Oil prices are caught in a tug of war between slowing demand (at least in some areas), flat production and declining net oil exports. I do think that it is a mistake to overestimate the possible decline in demand with 100s of millions of potential eager new drivers in India and China and a $2500 car coming on the market.

On the supply side, there is continuing evidence that the annual decline rate in net oil exports by the top five net oil exporters is accelerating. Russia, for the first time in years, is currently reporting a monthly year over year decline in crude oil production, after a period of essentially flat production since October, 2006, and domestic petroleum consumption is exploding. All this with total world production essentially flat and not very likely to increase beyond 85 million bbl per day.

Maybe we would see those kinds of prices with a major reduction in world population or a severe world depression but thats about it.