Falling fossil fuel prices and global consumption will take a toll on Canada’s stock market, warns Jeff Rubin, an economist who once predicted oil prices would rise to about US$200 per barrel. Now he says investors who want to limit the impact on their portfolios need to sell their energy stocks.
“When I was the chief strategist at CIBC in 2009, oil and gas was 32 per cent of the [TSX] index, now it’s 20 per cent,” he told BNN in an interview Wednesday. “If I’m right… soon it will be 10 per cent of the index.”
Rubin, a senior fellow at Canada’s Centre for International Governance Innovation, is perhaps best known for his 2008 prediction that oil prices would rise to US$225 per barrel by 2012. Today, the economist is researching how climate change and trends in global energy consumption will impact Canada’s economy.
Oil sands stocks, and fossil fuel companies in general, will continue to perform badly as climate change compels governments around the world to restrict future carbon emissions, according to Rubin.
“If we are going to go from a world where [we produce] 97 million barrels of oil per day to a world of 50-to-74 million barrels of oil per day – or less – it’s the high-cost producer that gets squeezed out of the market,” he said.
Rubin said he believes investors may not appreciate how quickly the dynamics of the energy markets are changing. To understand the risks associated with Canada’s high-cost oil production, he says you only have to look at the global coal industry which has seen the consumption – and the value of coal stocks – plummet over the past two-years.
“If the world’s power industry can wean itself off coal, is it that huge a leap of faith to believe that the world’s transit fuel industry can wean itself off oil?,” said Rubin.