SAN FRANCISCO (MarketWatch) -- Talk of $200-per-barrel oil prices by the end of the year has quietly faded away and been replaced by forecasts for $100.

It would be easy to say that crude oil has failed to meet market expectations, and a bear market may be in place. But the harder part is to figure out how long and to what point oil prices will fall.

Projections earlier this year for oil prices as high as $200 fell flat, with prices unable to even reach $150.

"Now analysts are lining up to say the top is in," said Sean Brodrick, a natural resources analyst at MoneyandMarkets.com. "I've been saying all along that volatility is the name of the game in oil this year."

He expects prices to move lower in the short term -- $120, $110 or even $100 "if we're really lucky."

“ 'The market is afraid to let go of its fear.' ” — Anthony Sabino, St. John's University

It'll probably be a rather slow drop, however. "The air will escape the balloon more slowly than the bubble was inflated," said Anthony Sabino, a professor of law at St. John's University.

"That's just a function of the hysteria of the market that inflated the bubble in the first place," said Sabino, whose legal practice includes oil and gas law. "The market is afraid to let go of its fear."

Crude futures reached a record intraday level of $147.27 on July 11 in Globex electronic trading .A year ago, prices were trading at $72 and five years ago, they were at $32.

But "investors should understand that while the upside moves in oil prices have been prolific, the downside corrections have also been substantial," said Emanuel Balarie, managing director at Balarie Capital Management.

Prices have dropped from their record level by almost 19%, or around $27, to close at $120.02 on Thursday. They dropped $16 in the month of July alone.

"The month of July saw oil hit an all-time high but at the same time, saw the biggest dollar value pullback in the history of the oil market," said Phil Flynn, a vice president at Alaron Trading.

Still, the recent pullback in oil prices should have been expected, "given the sizable move towards the upside (with no major correction) in such a relatively short period of time," said Balarie.

Cutting back

Among the factors that have been driving prices lower is the slowdown in demand from major oil consumers. But there's a bigger picture to look at.

For the first six months of this year, U.S. oil demand was at about 20.08 million barrels per day -- the lowest level in five years, according to a report from the American Petroleum Institute released in mid July.

"There's just too much supply chasing too little demand," said Michael Lynch, president of Strategic Energy & Economic Research.

Output from the Organization of the Petroleum Exporting Countries averaged 32.43 million barrels per day in May 2008, up from an average of 30.9 million for the year 2007, according to the Energy Department's Energy Information Administration.

And U.S. consumers have also been working hard to cut down their gasoline intake because of high retail fuel prices. See Commodities Corner

But as global production has been increasing and oil demand from the U.S. has been declining, consumption continues to increase in emerging markets such as China and India.

"The U.S. may be the world's leader in energy thirst" with over 20 million barrels of oil a day, "but China is coming on strong," said Brodrick.

Developing countries such as China and India are not yet done with their industrialization, said Balarie. "There are still more roads to pave, buildings to build and cities to expand," he said.

If China's oil demand growth rate continues at its current pace of 6% to 7% per year, China will use 20 million barrels a day by 2020 -- about the same as what the U.S. uses today, according to Brodrick. And by 2030, China would be up to 40 million barrels per day -- twice what America uses now, he said.

But Charles Perry, president of energy-consulting firm Perry Management, argued that these are "straight-line projections, whereby the current rate of increase in demand is projected forward ad infinitum."

"This will not occur," he said. "The market demands are fluid and demand will very much relate to price."

And since China sells much of its goods to the United States, an American economic slowdown will also slow the Chinese economy, said Sabino. "Without a doubt, it's the U.S. that is the paramount driving force" for the global economy, he said. "We slow down, the world slows down."

A new rational

For now, a new player has entered the oil market, and it's called "rationality," said Sabino.

"Long absent as speculative fever drove up prices to incredible and damaging levels, reality is setting in," he said. "High prices motivate conservation, i.e. the death of the SUV market, hybrids flying off showroom floors, and Americans just plain conserving energy."

“ 'If the market closes below $117, you can stick a fork in it -- it's done.' ” — Dale Doelling, Trends In Commodities

Recent weather forecasts for the Gulf of Mexico show no imminent threat to oil production and what's been going on in the Middle East is "nothing we haven't seen in the last 40 years," said Sabino.

Prices are likely to go "downhill from here, but with bumps on the road," said SEER's Lynch. He expects to see oil prices at $100 by the end of September -- and maybe even $80 by the year's end.

Dale Doelling, chief market technician at Trends In Commodities, said there's a major support area at $117 for oil. "If the market closes below $117, you can stick a fork in it -- it's done."

For the $200 threshold to be passed anytime soon, there would need to be a severe political event that would potentially disrupt supply, said Chip Hodge, a managing director at John Hancock Financial Services.

"I would bet on $100 before I bet on $200" by the end of the year, said Tom Kloza, chief oil analyst at the Oil Price Information Service. "That underscores a lack of confidence in the U.S. and European economies" and more demand destruction is occurring, not just with gasoline but also with diesel.

“ 'I would bet on $100 before I bet on $200' oil prices by the end of the year. ” — Tom Kloza, Oil Price Information Service

Oil producers have been making similar bets for lower prices, according to recent action in the crude-oil options market. See full story

Then again, there's no real "stopgap in place for the world economy to quickly convert from an oil-based consumer to a blend of other energy options such as natural gas, solar, wind and so on," said Neal Ryan, a manager at Ryan Oil & Gas Partners.

"Until we do, I certainly expect oil prices to remain at these elevated levels over $100 a barrel and eventually challenge their all-time highs again -- and then surpass them in the coming year," he said.