The International Energy Agency expects global oil production in 2007 to total 84.43 million barrels per day (OPEC: 30.41 million barrels per day, Non-OPEC: 50.02 million barrels per day), while global consumption is expected to rise to 85.92 million barrels per day. The major factors in rising demand? Emerging market demand (primarily China) and gasoline-based / heating oil-based consumption in the United States. Consumption in Europe's developed nations and other regions of the world also contribute to demand growth, but China and the U.S. lead the pack.

The significance of demand growth? Depending on the oil analysis selected, the consuming world will have to reduce demand growth relatively soon, or face a scenario in which OPEC -- the major source of spare production capacity -- can not increase production by an amount large enough to keep pace with rising demand and maintain a relative balance between global oil supply and demand.

Further, the current relative balance between global supply and demand is one reason crude oil has almost doubled since late 2004 -- from about $40 to the current $78-$80 range. To be sure, geopolitical risk (Iraq War, problems with Iran's lack of compliance with U.N. directives on nuclear technology, civil unrest in Nigeria), has also played a role in oil's price rise, but analysts generally agree that this risk premium is about $10-$15, perhaps $20 at most.

There's always a possibility that non-OPEC production could increase by more than analysts currently project, or that a major new oil find or technology could, likewise, boost the non-OPEC production component, but absent those factors OPEC remains the major source of spare capacity.

And the scenario if consumption outstrips OPEC's ability to maintain the relative supply/demand balance? Under that scenario the price of oil rises further still, and it's up to the market to stop the rise.

Basic laws of supply/demand suggest that demand destruction -- Wall Street's term for reduced consumption due a higher price -- will occur at some level. This is the theory that argues that at some level -- $4 per gallon, $5 per gallon, perhaps $6 per gallon -- consumers will reduce their consumption of gasoline and/or seek alternate energy sources. The same is true of heating oil. However, the theory may not hold perfectly in this case, due to oil's vital commodity status: there's only so much that residential consumers / industry can cut back in the short-term regarding winter heating oil consumption, absent installing a new energy system (natural gas, electric etc.).

Further, as the above suggests, there is a scenario in which the price of oil continues to rise, and demand destruction does not occur, due to the need for oil for essential activities. Under that scenario, consumers and businesses cut back on non-essential expenses, which will substantially slow the global economy, particularly in high oil consumption nations.

That's a scenario, many economists agree, that's worth avoiding. But to-date, there's been little in the form of public policy to reduce consumption -- a factor that may garner more attention if the price of oil continues to rise.