People think I'm crazy, but I mean it when I say that the $120-150 oil is creating a perfect storm of economics that will result in $30-50 oil in the next couple years. Think about how upside down economic principles get turned temporarily as a result of oil spiking 500% in the last five years and more than doubling even at its current quote this year. You know you can ignore those who say that oil's "down sharply" from its recent highs...the long-term economic ramifications and the cycles created thereby are the same at $120 oil as it is 15% higher than that at $150 oil.

The higher the price, the longer it stays here...the lower oil eventually goes as fixed supply continues to come on...and more to the point of this post, as fixed demand disappears.

You really think people paying more for a used hybrid than for a brand new one is a sustainable economic dynamic?

A used Prius is a hot commodity these days

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Some drivers are so impatient for the Prius that they pay more for used vehicles than for new ones, just so they can start driving them immediately.

Driven by gas prices and waiting lists for new Priuses at many dealers, buyers paid an average $27,945 in June for a 2008 Prius with an average 8,000 miles on it — about $1,300 above the average transaction price for a new one, Power Information Network found.

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And then there's this from today's NY Times...can you say demand destruction?

Shipping Costs Start to Crimp Globalization

When Tesla Motors, a pioneer in electric-powered cars, set out to make a luxury roadster for the American market, it had the global supply chain in mind. Tesla planned to manufacture 1,000-pound battery packs in Thailand, ship them to Britain for installation, then bring the mostly assembled cars back to the United States.

Elaine Thompson/Associated Press

A MORE REGIONALIZED TRADING WORLD Appliances, like those for sale in a Seattle store, above, are being affected by sharp increases in transportation costs.

Dot Earth: Are Oil Costs Creating a ‘Made Here’ Movement?

Staton R. Winter/Bloomberg News

Bread in a New Zealand supermarket. Soaring transportation costs also have an impact on food, from bananas to salmon.

But when it began production this spring, the company decided to make the batteries and assemble the cars near its home base in California, cutting more than 5,000 miles from the shipping bill for each vehicle.

“It was kind of a no-brain decision for us,” said Darryl Siry, the company’s senior vice president of global sales, marketing and service. “A major reason was to avoid the transportation costs, which are terrible.”

But as typical, don't you love how the author ignores all the same logic I'm using here in calling for a turn to this energy cycle:

Cheap oil, the lubricant of quick, inexpensive transportation links across the world, may not return anytime soon...

It's true -- cheap oil may not return anytime soon...then again, maybe it will. Remember that in addition to the fixed supply/demand changes that we're seeing accelerate before our eyes right now, we also have this whole economic downturn that will also destroy demand for energy on a cyclical basis.

And as for the energy stocks -- Chesapeake Energy (CHK), Diamond Offshore (DO), etc -- I keep telling you guys who explain to me that I should be long these stocks since they now have multi-year backlogs...that you wanted to be long these stocks BEFORE they had their multi-year backlogs and BEFORE the stocks had their multi-hundred percent rally to reflect that multi-year gain. Yes, you wanted to buy when business was horrible. And now you want to sell while business is booming and backlogged as far as the eye can see. The good times are more than already priced in.