Stocks rise and fall, bonds can reach default status, and housing? Well, we know what can happen to home prices, at least cyclically. But oil knows only one direction: vertical. Or so it seems, lately.

Oil closed Wednesday up $1.17 to $109.92, another record-high close, driven to new levels of the stratosphere by the falling dollar -- which hit a new record low of $1.55 versus the euro -- and continuing concern that the U.S. Federal Reserve's credit market infusions will not be enough to prevent the U.S. economy from tailspinning into a deep recession. Earlier in the session, oil traded at an all-time high of $110.20, breaching the $110 level for the first time.

The other major energy commodities also closed higher. Heating oil gained about 3 cents to $3.03 per gallon, unleaded gasoline rose 1 cent to $2.72 per gallon, and natural gas rose about 1 cent to $10.05 per million BTUs.

Inventory fundamentals ignored

Moreover, oil's latest surge occurred despite a weekly inventory report that indicated that crude and gasoline supplies are plentiful in the United States, the world's largest oil consuming nation. Weekly crude oil inventories jumped 6.2 million barrels to 311.6 million barrels for the week ending March 7, 2008, the U.S. Energy Information Agency announced Wednesday. (pdf)

That inventory statistic was well above the 1.6 million barrel estimate analysts surveyed by Bloomberg News had anticipated, and oil did briefly sell-off on the news, to trade near $107. But as has been the case for much of the past year, the sell-off was a mere profit-taking pause before investors and traders piled back into oil.

Independent energy trader Jim Dietz told BloggingStocks Wednesday, "Oil has become largely divorced from fundamentals now," with oil-as-high-return-asset driving its price. Institutional investors, hedge funds, and other investors seeking a lucrative return on assets in the face of likely underperforming stocks and bonds in 2008, are increasing their positions of oil futures, he said. That fact, combined with the falling dollar, has produced an oil market where the bulls are firmly in control. Dietz added that he has long positions in oil and gasoline with monthly contracts.

Further, Dietz declined to predict a top, or a short-term high price, for oil, simply stating that "$110 is a done deal."

Impact on global economy

Economist David H. Wang said the global economy could be a done deal, as well, if oil's +$100 price holds.

Wang said a $100 oil price "is inconsistent with sustainable, substantial global economic growth," adding that in his interpretation it would not be unreasonable for leaders of the world's major industrialized nations to hold an oil summit to develop policies to lower oil consumption, to help lower oil's price, long-term. Placing restrictions on hedge / investment funds that establish short-term positions in oil -- another factor in oil's price rise -- are not practical, he said.