new energy report from CIBC World Markets.

The report predicts that surging demand in developing economies combined with accelerated depletion of existing supply and widespread delays in getting new oil fields up and running will see the global supply of oil fall as much as 8 million barrels a day below U.S. Department of Energy and International Energy Agency estimates by 2012.

“Those projections ignore two fundamental forces that have, in recent years, brought global production to a virtual standstill,” says Jeff Rubin, chief strategist and chief economist at CIBC World Markets. “The first is depletion. You have to run faster to stand still. Depletion from existing fields has accelerated to over 4%, a rate that currently cuts nearly 4 million barrels per day out of each year’s production.

“The second fundamental force blowing up supply forecasts is the huge project delays and massive cost overruns associated with many of the world’s largest new oil mega-projects. From Kazakhstan to Nigeria’s Delta region, protracted delays in some of the world’s largest energy mega-projects will have huge impacts on actual supply growth over the next five years.”

CIBC World Markets says it reviewed nearly 200 new oil projects slated to start production over the next five years and found that scheduled production timelines are far too optimistic, with project delays the norm, not the exception, among the group.

Rubin notes that delays in the Venezuela and Canada will shave over 700,000 barrels a day from earlier 2012 production forecasts.

“Of course, stagnant conventional world oil production underlies the recent problems associated with harvesting unconventional supply. Virtually all of the increases in global oil production have occurred from deepwater fields or oil sands, with conventional production seemingly stuck at 2005 levels of 67 million barrels per day.”

These project delays are also happening at a time of accelerated global depletion in existing fields. The rate has climbed to over 4%, which cuts nearly four million barrels per day out of each year’s production. The recent increases are in part, related to the growing importance of offshore, and, in particular, deepwater fields, which have depletion rates twice that of conventional fields.

The complete CIBC World Markets report is available at: http://research.cibcwm.com/economic_public/download/occtrept65pdf.