From its high of $147 a barrel last July, West Texas Intermediate Crude oil prices have crashed a cumulative 74%. That ranks as one of the worst absolute declines for any asset since the onset of deflation last July as investors dump most commodities, except gold, silver and several other soft commodities.

Oil prices now trade at a five-year low.

If oil prices overshot on the way up to $147, then the opposite is certainly true today with prices at $36 a barrel. At some point, crude oil will bottom; the odds of a spectacular bounce occurring is highly likely as global governments spend trillions of dollars at the same time to desperately boost economic growth in 2009-2010.

China, which is the world’s second-largest consumer of oil after the United States at 9.4 million barrels per day, is now importing the lowest amount of crude oil this decade amid a softening economy. U.S. demand has also declined sharply to less than 19 million barrels per day.

According to the International Energy Agency (IEA), oil consumption in 2009 will decline to its lowest levels since 1982.

The IEA cut its demand outlook last week as the global economy continues to deflate since the fourth quarter. The Paris-based agency now projects oil consumption will decline by 570,000 barrels per day to 84.7 million barrels. Just 12 months ago, the world sat on a net supply deficit of about 1 million barrels.

More than any other nation China has seen the largest spike in net oil consumption this decade.

Chinese oil consumption has increased by 3.2 million barrels per day since 2000, accounting for a third of the total increase in global demand.

The Chinese are also in the midst of their biggest expansion of credit in history following the passage late last year of a $541billion dollar stimulus package. That spending should at least boost short-term demand for oil assuming consumption in the United States is also supported by the government’s recent passage of the $878 billion fiscal spending package.

Even the biggest bears will concede that concerted global government spending will buy at least a few quarters of economic growth later this year or in 2010 – and that should boost oil prices. Combined with additional supply cuts by OPEC and a host of cancelled exploration and development projects over the last few months, oil prices are bound to bottom shortly.

The above chart shows oil prices dating back to 1997. In 1998, amid the tail end of the Asian economic crisis and the Russian debt default, oil prices bottomed at an incredible $10.50 a barrel. Ten years later, at its peak, oil climbed a cumulative 1,300%.

I think it’s highly unlikely we’ll see 1998 prices again, unless another major bank fails or worse, a major sovereign borrower defaults in this cycle. This remains a possibility in a brutal deflationary environment.

Yet if the time to buy an asset is when prices are low and in near disrepute, then crude oil fits that bill right now. When the time comes to buy oil, look to the oil futures or oil futures related ETFs. They’ll give you much more bang for your buck than most oil stocks.