I know that last thing you probably wanted to hear this morning was that oil prices moved even higher, but that is exactly what is taking place, as oil rose as high as $125.98 and is currently trading at $125.60.

Leading the charge today is the weak dollar as investors continue to seek refuge from the falling U.S. currency in commodities -- most notably, oil. The dollar has fallen today against the euro, the British pound, and the Japanese yen. The euro was sitting at $1.5404 last night, but has moved higher today, up to a current price of $1.5466.

The market is also concerned about the upcoming peak driving season for Americans. With the season getting under way, oil prices will definitely continue to rise, and if gasoline stockpiles continue to fall, you can be sure that gasoline prices are also going to keep moving higher over the next couple of months. Will we see national averages of $4 or greater? I don't think so, but at the current rate prices are moving, nothing is out of the question right now.

Growth is slowing in all regions of the world, and inflation is rising, but the International Monetary Fund's No. 2 person in charge says a repeat of the 1970s stagflation period isn't likely.

IMF First Deputy Managing Director John Lipsky said the "inflation speed-up must be taken seriously as it creates potentially significant challenges to economic stability," Bloomberg News reported Thursday. However, Lipsky added that a return to 1970s-style stagflation isn't likely, but it cannot be totally ruled out.

Oil, commodity-rooted inflation

Further, Lipsky underscored that the current inflation rise is being driven by a fundamental increase in demand for commodities, primarily oil, and to a lesser extent by supply constraints around the world, Thomson Financial reported Thursday via Forbes.com. Hence, the recent price increases are likely to prove finite, Lipsky added, unless these items keep rising more rapidly than other items.

Economist David H. Wang told BloggingStocks Thursday he agreed with Lipsky's categorization of the most-recent rise in inflation but added that government subsidies may prevent a pullback in commodity prices, especially oil. Classic economic theory holds that as the price of a good rises, people will use less of it. However, governments in China, Venezuela and the Middle East, among other nations, subsidize gasoline/fuel, lowering its cost, which discourages conservation, Wang said. The United States does not subsidize motor fuel at the federal level, but individual states do subsidize heating oil/natural gas for low-income citizens.

Oil continues its charge today, with prices rising above $122. At noon, oil is at $122.21, up $2.21.

The bulls have definitely had plenty of reason to continue to push prices higher this week. Concerns over supplies and the weak U.S. dollar continue to lead headlines, adding a boost to the current record high prices. Unfortunately for consumers at the gasoline pumps, higher oil will probably continue to prop up gasoline prices.

In an already uncertain market, any sort of rumors over supplies will always lead to higher prices, and that is definitely playing a part in the current market. Fresh concerns are flowing out of Iraq after Kurdish rebels threatened to start running suicide operations against American interests in the country. Iran is (as always) in the minds of traders as the country continues to defy the United Nations over its nuclear program.

Just a year ago, if you mentioned "sovereign wealth funds," you probably would have gotten a blank stare. But, of course, this is now the hot thing in finance. More importantly, it looks like sovereign wealth funds are poised for strong long-term growth. In fact, Lehman Brothers (NYSE: LEH) recently set up a division to capitalize on the mega trend.

Sovereign wealth funds are found in many countries in Asia, Africa, Europe and the Middle East. It's the inevitable consequence of some major forces: strong economic growth in emerging economies, the fall in the US dollar and spikes in commodities prices, especially oil.

Global Insight, a research firm, estimates that sovereign wealth funds have grown an average of 24% per year for the past three years. They have about $3.5 trillion in assets, which is more than private equity and hedge funds combined.

No doubt, sovereign wealth funds have become a key element in global finance. For example, they contributed to about 28% of M&A deals (in January 2008) and about 10% of private equity transactions.

Global Insight forecasts that – by 2015 – sovereign wealth funds will exceed the value of the GDP of the US economy. And, I'm sure, the funds will also own a big chunk of it as well.

Tom Taulli is the author of various books, including The Complete M&A Handbook (www.mergerbook.com) and is also a principal in Averiware, which provides an ERP system to small and midsize businesses.

AP reports that Goldman Sachs Group (NYSE: GS) predicts that the price of a barrel of oil could climb from its current $120 to as high as $200. That's not too much of a stretch because since January 2001, that price has risen 400% from $24. A rise to $200 would be a mere 67% increase from the current price. Meanwhile gasoline is likely to hit $4 a gallon this summer -- and if oil hit $200 a barrel, that could drive the price to $6.67 a gallon -- up 319% from the $1.59 it cost back in January 2001.

Why is the price of oil going up so much? Experts don't seem to know and I'm not an expert. But it looks like simple supply and demand does not explain such a rapid price rise. Some cite rising energy demand -- from China and India -- combined with a reduction in supply -- e.g., production declines in Mexico, an unstable oil industry in Venezuela and possible shrinking production capacity in the Middle East -- as a partial explanation.

But then there are the other factors that seem hard to measure -- the potential decline in the dollar, political instability (such as the U.S. firing warning shots at two Iranian boats in the Persian Gulf this week), and so-called speculators. Of all these factors, the speculators explanation is the most interesting. These could be hedge funds and commodities traders who borrow huge amounts of money to bid up oil prices.

Oil zoomed past $119 per barrel Friday at mid-day after a cargo ship hired by U.S. military fired warning shots at boats suspected to be Iranian, Reuters reported Friday.

According to a U.S. Navy Bahrain-based Fifth Fleet spokeswoman, the Westward Venture, a cargo ship chartered by the U.S. Department of Defense, fired "a few bursts" of machine gun and rifle fire to warn two, approaching, unidentified small boats believed to be Iranian vessels, Reuters reported Friday. The small boats left the area, a short time later, the spokeswoman said.

Oil jumps $3

Oil surged $3.04 to $119.10 per barrel on word of the incident. The other major energy commodities also rose on the news. Heating oil rose about 4 cents to $3.30 per gallon, unleaded gasoline added about 4 cents to $3.05 per gallon, and natural gas gained 13 cents to $10.92 per million BTUs.

Independent energy trader Jim Dietz said the incident underscores how one unexpected event in today's oil-challenged world can send the oil markets into buy-mode in seconds.

Oil prices have dropped slightly today following the weekly inventory report from the U.S. Department of Energy. Typically, the weekly inventory reports are able to move prices one way or the other, but this week we got mixed signals, and consequently, prices have not reacted too much in either direction.

Following the recent surge in oil prices, traders were looking for some concrete data to justify more price moves, but they were given a larger than expected decline in gasoline inventories, but higher than anticipated oil inventory numbers .

Analysts were expecting to see gasoline inventories drop by 2.1 million barrels, but the actual decline was 3.2 million barrels. Not good news for drivers that are already feeling the pain of record high gasoline prices. On the oil side, analysts had been looking to see inventories rise by 1.1 million barrels, and the actual increase was over twice that amount, at 2.4 million barrels.

The Saudis will shortly open one of the largest oil fields in the world for production. That would seem to be good news, but it may be the last big deposit of crude left in the country. And, getting it online has cost $15 billion.

According to The Wall Street Journal, "Even in Saudi Arabia, home to more than a quarter of the world's known recoverable reserves, the age of cheap and easily pumped oil is over."

In a period where oil now sells for $117 a barrel, the largest single question is whether global oil production has peaked. There are very few new, large fields being found now. Recently, Brazil said it has discovered one off its coast, but that is in very deep water. Getting to the crude will be expensive, and some of it may be beyond reaching at all.

Part of the rise in oil prices probably has nothing to do with current supply, but it may well anticipate a fall-off in crude production in years to come. Developing nations like China and India are still increasing their consumption. Without large new deposits to develop, there is every reason to expect that oil reserves may start to fall a decade from now.

There is nothing to replace that.

Douglas A. McIntyre is an editor at 247wallst.com.

Oil prices have once again hit new highs today, trading up all the way to $118.05, before cooling off slightly, and are currently sitting at $117.85.

The main concern fueling today's move is over supplies from some of the world's major oil producing countries. Nigeria is on the list, as a joint venture of Royal Dutch Shell PLC (NYSE: RDS) stated that it would be reducing its output in April and May by around 169,000 barrels a day. This comes in response to a militant attack on one its pipelines last week.

This is really nothing new to Nigeria, which over the past two years has been the victim of multiple attacks on its oil infrastructure. The country is a major supplier to the the United States, and over the past 2 years the country has seen its oil output fall by a pretty hefty 25%. All the result of militant attacks.

Large emerging market countries will use more crude oil than the US for the first time ever. According to Bloomberg, "China, India, Russia and the Middle East for the first time will consume more crude oil than the U.S., burning 20.67 million barrels a day this year."

While OPEC says that higher oil prices are the result of a weak dollar and speculation, that viewpoint is clearly wrong. Demand for oil is moving up and moving up quickly. At the same time there is evidence that supply may drop. Saudi Arabia has indicated that it will soon stop investing in more oil production facilities. The Wall Street Journal says that "After 2009, the kingdom is putting a brake on new projects, because it fears rising output and consumption of biofuels and other non-fossil fuels will erode crude-oil demand."

Anyone who believes the Saudi excuse for cutting investment is a oil production is a fool. By dropping capital expenditures on new facilities, the country can increase the tens of billions of dollars in profits it makes on $116 oil.

The war between consuming nations and producing nations is entering a new and more dangerous phase. Oil needs to rise 30% to hit $150. Based on the price increase over the last year, that number is not beyond the realm of possibility. Nor is the idea that gas prices could top $5 a gallon.

Oil. More consumption and less supply. Ugly results.

Douglas A. McIntyre is an editor at 247wallst.com.

On an almost weekly basis, OPEC makes its case that increasing oil production will not bring down the price of crude. And, almost every week oil consuming countries see the statements as self-serving. While the members of the cartel bring in tens of billions of dollars with oil hitting $116, there is absolutely no economic incentive for them to pump on additional drop of the black gold.

Bloomberg reports that OPEC's chief says, "Any increase in production now will not have an impact on prices because there is a balance between supply and demand." The statement is laughable on the face of it. While speculation in price and a falling dollar have contributed to some of the rise in crude, so has demand from countries like China and India. Demand has also not fallen in the U.S., Europe, and Japan, which have traditionally been the largest markets of oil.

Unfortunately, consuming nations have very little leverage with OPEC. The U.S. does offer military security to many Arab states in the Middle East, but it does not seem to be willing to use that as a bargaining chip.

Too bad.

Douglas A. McIntyre is an editor at 247wallst.com.

While most of us are pretty amazed at just how high oil prices have risen recently (ended the week at $116.69), one man thinks that oil is still pretty cheap compared to its true value. According to Iranian President Mahmoud Ahmadinejad, oil prices have yet to hit fair value.

Speaking in front of an oil and gas exhibition in Tehran, Iran's President stated that the Western world was "selfish" in its desire to obtain cheap oil. A big reason for the recent run up in oil prices can be attributed to the weak U.S. dollar, and Ahmadinejad definitely made it a point to bring up the weak currency, calling the dollar "a handful of paper" with no global support.

While I take most of what I hear from the Iranian President with a grain of salt, as far as the dollar is concerned, he does make a decent point. Over-exaggerated, yes, but still a valid point. The dollar has been steadily falling and with more interest rates on the horizon it will only weaken further as the year progresses.

Gasoline prices have continued their charge up to $4 a gallon today, rising to a new record high of $3.418 after jumping 1.9 cents last night.

Gas prices have been rising sharply over the past few months in reaction to record high oil prices and a weak dollar, and some analysts are already predicting that we will be seeing $4 a gallon before it is all said and done. Diesel prices also rose to a new high, hitting $4.146 per gallon.

As we noted in earlier discussions, gas prices are only expected to move higher in the next few months as more drivers hit the road for their summer vacations. The heavy demand summer driving months always apply upward pressure to prices, and despite the current high prices, summer demand will definitely push prices even higher.

Another strong start to the day for oil prices, as the weak dollar has led traders to push oil up to another new high today of $114.53, though it has moved a bit lower in early morning trading.

As we noted last night, there were several factors at work yesterday, but today's move is being attributed mostly to investor fears over the weak U.S. dollar. The euro has been moving strongly lately, and continuing to trade at record levels against the dollar, currently trading at $1.5966.

It is strange writing about oil's recent run up because typically we would be talking about supply and demand, but that is just not what is pushing prices higher. Traders are moving into oil (and all commodities) mainly because they are just flat out out-performing the stock market, and with the dollar continuing to fall, the procession into commodities still has a way to go before traders get tired.

As Joseph Lazzaro wrote earlier today, oil prices were surging once again in today's market, and traders set a new record, pushing prices up as high as $114.08 today.

Fueling today's rally were concerns over global supply, as news spread that Russian oil production has fallen this year. This is the first time in a decade that Russia is seeing a decline in its production.

Russia is not the only country making headlines. We were also given the news that China had a massive jump in its diesel oil imports last month of a remarkable 49%. So, we are being given both the news that Russia is producing less, while China is demanding more; the perfect recipe for a strong day for oil prices. Other oil producers, Mexico and Nigeria, announced that they had temporarily shut down some of their production as well.