Gas prices will soon hit US$7 per gallon and that will make driving a car too expensive for millions of Americans, taking an unprecedented 10 million vehicles off U.S. roads over the next four years, according to a new energy report from CIBC World Markets.

The report forecasts that continued growing global demand combined with ongoing supply challenges will see oil prices continue to rise and hit US$200 per barrel in 2010. This will translate into further pain at the pump for motorists and businesses as the national average price for gasoline will approach US$7 per gallon two summers from now.

“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,” says Jeff Rubin, chief economist and chief strategist at CIBC World Markets. “Many of those in the exit lane will be low income Americans from households earning less than US$25,000 per year.”

With gasoline prices climbing from an average of US$1.80 in 2004 to more than US$4 today, car sales are already in decline. After averaging close to 17 million units per year over the first half of the decade, sales have dropped to 14 million units a year. CIBC World Markets forecasts that a US$7 gallon of gasoline will see these sales drop to as low as 11 million units a year by 2012, the lowest level since the early 1980s.

Economists at Desjardins Group dispute Rubin’s forecast. They say a more likely scenario is a gradual return toward crude prices that are founded on the theory of supply and demand.

In a statement released today, they say “prices should drop back below US$100/barrel in early 2009.”

Sticking to his forecast, Rubin says skyrocketing prices for gasoline will cause consumers to change their driving habits.

“While Americans are already driving 11 billion fewer miles than they did last year, a decline of 4.3%, they still drive today about 30% more than they did before the OPEC oil shocks,” notes Rubin. He believes that as prices continue to rise Americans will cut back on their driving even further and turn to more fuel efficient vehicles.

Rubin believes Americans will, by necessity, start to mimic the driving habits of Europeans, who have long faced much higher gasoline prices. He notes that over 90% of American households currently use a car to get to work, while over 60% of U.S. households own two or more cars. By comparison, just 60% of British households use a car to get to work and less than 25% own two or more cars.