China's rapidly growing economy and its implied increase in energy consumption will be among the most important factors propelling the price of oil higher, says a key energy analysis firm.

What's more, almost half of the net growth in global oil demand through 2035 will come from China, and the Asian giant will be chief among the factors that push the price of crude over $100 per barrel after 2015, permanently, and then and over $200 per barrel by 2035, according to research compiled by the International Energy Agency, dw-world-de reported Tuesday.

Is it more fodder for the oil bulls or the oil bears? In its first forecast for 2011, the International Energy Agency said it expects global oil demand growth to slow to a 1.6% increase in 2011, compared to a projected 2.1% increase in crude this year.

Even so, the 1.6% increase would bring global oil demand to 87.8 million barrels per day (bpd).

Most people don't realize that world economies spend more that $550 billion dollars on energy subsidies. This is $75 billion more that was originally thought. These data come from the International Energy Agency (IEA)

In 2008, the latest year for these numbers, $557 billion was spent on energy subsidies. The biggest spenders were Saudi Arabia, Russia, India, Iran and China, spending an average of 2.1% of GDP.

The 2010 oil demand outlook saga continues. The International Energy Agency created a hurdle of sorts for the rising-oil-demand-thesis advocates, by lowering its 2010 global oil demand forecast by 190,000 barrels per day (bpd) to 86.4 million bpd.

In its May report, the IEA quickly added that the revision stems largely from changes to non-historical baseline data, including slightly higher GDP prognoses, offset by a higher oil price assumption.

In its most recent forecast, OPEC, producer of about 40% of the world's oil, estimated global oil demand at 85.38 million bpd.

Notch another positive data point for the global economic recovery. The International Energy Agency has increased its 2010 global oil demand forecast by 170,000 barrels per day, to 86.5 million barrels per day (bpd), which represents a 1.6% bpd increase from the same period a year ago.

Further, in its February report the IEA forecasts that all of the demand increase will occur in emerging markets, or in what the IEA calls non-Organization for Economic Cooperation and Developed (OECD) countries. Oil traded Friday afternoon down $1.81 to $73.47 per barrel.

According to the International Energy Agency (IEA), global energy use is going to fall this year. That said, the group also believes that energy use will resume its upward trend, should government policies remain the same.

Looking far ahead, the IEA believes that the world's demand is projected to rise by 40% between now and 2030, when demand is estimated to hit 16.8 billion tons of oil equivalent.

Oil prices hit a 6 week high today, as cold weather gripped most of the country.

Over the weekend the nation was hit with a cold front that reminded oil traders that the high demand winter season is on its way, and could help reduce a lot of the oversupply that the market is currently looking at.

Rising oil prices a positive development for economies around the world? For the new investor, that may appear to be a contradiction in terms, but experienced investors know it's not.

The International Energy Agency's 350,000 barrel-per-day (bpd) increase in its 2010 global oil demand forecast to 86.05 million bpd is a positive development for both the U.S. and global economies – positive, that is, provided oil prices don't return to stratospheric levels.

According to the chief economist at the International Energy Agency (IEA) in Paris, the world could be hurtling toward an energy crunch that could effectively kill any global economic recovery. Dr. Fatih Birol said in an interview that most major oil fields in the world have eclipsed their peak production. Birol noted that the public and many governments are oblivious to the fact that oil is running out faster than earlier predicted, with global production likely to peak in roughly 10 years.

Birol said, "One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for the day. The earlier we start, the better." It will not be cheap to convert from our dependence on oil, but the cost may be better than the possibility of having no oil whatsoever; or having $200-per-barrel oil.

Investors thinking about positioning themselves in oil stocks, or in other stocks that would benefit from higher oil prices may want to wait awhile.

Global oil demand -- a major factor in determining oil's price -- is expected to decline in 2009 by 1 million barrels per day (bpd), the International Energy Agency announced Friday in its latest monthly report.

Even more significant, the IEA also decreased its 2008 global oil demand estimate by 70,000 bpd to 85.8 million bpd, a reduction which means oil demand dropped 0.3% in 2008 and is forecast to decline 0.6% in 2009 -- the first 2-year decline in global oil demand in 26 years, or since 1982-1983.

Oil fell 13 cents on Friday at mid-day to $35.24 per barrel. Oil has fallen an astounding $112.03 since hitting a record high of $147.27 per barrel in the summer of 2008.

OPEC cut production by 9% last week, and has pared production by more than 4 million barrels per day (bpd) this year, but even those large supply cuts may not be able to create a bottom in oil's price.

Incredibly, more production cuts may be needed, so say economists. The modifier 'incredibly' is used to describe current conditions in the oil market because less than one year ago the talk was of spot shortages, out-of-control commodity prices due to emerging market demand, and visions of $200 crude.

However, the U.S. economy fell into a recession in late 2007, intensifying the ripple effects of the financial crisis, which pushed the global economy into a recession this year, and the oil market not only just cooled, it collapsed. Oil Friday closed down $2.35 to $33.87 per barrel. Oil has fallen an unthinkable, mind-boggling 77% since hitting an all-time high of $147.27 per barrel in the summer.

Possible 'nightmare' oil producers' scenario

Further, a bottom for oil prices is nowhere in sight, so says economist Peter Dawson. Oil will test $30 per barrel very soon, he said, due to declining U.S. gasoline and oil consumption, and slowing oil consumption growth around the world.

There are data points of consequence, and then there are data points that literally alter business plans and national goals.

The International Energy Agency's December oil market report is an example of the later, as the agency forecasts that 2008 global oil demand will decline - - that's correct, decline - - for the first time since 1983.

Oil demand: from boom to bust

The agency now expects 2008 global oil demand will fall by 200,000 barrels per day (bpd) to 85.8 million bpd, down about 350,000 bpd from its previous forecast.

Further, the IEA also sees slower demand growth in 2009, forecasting 2009 global oil demand to rise to only 86.3 million bpd, but the agency quickly noted that the forecast is based on the International Monetary Fund assumption that the global economy will gradually recover starting in the second half of 2009.

Economist Peter Dawson said the U.S. and global recessions are at the heart of both the world's first oil consumption decline in 25 years and the modest oil demand picture for 2009.

"We have seen two, large, macro changes in the oil market. The first was American consumers finally cutting back gasoline consumption. First the $4 a gallon gasoline price, then simply fewer drivers from rising unemployment, cut U.S. gasoline consumption," Dawson said. "Second, the remaining regions of the world, the E.U. and Asia, followed the U.S. into a recession, flat-lining oil growth in these areas. We now have all three major economic regions of the world in recession for the first time in the modern era, and that's really bearish for oil prices."

OPEC, which Tuesday again lowered its 2009 global oil demand forecast (pdf), is still seen cutting production quotas, but at its regularly scheduled meeting on December 17 in Algeria, not at its special meeting November 29 in Cairo.

Still, the compelling question remains whether OPEC members will comply with existing decisions to lower production, let alone new ones, said economist Peter Dawson.

OPEC problem: production 'cheaters'

"OPEC members are getting into a bit of quandary, and it's one we've seen before, cyclically, in the oil market. States know that if they all cut, their action will support prices some," Dawson said. "The problem has been that historically, some members 'cheat' a little and produce over their quota, thinking their small increase will not affect prices that much, and they will reap extra revenue as a result. When several members do this, the price of oil continues to drop, and so does the cartel's effectiveness."

In the past, cheaters have been small OPEC states, such as Iran, Libya and Nigeria, Dawson said. Oil Tuesday fell 37 cents to $54.58 per barrel. Oil has plunged more than 60% since hitting a record high of $147.27 per barrel this summer, as both long-term investors and short-term traders exited long positions in the markets.

In a new report today, the International Energy Agency warned that an insufficient amount of investment into oil supply is going to result in a serious supply shortage that could make the recent record high oil prices look weak in comparison.

Oil prices spiked to a record high $147 a barrel earlier this summer, but have since been in a pretty steady downward spiral, and were down again today, as the credit crunch and recession fears have created fear among oil investors that oil demand is going to erode over the months to come.

Prices were off sharply again today, and in afternoon trading oil was down another $3.17 a barrel to $56.16, off 5.3% on the day, as the U.S. government lowered its forecast for oil next year to $63.50, down from its previous estimate of $112 that it maintained back in October.

This June, Houston was the most economically attractive place in the country. That was when oil was climbing to its peak of $147 a barrel. Back in those glory days for the offshore oil patch, 81% of oil trading was conducted by speculators who were long oil and short the dollar. But that trade has lost its appeal and now Houston is suffering the effects of a 56% drop in price as the dollar booms 25%.

With the 40% decline in stocks this year and a financial crisis upon us, it looks like New York and Houston -- two cities which are culturally apart -- will both be suffering but for different reasons. Houston is going to suffer due to an expected oil demand slowdown. Despite OPEC's decision to cut its production quotas by 1.5 million barrels a day, crude still dropped $3.39 to close at $64.15 on Friday. Since oil trades in dollars and the world is buying up our Treasury bills due to a belief that the U.S. is a safe haven, the dollar is rising which means it takes fewer of them to buy a barrel of oil.

But despite an apparent slowdown driven by the economic crunch, official forecasts still forecast growth in demand -- albeit at a slower rate. For example, Paris's International Energy Agency (IEA) now predicts global oil demand will average 86.5 million barrels a day this year, up about 440,000 barrels a day from 2007 -- it previously forecast 940,000 barrels a day. This is making Houston's energy sector nervous. Why? The IEA reported that some analysts expect a big proportion of "global drilling rig orders will be canceled."