CIBC World Markets doubts the recent easing in oil prices. In a new report, it predicts that crude prices will almost double over the next five years. And, energy stocks will dominate equity markets much as techs did in the late 1990s.

In a new report, it suggests that crude prices will almost double, averaging close to $77/barrel and reaching as much as $100/barrel by 2010. “That’s over twice the previous 6-year high (1980-1985) following the second OPEC oil shock, when crude, in today’s dollars, averaged the equivalent of $65/barrel,” it reports.

“Tomorrow’s price hikes won’t be triggered by sudden supply disruptions like the Arab oil boycott of 1973 or the Iranian Revolution in 1979. Instead, they will follow from the inevitable collision between surging global crude demand and accelerating depletion of conventional crude supply,” CIBC says. “By 2010, prices will have to take out nearly 9 million barrels a day from world oil consumption—no mean feat for a world that has never been more thirsty for oil.”

It predicts that oil prices will dominate the economy and financial markets, as they did back in the 1970s and early 1980s. However, this time around, it says, “On the economic front, the impact of surging crude prices is likely to be far more deflationary than inflationary.”

As a result, it says the implications for monetary policy “couldn’t be more different” than the ones posed by the OPEC shocks. “Instead of draining the system of liquidity to starve out wage-price inflation, the primary concern of monetary policy in oil-importing economies like the US will be to support economic growth,” CIBC says. “Offsetting the massive terms of trade effect, and its taxing implications for both American consumers and American businesses, will require a much more accommodative posture than today’s Federal Reserve Board has so far acknowledged.”

“On the financial market front, energy stocks will become almost as dominant in equity markets as tech stocks were in the last decade,” it predicts. “As oil prices continue to rise, energy stock valuations, already characterized by some as a bubble, should follow a similar trajectory to the one they charted in the 1970s. Between 1973 and 1979, the oil and gas index of the TSX more than doubled.”

“The first two oil shocks were transitory, as political events encouraged oil producers to seize full sovereignty over their resources and temporarily restrict supply. This time around, with suppliers already running full tilt, there’s no tap that can suddenly be turned back on,” it concludes.