Exactly 12 months ago, West Texas Intermediate crude oil was trading at just under $63 a barrel.

Yesterday (Thursday) futures prices for that benchmark grade of crude oil hit the latest in a succession of record highs, punching through the $135-a-barrel mark on the New York Mercantile Exchange, before sliding back.

In other words, in only a single year, crude-oil prices have more than doubled, soaring 115% - and setting 27 separate new records along the way. And while a short-term correction may be in the offing - especially with fears of a U.S. recession ebbing - the reality is that oil prices are nowhere near the end of their run, meaning the United States is really an economic system that’s at the crossroads.

“The market is less worried about the economy and subprime problems,” Tim Speiss, head of the wealth-management arm of Eisner LLP, told MarketWatch.com. “But that’s near-sighted. If oil stays above $130 a barrel, that’s a very significant event and a lot of the sectors of the economy would have to be re-engineered.”

Commodities of all types are at or near all-time record highs. And the impact - on a global basis - has been as starting as it is far-reaching, affecting consumers at all income levels and in every market across the world.

Even so, here in the U.S. market, it’s the price of oil - and of gasoline - that continues to dominate the headlines. Like a junk-food junkie who’s constantly searching for a sugar fix, the U.S. economy is addicted to foreign oil. And because it’s not a habit we’re going to kick anytime soon, U.S. consumers will be forced to live with the heinous consequences.

Given that harsh reality, shrewd investors will look for ways to offset that largely unavoidable pain with some well-placed profit plays. Before we can do that, however, a look at the basics is necessary.

Oil Prices 101

Since 2005, global oil production has remained stagnant, but demand has increased exponentially. Even if American consumers are unwilling to pay $4 a gallon for gasoline, and U.S. demand plummets, global demand will continue to rise.

Eduardo Lopez, an analyst with the International Energy Agency, told The Independent that America’s role as the global oil-price arbiter - the United States consumes one out of every four barrels of oil used worldwide - is dwindling.

“Demand is coming from emerging markets. As long as the [United States] doesn’t collapse, it doesn’t really matter if the mature economies are slowing,” Lopez said.

While the IEA expects demand in industrialized countries to decline by 0.7% (about 300,000 barrels of oil per day) this year, the Paris-based group says oil consumption in the rest of the world will grow by 3.7% (1.4 million barrels a day).

The net increase is due chiefly to the rapid growth in China and India.

Fueling the Fast-Growing Economies of China and India

According to the China Petroleum and Chemical Industry Association (CPCIA), China’s apparent consumption of petroleum byproducts such as gasoline, diesel and kerosene rose 16.5% year-over-year in the first-quarter. Crude oil consumption jumped 8%.

China’s net imports totaled 44.95 million metric tons in the first quarter, up 15%, and net imports of oil products rose by 32% from a year ago, according to the Asian nation’s General Administration of Customs.

And now that the most powerful earthquake in 58 years has ravaged the country’s infrastructure - smashing roads, leveling refineries, and shutting down hydroelectric plants - China has been forced to supercharge its imports of diesel and jet fuel just to supply power generators and airports to help it accelerate the desperate rebuilding process.

Ultimately, the IEA sees China’s oil demand more than doubling to 16.5 million barrels a day by 2030.

But that’s nothing compared to other emerging hot spots, where demand is expected to rocket sevenfold during that same stretch.

Just look at India, another big country with a pedal-to-the-metal growth rate. That country is expected to overtake the United States, Japan, and China as the world’s leading net importer of oil by 2025.

In 1970-71, India was importing 11.66 metric tons of crude oil. By 2005-06, however, the imports had increased to 99.40 metric tons, the Economic Times reported. Since 1997-98, alone, petroleum imports have almost tripled. Nearly 76% of India’s domestic oil needs are met via imports.

And it’s really no wonder: India’s demand for oil is expected to grow by 8%-10% this year alone.

Together, China and India will account for 45% of the increase in global primary energy demand through 2030. The two countries’ net oil imports are expected to jump from 5.4 million barrels in 2006 to 20 million barrels a day in 2030, which could create a “supply crunch” as early as 2015 according to the IEA.

The Pending ‘Supply Crunch’

There’s no avoiding the fact that the world will one day run out of oil. In fact, the biggest field in the world, Saudi Arabia’s Ghawar field, is only a shadow of its former self. It was originally discovered in 1948. And since the 1970s, the oil field has required large-scale injections of seawater - a technique used to artificially pressurize an oil reserve that’s on the decline.

Ghawar isn’t the only spot where this seawater saga is playing out. As the biggest, most-accessible, and most-cost-efficient wells on the planet dry up, oil producers are struggling to replace them.

To do so, they’ve been forced to experiment with challenging and costly deep-sea drilling expeditions. Such heavy-hitters as Exxon Mobil Corp. (XOM), BP PLC (BP), Total SA (TOT), Chevron Corp. (CVX), ConocoPhilips (COP), and Royal Dutch Shell PLC (RDS.A, RDS.B), will spend a record $98.7 billion this year on exploration and production, according to Lehman Bros. Holdings Inc. (LEH).

Exploration costs have more than quadrupled since 2000, as oil producers have been forced to take on more complex projects and the costs of both labor and materials have skyrocketed. In just the past eight years alone, the cost of finding and developing a barrel of crude oil soared from $4 to $18, Andrew Latham, vice president of exploration services at consulting firm Wood Mackenzie Ltd., told Bloomberg News.

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