Carbiz, you're smarter than this. Demand was nearing maximum supply capacity, since there was little slack in and inelastic market the initial spike in price occurred. The initial price spike fueled fears and a buying spree <sprinkled with some corruption> shot the prices up to that $147 market.
People reacted surprisingly quickly, shifting to lower mileage vehicles, carpooling, flooding public transit. That killed demand at the retail level. Many of those users aren't coming back. (Anecdotal: I went from a full size SUV and Sports Sedan to no vehicle at all using public transit, car sharing, and borrowing my BF's car with no inconvenience)
At the same time, the people who were still driving lots could no longer afford to both fill up their vehicles AND buy goods and services. That, combined with the mortgage crisis and credit crisis, is killing the retail sector. No retail sales means no shipments via truck, train, ship. No shipments means factories all over the world close. The demand has been killed in the commercial sector.
Since supply is relatively fixed, even a 10% drop in demand would cause huge pools of surplus to form. The U.S. consumes about 7.6 billion barrels of oil a year. A 10% drop in demand means that there are an extra 760 million barrels out there on the market that were expected to be sold but weren't.
Since last November, American driving has dropped by over 90 billion miles. At an average fuel economy of 20mpg, we saved 4.5 billion gallons of gasoline.
In this perfect storm we've had a huge drop in demand, not 50%, but enough to cause this cascading effect on oil prices.