Gas prices are rising and show no signs of coming back down. In fact the predictions are for higher prices to come. At the moment, gasoline averages $3.542 per gallon, according the the AAA motorist group, as reported by CNNMoney.

The highest recorded nationwide price was $4.114 on July 17, 2008. Forecasters are looking for the $4.00 per gallon marker to be hit by this summer.

The Department of Energy has had to up its forecast its forecast for oil prices for 2011 and 2012 from last month. The updated forecast takes into account the loss of one million barrels per day from the Libyan conflict, The Wall Street Journal reported.

Last month, the DOE's Energy Information Administration's (EIA) estimate for West Texas Intermediate (WTI) crude was $91 per barrel for 2011. Now, EIA forecasts WTI crude to average $102 per barrel in 2011 and $104 per barrel in 2012. The EIA qualified its forecast with this statement: "There is significant uncertainty surrounding this forecast."

The turmoil in the Middle East is spreading as protests surge throughout the Arab world. This is not a one country phenomenon -- and it won't go away any time soon.

The great fear for the West is that the unrest will spread to other oil-producing countries. Half of Libya's oil production is shut down. Protests in Iran -- the second largest oil producer in OPEC -- are growing. Saudi Arabia's King Abdullah is giving away $36 billion to his people in the hope of warding off further unrest.

The turmoil in the Middle East is getting worse by the day. Protesters now control a good portion of Libya. The panic is spreading to Saudi Arabia where King Abdullah is handing out $36 billion in housing support and funding to offset inflation, according to the Wall Street Journal.

So the number crunchers are putting together possible "what-if" scenarios for the oil market. One such possibility is: What if Algeria joins Libya in revolt. Both countries produce 4 million barrels of oil per day. If such events develop, oil could surge to $220 per barrel, according to Nomura Securities in the Wall Street Journal.

There's a catch-22 in world food supply and demand. The demand for food from developing nations is putting pressure on supplies across the globe. But governments are getting increasingly nervous and worried about unrest. To try and preempt civil disturbances, governments have stepped in and are buying food staples. This government buying is driving prices still higher.

Algeria and Saudi Arabia have announced extraordinary purchases of wheat, driving prices to a two and a half year high. Last week Algeria bought 600,000 tons of wheat, much more than usual. Saudi Arabia announced plans to double the size of its wheat stockpile.

First things first, the United Arab Emirates (UAE) and Saudi Arabia are not banning the BlackBerry device produced by Research in Motion Limited (RIMM). What is being suspended is BlackBerry mobile services like e-mail and text messaging. The supposed ban will start in October.

This ban stems from a dispute between the UAE and RIM concerning RIM's encrypted data system. The system makes government monitoring of data more difficult. The problem for RIM is that such a move could be followed by other countries in the region, as Kuwait and Bahrain have also raised concerns over the data encryption.

Saudi Arabia's Saudi Aramco raised its light crude oil prices to Asia and the U.S. For Asia buyers it raised its crude price by $1.00 to $2.10 over the Persian Gulf benchmark. It raised the premium it charges U.S. customers by 40 cents a $1.35 a barrel over Argus Sour Crude Index.

Saudi Arabia, the largest member of OPEC decided to leave production quotas unchanged. Most of the Persian Gulf States are increasing production to take advantage of higher prices.

Now here's a real important story. If you are an oil trader, chances are you traded the New York Mercantile Exchange West Texas Intermediate (WTI) contract. World pricing of oil by the biggest exporters was based on the WTI contract.

Now, suddenly, Saudi Arabia has decided to drop the WTI contract as the benchmark pricing unit for its oil. It is substituting a contract called the Argus Sour Crude Index, which will track the price in the physical market of a basket of U.S. gulf coast crudes, including Mars, Poseidon, and Southern Green Canyon.

You are probably wondering: "When will this happen?" and "Which currencies will be included in the basket? In answer to first question the changeover would take place over nine years. The currencies to be included in the basket include the Japanese yen, the Chinese yuan, the euro, gold and a new unified currency planned for nations in the Gulf Cooperation Council, including Saudi Arabia, the United Arab Emirates, Kuwait, and Qatar.

What this means is that oil will no longer priced in dollars.The article in The Independent claimed the U.S. is aware of the talks and is "sure to fight this international cabal."

In an unusual move, U.S. Treasury Secretary, Timothy Geithner, is making a special trip to Saudi Arabia. Why? Authorities in Saudi Arabia have recently withdrawn $50 billion of U.S. investments to reinvest at home. The Saudis are planning a $400 billion stimulus plan at home over the next five years.

With last year's record oil prices, the Saudis racked up a huge budget surplus. Much of that surplus of $500 billion is invested in US Treasury bills.