The worst-case scenario regarding the price oil just became, well, a little worse.

On Thursday CIBC World Markets Chief Economist Jeff Rubin said oil production will barely grow over the next five years, and that shortfall, combined with solid emerging market demand, will drive oil to $150 per barrel by 2010 and $200 per barrel by 2012, and The Financial Post reported Thursday.

Just as bad, and despite easing gasoline demand in the United States, U.S. gasoline prices will climb to as much as $7 per gallon by 2012, Rubin said, and The Financial Post reported.

The saga of oil in the initial decade of the globalization era continues.

Billionaire energy investor and oil guru T. Boone Pickens Thursday said he has reversed his short position and is now buying oil and he expects the world's most important commodity to hit $125 per barrel, Bloomberg News reported.

``The position is long, not short,'' Pickens told Bloomberg News. ``I covered the short position, it was a mistake on my part. We missed.''

Surging economic growth in emerging markets in Asia and Latin America, along with steady demand in developed markets has increased demand for oil during the last 4 years, and strained oil producers' capabilities to meet that rising demand. Oil is up 82% in the last 12 months and is up an astounding 350% since late 2002. Oil closed Thursday down 7 cents to $114.86 per barrel after hitting a record-high $115.54 earlier in the session.

In a report that surprised many sector watchers, Russian oil production fell for the first time in a decade, based on year-over-year basis The Wall Street Journal reported Tuesday (Subscription required).

Russia, the world's second biggest exporter of oil after Saudi Arabia, averaged production of 10 million barrels per day during the first three months of this year -- a 1% drop in production when compared to the same period in 2007, The Associated Press reported Tuesday, citing International Energy Agency data.

Aging infrastructure or aging fields?

Analysts, oil industry executive, and economists will now begin the painstaking process of determining the exact cause of the production shortage. Russia has suffered from electricity shortages and poor weather conditions in oil production zones during the past year. In addition, despite Russia's impressive, 5-year economic boom and related development -- an economic expansion driven to a considerable degree by Russia's oil revenue -- the nation's oil infrastructure remains inadequate and in need of up to $50 billion in improvements and upgrades.

Independent energy trader Jim Dietz said if the current production drop stems from weather problems or infrastructure deficiencies, the oil market will largely overlook the decline, as a temporary dip.

Global oil demand will increase by considerably less than previously expected in 2008, due to the anemic U.S. economy, which is probably already in recession, and slowing global growth, the International Energy Agency announced Friday.

The IEA lowered its per day global oil demand increase by 460,000 barrels, from 1.76 million to 1.3 million barrels - - its biggest cut to a growth forecast in seven years.

Global oil demand for 2008 is now projected to be 87.2 million barrels per day, the IEA said. Meanwhile, global oil supply for March 2008 totaled 87.3 million barrels per day, due to lower supplies last month from OPEC, the North Sea region, and non-OPEC Africa.

Global oil demand in 2008 will total 87.6 million barrels per day, about 200,000 barrels less than an initial 2008 estimate, due to slowing global economic growth, the International Energy Agency announced Wednesday.

The IEA said demand for transportation fuels in the eastern U.S. and other developed nations is slowing. However, the IEA added that projections for robust economic growth in China and the Middle East will continue to help support oil prices in 2008.

Oil fell 42 cents to $92.36 per barrel in mid-day Wednesday trading.

"Weaker projections for global economic growth are offset by low stocks, forecast cold weather in the U.S. and parts of Asia, supply disruptions (Nigeria/North Sea) and concern about Venezuelan supplies. Products have underperformed crude, leading to weak refining margins," the IEA stated.

The oil ministers at OPEC could not leave well enough alone and just tell the world that they would not alter production at their current meeting. They had to add that they might decrease output in March because they believe that economic growth in the U.S. is slowing.

Reacting to these comments, the International Energy Agency said "With the current pressures from the financial system, the economy does not need additional downward pressure on consumer spending and growth from near record oil prices," according to the Financial Times. That is a masterpiece of understatement.

Much of the movement of oil price is now based on rumor and psychology as much as on real measurement of supply and demand. The willingness of China to underwrite gas and diesel prices perverts the global market's normal action. Oil suppliers are now keeping more of their output for growing numbers of cars and new infrastructure building within their own borders. The normal measurements of how oil is priced have warped into something new.

OPEC's hint at a March cut says one thing and one thing only. When oil is over $90, we make more money. The current slowing of the global economy has not dropped prices much. If it does, we can keep prices high by a slight manipulation of what we ship.

Douglas A. McIntyre is an editor at 247wallst.com.

OPEC is said to be evaluating a potential production cut this spring, but is likely to keep its output quota the same when in meets Friday in Vienna, The Wall Street Journal (subscription required) reported.

OPEC, which produces about 40% of the world's oil, is said to be concerned that the U.S. economic slowdown could hurt oil demand growth. Oil traded 77 cents lower to $89.94 per barrel in Monday afternoon trading. Heating oil fell about 2 cents to $2.50 per gallon, unleaded gasoline declined 1 cent to $2.30 per gallon. Natural gas fell about 1 cent to $7.99 per million BTUs.

OPEC expects global oil demand of 87.4 million barrels per day in Q1 2008 and 85.5 million in Q2 2008. Meanwhile, the International Energy Agency expects slightly higher demand during the two periods, 88.2 million in Q1 2008 and 86.7 million in Q2 2008.

On the heels of Cambridge Energy Research Associates study arguing that new oil finds are replacing declining production at existing oil fields, a BP economist said the world is more likely to switch away from oil as opposed to running out of the commodity in the decades ahead, Reuters reported.

BP plc (ADR) (NYSE: BP) Special Economic Advisor Peter Davies also told ministers from Britain's Parliament that world oil production is likely to peak -- but not due to any "peak oil" scenario involving declining recoverable supplies and/or declining production -- but rather due to declining demand, Reuters reported.

"I think we will run out of demand before we run out of supply," Davies said, Reuters reported. "There's a distinct possibility that global oil consumption could peak as a result of climate policies."

Oil plummeted $2.38 to $89.52 in early trading Wednesday after the U.S. Energy Information Agency announced that weekly crude oil inventories rose 4.3 million barrels to 287.1 million barrels, well above the 1.25 million barrel increase consensus estimate.

Heating oil fell 4 cents to $2.49, unleaded gasoline fell about 5 cents to $2.26, and natural gas fell about 4 cents to $8.15 per million BTUs.

However, despite the prospect of a U.S. recession that could lower oil demand, the International Energy Agency maintained its 2008 global oil demand forecast at 87.8 million barrels per day, a 2.3% increase from 2007, the organization announced Wednesday in a statement.

Still, the IEA qualified its 2008 oil demand projection by saying the estimate would be adjusted downward if evidence indicated the U.S. economy continues to slow.

The International Energy Agency Friday increased its forecast for 2008 daily global oil demand. IEA now expects daily global oil demand to increase by 2.1 million barrels to 87.8 million barrels, or an increase of 210,000 barrels per day from the group's previous estimate.

Further, the IEA also said the Organization for Economic Cooperation and Development members oil stockpiles in October 2007 fell to 52.6 days, or just below the 5-year average.

Energy prices

Energy prices cast aside the news Friday morning, at least for the time-being: oil fell 90 cents to $91.36 per barrel, heating oil fell 1 cent to $2.62 per gallon and unleaded gasoline dropped 4 cents to $2.37 per gallon.

"It's a slightly bearish report, but one that shouldn't move the markets too much," independent energy trader Jim Dietz told BloggingStocks Friday. "A 210,000 increase on a monthly revision isn't too bad, and the market expects these rough numbers to move around, so it's pretty much factored into the price." Dietz added that he remains flat and has no positions in oil, heating oil, gasoline or natural gas at this time.

If the industrialized - - and the industrializing - - world needs a wake-up call regarding the development of alternate and renewable energy sources, the nations need look no further than the International Energy Agency's research.

IEA projects that between now and 2015, the world will need an additional 37.5 million barrels per day of oil to meet rising demand. Currently, the world use about 84 million barrels of oil per day. [Oil closed Thursday down 91 cents to $95.46. A convergence of events, including strong global economic growth and geopolitical concerns, has pushed oil's price up more than 135% in three years; traders see oil testing the $100 per barrel mark in the weeks ahead.]

And here's the riveting statistic from the IEA: current oil production development plans will add only about 25 million barrels per day by 2015.

And what about that 12.5-million barrel gap? The gap, the IEA said, must be made up through further investment or easing of demand.

If the gap is not filled, a supply shortfall will result, the IEA said. "'A supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices, cannot be ruled out," the agency said.

Oil Analysis: While oil consumption increases are expected in every region in the world and by dozens of nations, the importance of the United States and China in marshaling any energy coalition cannot be underscored enough. Each is the primary engine of growth in its hemisphere. Each has the private, public, and university-based economies of scale necessary to both implement conservation measures and development new energy sources - - practices that smaller nations in each region would undoubtedly mirror. Finally, each - - by virtue of the sheer size of their consumer bases - - can decisively "move the needle" toward increased energy efficiency and, along with it, toward less CO2 in the atmosphere, in the years and decades ahead.