Tuesday, March 11, 2008

Gas Prices

Light, sweet crude for April delivery rose $1.10 to $109 a barrel in Asian electronic trading on the New York Mercantile Exchange, by midday in Singapore, after setting a record high of $109.20.

Crude futures on Monday rose $2.75 to settle at a record $107.90 a barrel.

Many analysts believe speculative investing attracted by the weak dollar is the primary reason oil has risen so far so fast in recent months. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.

There was little in oil's price uncertainty to convince analysts that the huge runup in oil prices has run its course. Analysts have said expectations are growing that the U.S. Federal Reserve would cut interest rates at its policy planners' next meeting March 18.

"Lower interest rates would mean increasing liquidity, which means a further weakening of the U.S. dollar and rising U.S. inflation," Shum said. "What that means for investors is that they therefore move their money into commodities as a hedge against inflation."

read the CNN story

Weak dollar, interest rate cuts, and inflation fears are driving oil prices.

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