The price of oil has defied logic and has continued to rise in the face of many bearish catalysts. However, I think the current price of oil has had a significant affect on demand and this can no longer be overlooked by the speculators who have been bidding oil to stratospheric levels.

The morons such as the analysts at Goldman Sachs who have called for $200 oil seem to think that the demand for oil is inelastic (that demand will remain the same regardless of price). This is definitely not the case and it is fairly clear that oil at its current price is putting a considerable dent in demand.

Edward Meir, and analyst at MF Global UK Ltd. said in a research not that “if the present trends continue, we could be heading for the first annual drop in gasoline consumption in some 17 years.” Also, Asian countries are being forced to cut subsidies due to the soaring price of crude.

I think the price of oil has probably peaked and if it hasn’t I don’t think it will run up too much more before there is a sizable correction.

When this happens it would be wise to buy airlines and short pricey alternative energy stocks such as solar stocks. You can also short energy stocks such as MXC that have made ridiculous speculative runs.

Disclaimer: I have no position in oil futures, airline stocks, solar stocks, or MXC.