Oil's surge to near $70 a barrel has stoked fresh debate about what's driving the market -- and where prices may be headed if the economy is turning up. Edward Silver, a former Times staff writer who keeps a close eye on the energy market, offers some context on the latest price action, and the global supply/demand equation:

The world consumes 30 billion barrels of oil a year. Without it, our food doesn’t make it to the supermarket and our flights to Hawaii are grounded. Too bad the price is set by such a moody bunch.

Crude gained 3.2% to $68.44 a barrel in futures trading last week, but prices seesawed along the way. Again, bulls won the tussle. An $85-a-barrel yearend forecast from Goldman Sachs and more hints of economic recovery -- including surprising strength in Chinese manufacturing -- overshadowed flush oil stockpiles and other dismal data indicating a weak appetite in the United States, which still devours almost a quarter of global output.

Even before the economic signs turned more encouraging, oil was sizzling. Prices have more than doubled since crude visited the low-$30s in February. The falling dollar has helped, as some investors have turned to raw materials as a hedge against the greenback's slide.

Clearly, instability is in the DNA of our primary energy source. Only a year ago, oil was on an epic ascent, driven by exuberant traders to a peak of $147 a barrel in July. The industry was vilified. Priuses were sold out. Some analysts set targets of $200 a barrel.

Yet in short order, the recession and credit crunch rewrote the script for the rest of 2008. Those traders turned morose, vaporizing almost 80% of the commodity’s value in five chaotic months. In the aftermath, big oil companies and the petrostates of the world have been grappling with a surplus and paring production to shore up the market.

Demand for crude, however, is considerably less volatile than the price. Even as the rally unfolded this spring, commentators often repeated the view that the price strength made no sense because fuel use had collapsed. But "collapsed" doesn’t describe a world market that will shrink a measly 3% this year to 83.2 million barrels a day, according to the International Energy Agency.

Though fewer Americans took long car trips over Memorial Day weekend, China’s 8-million-barrel-a-day habit will see a dent of only 70,000 a day this year, the IEA says. In fact, the Asian giant burned more oil this April than last April. And all those tankers filled with surplus crude that bearish observers point out? Combined, these floating warehouses hold just over a single day’s worth of global use.

Wall Street, bullish oil traders and the Obama administration all are betting that the U.S. economy will look better in the second half than the first, of course. In its mid-May report, the Energy Department assumes the beginnings of a recovery in consumption. It forecasts only a slight pullback in U.S. oil use this year, to 18.9 million barrels a day from 19.4 million in 2008, and an uptick in 2010.