Tuesday was a tough day for oil traders, with oil prices falling 3% to a two-week low.

The main thing spooking traders was a report that indicated growth in China was running lower than previously expected.

The Conference Board announced that, when it previously released that China's leading economic indicator rose by 1.7% during April, there was a calculation error. Instead of growing by 1.7% in April, it actually grew by a mere 0.3%.

The headline in The New York Times reads "American Energy Policy, Asleep At the Spigot." The rise in old prices could have been prevented to some extent. The question is who is at fault. Describing how out of control crude consumption is in the U.S., the paper writes, "Home to only 4 percent of the world's population, the nation slurps up about a quarter of the planet's oil -- and Americans' daily use is nearly twice the combined consumption of the Chinese and Indians."

Well said, and true. But, the actions described are terribly American and could not, under the current economic and government system, have been prevented.

Oil consumption is not unlike the use of cigarettes or liquor. The government can tell citizens that the behavior is dangerous. It can even raises taxes on the products to remarkable levels. But, it is not willing to legislate limited use of oil. It is not willing to create a "Prohibition" like Congress did when it tried to eliminate drinking. The attempt lasted from 1920 to 1933. Americans drank right through the 13 years.

No matter how bad the oil crisis is now, on the consumption side, the U.S. government is poorly equipped to change the behavior of its citizens unless there is a period of emergency. In WW II, people were willing to go along with restrictions in their use of certain goods and services, like rubber.

With gas over $4 and going higher, the present turmoil has the hallmarks of a grave danger. Perhaps it is time for Congress to pass an "Emergency Gas Act." Nothing short of that is going to change how fossil fuels are consumed.

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

As oil trades near $100 per barrel, one of the questions economists and analysts are asking is why hasn't global energy demand moderated?

With only isolated exceptions, both oil use in emerging markets and gasoline use here in the United States continue to increase. Emerging markets, particularly China, continue to register sizable increases in oil use. There has been some slackening of the increase in gasoline consumption in the U.S. as gasoline rose again above $3 per gallon this year, but not enough to cause a substantial drop in prices at the pump.

Is +$90 oil a price that's too costly for nations? Economist David H. Wang says perhaps not, particularly if a nation is not, in effect, paying the spot price, and he argues that a little-publicized fact regarding the oil market may be stoking demand. Namely: oil pacts among oil producing and consuming nations below the spot price for oil.

Oil surged above $98 per barrel Wednesday on expectations that U.S. oil stockpiles declined for a seventh consecutive week, Bloomberg News reported Wednesday.

Oil rose $2.31 to $98.29 before pulling back slightly to $97.75, as traders attempted to gauge both U.S. demand and geopolitical factors affecting supply as the new year dawns.

Demand, Nigeria weigh

Independent energy trader Jim Dietz told BloggingStocks Wednesday that unrest in Nigeria is also putting energy traders' moods in a bullish frame of mind.

"We've got the political situation in Nigeria popping up again where 12 people were killed by militants and a near-unanimous consensus that U.S. stock piles will be lower, so that's more than enough to send this oil market higher," Dietz said. "I know it's not what consumers want to hear at the start of a new year, but oil and heating oil prices are heading higher, at least for the short-term."

Heating oil gained about 4 cents to $2.69, while unleaded gasoline rose 5 cents to $2.53 in Wednesday morning trading. Natural gas gained 17 cents to $7.65 per million BTUs.

Crude oil rose slightly Thursday at midday, as traders digested the market impact of OPEC's decision in Abu Dhabi to maintain current oil production levels.

Crude oil gained 55 cents to $88.54. Heating oil rose 2 cents to $2.51 and unleaded gasoline rose 3 cents to $2.25.

Despite elevated oil prices, the Organization of Petroleum Exporting Countries Wednesday opted to maintain current production levels, brushing aside calls to pump more crude oil in order to help lower -- what many believe -- oil price that may further slow the U.S. and global economies.

True, no one on the trading floor of the New York Stock Exchange Friday yelled, "It's a return to the 'Roaring 90s,' " but given the way the U.S. economy and the stock market have gone in 2007, it's a start.

The Dow Jones Industrial Average closed Friday up 59.98 points to 13,371.71 - - hardly the stuff of a headline, but it was a technically-significant day.

The Dow's accomplishment? On Friday the Dow closed above the critical 200-day moving average at 13,250.10 - - the toughest moving average to break - - for the third consecutive day. Technical analysts argue that three consecutive closes above the 200-day moving average is a bullish sign. [For background on the Dow and the 200-day moving average, click on this bloggingstocks link: "Fed be nimble, Fed be quick."]

Hence, the Dow has cleared a major technical hurdle. The 'three closes above 200' does not guarantee that the rally will continue, but it is a step in the right direction.

Oil fell below $90 per barrel for the first time in a month Friday, after Enbridge Inc. reopened the biggest pipeline to the U.S. from Canada, Bloomberg News reported.

Crude declined $1.67 to $89.34. Heating oil fell about 4 cents to $2.53, and unleaded gasoline declined 3 cents to $2.23.

Independent Energy Trader Jim Dietz told Bloggingtocks Friday that the Canada pipeline accident was a momentary event that only temporarily deflected the oil market away from an ongoing oil price pullback.

"With OPEC's likely production increase, sentiment has shifted to a continued pull-back for oil. If we close below $90 per barrel today, that would be bearish for oil, short-term, but good news for just about everybody else, I guess," Dietz said.

Saudi Arabia, OPEC's biggest producer, indicated it will increase production by 500,000 barrels of spare capacity in December to ensure that consumers are adequately supplied, Oil Minister Ali al-Naimi said in Singapore on Nov. 28, Reuters reported.

Safety cushion

Dietz said oil demand remains strong, but OPEC's effort, led by Saudi Arabia, increases the oil market's safety cushion, or the difference between global oil supply and demand.

"Traders are confident now that there will be enough oil for the [Northern Hemisphere] winter," Dietz said. "The Saudi's decision makes an enormous difference in this market. There's even a chance that some crude supplies could begin to build in certain areas, which would be a change for this market."

The 10 OPEC countries subject to quotas will supply 27.5 million barrels a day this month, according to the U.S. Energy Information Agency. OPEC's official production target is 27.25 million barrels per day.

Hedge funds, which control more than $2 trillion in assets, and when one includes leverage, substantially more than that, are an institution that has helped produce massive increases in trading volumes and financial transactions in the last decade.

Further, together with wealth management investment funds, private equity funds, and of course investment banks and brokers, these institutions form the bulk of the market's "shorter-term players" - - organizations that are likely to have an investment horizon that is shorter than the typical person's. They're also more-likely to use aggressive investment techniques and invest in high-risk instruments.

Few deny that the above institutions, particularly hedge funds, with their buying power and volumes, have increased market liquidity.

However, lately a growing chorus is beginning to question the ultimate impact of hedge funds, and comparable players. Namely, they're asking if hedge funds and their companions are distorting prices of commodities, stocks, and other investments.

A day after word spread through the oil markets suggesting that Saudi Arabia was set to press for a 500,000-barrel OPEC oil output increase, Saudi Arabia's oil minister said Tuesday that OPEC members will not announce an increase in oil production at an oil producers summit this weekend.

"There will be absolutely no discussion" of a production increase when the meeting convenes in Riyadh, the Saudi capital, Saudi Oil Minister Ali Naimi said, the Financial Times reported.

The markets had factored-in an OPEC production hike, a fact that helped oil prices pull-back more than $4 from recent highs. Oil continued to drift lower Tuesday, falling $1.00 to $93.62 in morning trading.

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.

The markets have two additional oil industry data points to digest Friday, and through the weekend:

First the good news: OPEC (Organization of Petroleum Exporting Countries) has increased oil production in response to sustained +$90 per barrel prices.

OPEC's 10 members bound by output targets, all except Iraq and Angola, pumped 26.98 million barrels per day, up 180,000 barrels per day from September 2007, according to the survey of oil firms, traders, OPEC officials and analysts, Reuters reported Friday.

On the heels of oil's push through $79 per barrel, with traders indicating that a move through $80 is likely, the elevated price of oil is once again placing itself on the table of concerns facing investors.

On Tuesday OPEC agreed to increase production by 500,000 barrels per day after production-increase advocates, including Saudi Arabia, successfully argued that continued elevated oil prices are likely to reduce global GDP growth. (Those elevated oil prices have already reduced U.S. GDP by one percentage point or more, depending on model projections.)

However, even more disconcerting for economists, analysts and consumers alike is the secular, long-term trend regarding oil: namely, that both OPEC and non-OPEC sources combined are unable to keep pace with rising demand.