It looks like the bear market rally on crude oil has peaked and the next leg down is starting. In the last post about crude oil, I had predicted a peak in the $115 to $122 range. The bear market rally peaked a hair short of the target zone at $114.81 a barrel. Primary wave  down has arrived for crude oil.
Here's an intermediate term chart of crude oil.
We can see that when the ending diagonal was done, it was followed by a sharp decline downwards. The sharp decline isn't too surprising, given that it would take roughly a month to retrace the ending diagonal. The decline in progress, however, is likely too brief to be a Minor degree impulse, so its most likely Minute wave [i] of a leading diagonal. Notice the potential three wave structure of the initial decline from the top.
A leading diagonal has implications at the gas pump as well, since gas prices tend to follow crude oil. The implication of a leading diagonal is that gas prices at the pump could stay above $4 a gallon in many areas of the United States until perhaps early 2012. A rounded top pattern in gas prices at the pump is a very likely scenario.
The top of the bear market rally really does have all the expected characteristics of a large wave 2 in a bear market. In 2008, when oil peaked at $147 a barrel, there were calls by Congress for an investigation into speculation and price manipulation, but the pressure was brief. This time around, with the peak of the bear market rally approaching, the Obama Administration started calling for investigation into the role of speculators and price manipulation in the rise of oil. The difference is that there has been a stronger response from the government this time around, which indicates a stronger level of fear than in 2008. Not only has the Obama Administration called for an investigation into price manipulation, but also recently pushed to put an end of government subsides for Big Oil as well, arguing that Big Oil is doing fine without the subsidies as evidenced by stratospheric profits. On top of that is a speech by Obama in April 2011 on the subject, emphasizing the need for energy independence and cutting the use of foreign oil.
Expect the Obama Administration to continue putting pressure on Big Oil for a number of months, possibly into 2012, in spite of crude oil's decline from the peak. Only when crude oil starts the initial Minor wave 3 down will government involvement end.
We are seeing the effect of "The Great Deflation" in crude oil prices, and the forecast is for oil to continue falling. Here is a chart of oil from 2003 to 2022.
Recall that when Primary wave  down took place in crude oil, OPEC started cutting production in a frantic effort to put a floor on falling prices. There is every reason that the same thing will happen again when Primary wave  down unfolds in earnest.
Looking at the larger picture, Peak Oil occurred in 2008 at a global production of 86 million barrels per day. With Primary wave  down unfolding in oil prices, OPEC will cut production again to try to put a floor on falling prices. This will be accompanied by Big Oil shutting down production facilities as well. It costs roughly $25 to produce a barrel of oil from oil sands and from deep sea drilling. Once oil falls below $25 a barrel, oil companies will start shutting down production to avoid taking losses on their balance sheet. The result will be a chronic shortage of oil that will be evident during the Palin Administration Period, with production falling faster than the Hubbert Curve would predict. One of the consequences is economic and living conditions falling to the level of the 1930s by 2021.