Oil briefly rose to a record $139.89 per barrel Monday before pulling back after a fire cut North Sea output, Bloomberg News reported Monday.

Oil traded briefly at $139.89 -- an all-time high -- before pulling back to trade up $1.73 to $136.60 per barrel in Monday afternoon trading.

An field off Norway's coast was shut down after a fire broke out Sunday. StatoilHydro ASA's 150,000 barrel-per-day Oseberg oil and gas field off Norway's coast accounts for about 5% of Norway's output.

The other major energy commodities also rallied Monday at midday on the news. Heating oil jumped about 7 cents to $3.90 per gallon, unleaded gasoline added about 3 cents to $3.49 per gallon, and natural gas climbed 29 cents to $12.91 per million BTUs.

Oil market: Dueling arguments

Energy trader Jim Dietz told BloggingStocks Monday the oil market is "in a battle to define reality" between the oil bulls and bears.

Saudi Arabian Oil Minister Ali al-Naimi said a summit of oil producers, consumers, companies and other energy officials in his country this month will find a solution to "stabilize" oil prices he argues are "unjustified" by supply/demand fundamentals, Bloomberg News reported Friday.

Oil traded lower early Friday on al-Naimi's summit comments, falling $2.30 to $134.44 per barrel.

Saudi Arabia has invited the United States, United Kingdom, China, Germany, India, and Japan, among other nations, as well as dozens of energy officials and analysts to the June 22 meeting in Jeddah, Reuters reported Friday.

Saudi Arabia, the world's top oil exporter and holder of the largest proved oil reserves, is an influential member of OPEC. Throughout oil's record price rise, OPEC has argued that the oil market is well supplied, with no shortages, and that other factors - - the weak dollar, geopolitical tensions, and above all, investor speculation -- not supply -- has kept prices higher than what the supply/demand balance would dictate.

Others disagree, arguing that global oil inventories, which are in the lower-half of a 5-year average, and the small safety cushion -- the difference between daily global oil supply and demand -- are two objective data points that explain high prices. Oil hit a record high of $139.12 per barrel on June 6, 2008. Oil is up more than 100% in 2008 and more than 400% since 2000.

This energy fact will not be a revelation to American motorists:

The U.S. Energy Department now forecasts that gasoline prices will remain high -- around $4 per gallon -- this year and next, The Associated Press reported Wednesday.

The Energy Department's Guy Caruso, head of the department's Energy Information Administration wing, announced the revised forecast in testimony before a U.S. House of Representatives committee, The AP reported.

The EIA now expects the average U.S. gasoline price, currently over $4 per gallon, to peak at $4.15 per gallon in August. Regular-grade gasoline, which typically is 87 octane at U.S. gas stations, is expected to average $3.78 per gallon in 2008, or 97 cents above the 2007 average price.

Nevertheless, many high-cost U.S. cities -- including New York, Los Angeles, San Francisco and Boston -- are already experiencing gasoline prices in the $4.20-$4.60 per gallon range, with selected areas approaching $5 per gallon.

Moreover, the steady rise in gasoline prices is occurring despite the fact that weekly U.S. gasoline consumption has declined, on a year-over-year basis, for more than four months.

OPEC said Wednesday it wants a "solution" to end record-high oil prices, including an examination of the role speculators and governments of consuming and producing nations, when it meets later this month in Saudi Arabia, Bloomberg News reported.

Saudi Arabia, the world's top oil exporter and holder of the largest proved oil reserves, said it wants heads of state from consumer/producer nations to attend the June 22 meeting in Jeddah, Reuters reported, although it was unclear if any heads of state outside the cartel will attend the meeting.

A International Energy Agency official said the IEA's Executive Director Nobuo Tanaka would attend the meeting.

After a week-long pullpack with many traders calling a correction in a bull market, oil's seemingly inexorable drive to a price few individuals or companies can afford continued Wednesday. Oil closed up $5.11 to $136.42 per barrel after the U.S. Energy Information Administration announced a below-consensus 4.6-million-barrel decline in weekly oil inventories.

Although OPEC's previous meeting in Rome led to no new insights regarding oil, OPEC General Secretary Abdalla el-Badri told Bloomberg News this meeting will be different: "This one is different. This one is specifically to tackle the high oil prices, why they are high, who is to blame," el-Badri said. "Is this a real shortage in the market, or speculation, or the dollar? What is wrong?"

No, the airlines haven't started charging by the pound. At least not yet...

Jokes aside, nobody told the airlines there'd be days like these, to paraphrase John Lennon.

Jet fuel costs -- up 84% in the past year alone -- have skyrocketed, along with the cost of just about every other product derived from the world's most vital commodity, and the airlines are looking for every conceivable way to reduce weight, reduce wind/resistance drag, and increase operational efficiency, The New York Times reported Wednesday.

The major carriers are replacing heavier seats with lighter ones, cleaning engines and planes more often, reducing the fresh water available on flights, and plugging into electric outlets instead of idling engines at the gate, among other changes, in order to cut fuel consumption.

More air travel changes ahead

Moreover, the changes -- and charges -- have only just begun, so says stock analyst C. Leonard Bauer. "Everyone knows about the added bag charges, a pain in the neck, for sure. But it could get worse," says Bauer, who also flies on a major carrier about 5-7 times per year. "In the winter you could see a per pound baggage charge, or something along those lines. So don't pack that extra winter coat when you fly this December."

Crude oil surged past $135 Wednesday after a weekly U.S. Energy Information Administration report indicated weekly oil inventories plunged 4.6 million barrels.

Economists surveyed by Bloomberg News had expected weekly oil inventories to decline by 1.5 million barrels. It was the fourth straight weekly decline for oil inventories.

The oil market, at least initially, interpreted this week's report as another bullish data point for oil, and looked past weekly increases in both gasoline and distillate supplies, which rose 1 million and 2.3 million barrels, respectively. Oil futures, up about $3.50 before the report rallied further -- rising $4.63 to $135.96 on the news in Wednesday morning trading.

Shareholders tendered billionaire investor Kirk Kirkorian 1.02 billion shares -- almost half of Ford's shares outstanding -- on growing concern that CEO Alan Mulally's turnaround plan won't work, Bloomberg News reported Tuesday.

Kerkorian is seeking and will buy an additional 20 million shares at $8.50 per share to add to his existing 100 million shares, held by his Tracinda Corp., The Associated Press reported Tuesday. Prior to the 20-million share tender, Kerkorian's average share cost was $6.91.

Shares of Ford (NYSE: F) fell 19 cents to $6.17 in Tuesday afternoon trading.

"I guess one can call Kerkorian's latest tender sufficiently oversubscribed," said C. Leonard Bauer, independent stock analyst. "Seriously, the flood of shareholders willing to sell is investors' statement regarding Ford's remake. It's a sign their's deep doubt regarding the near-term probability of a return on investment. A price of $8.50 looks like a pretty good price for Ford's shares right now." Bauer added that he does not have a rating on nor own shares in Ford.

There may be a glimmer of progress regarding oil policy, and by extension, oil prices. To be sure, it's nothing likely to immediately relieve the pain at the pump that American and European motorists are feeling, but it could point the way toward a moderation in price increases.

United Kingdom Prime Minister Gordon Brown, warning that the world is facing an oil shock, has proposed that governments around the world take coordinated action to mitigate price increases, The New York Times reported. Also, on Monday, Saudi Arabia's oil minister Ali al-Naimi called for a meeting of oil producing and consuming nations to discuss how to deal with high oil prices, Bloomberg News reported.

Oil Monday closed down $4.19 to $134.45 per barrel. Still, oil is up more than 100% in the past year, and more than 400% since 2000.

In light of oil's rise to triple-digit prices, the United States' inability to pass an energy policy aimed at increased efficiency, renewable energy, and energy independence, represents an opportunity squandered -- on two fronts: transportation and power generation.

True, oil has retreated from the $135 range to the $125-128 range, but the nation now faces record-high gasoline/diesel prices, along with high prices for heating oil, natural gas, and coal. As a result, the broad-based disposable income -- so essential for U.S. economic growth -- has been squeezed, with many economists now arguing adequate GDP growth is not possible, if energy prices remain at current levels.

At minimum, the U.S. faces a period of economic and social adjustment -- corporate, public, personal -- as it copes with the brave new world of $4 gasoline ... and that's if gasoline remains in the $4 per gallon range. A variety of scenarios could quickly send gasoline over $5 per gallon and higher in 2009.

Oil fell to $122 in early trading Wednesday, as traders locked in profits earned during oil's record up in the first half of the year.

Oil fell $2.21 to $122.10 per barrel -- its lowest level in about two months -- despite the fact the U.S. Energy Information Administration Wednesday reported a 4.8 million decline in weekly crude oil inventories.

Jim Dietz, independent energy trader, told BloggingStocks Wednesday that the bottom line is compelling traders and institutional investors to unwind intermediate oil-long positions.

"In some cases you've got players [traders, institutions] with four-month and six-month positions where they're up 30% or 35%. It's kind of hard to sit on that profit when it looks like oil demand growth is going to slow," Dietz said. "A good strategy would be to sell half or most of your position and that's helping to push the market lower now." Dietz added that he was presently short oil with a monthly contract.

That the arrival of $4 per gallon gasoline has already propelled changes in consumer and corporate behavior would not be a revelation to most investors / readers.

Still, a prudent tack for investors -- or heads of households/husbands/wives, for that matter -- is to look beyond the short-term conditions and try to gauge longer-term trends -- trends that may uncover investment opportunities.
Short-term, oil is likely to correct, many economists agree. Oil at one-hundred-twenty-five bucks per barrel is well above what many economists and analysts believe is a price capable of sustaining adequate U.S. and global economic growth. Speculators have pushed oil higher than what it should sell for based on fundamentals, and a pull-back is likely in the quarters ahead. That will take some pressure off gasoline, diesel and heating oil prices.

But what about long-term? Short-term, gasoline prices should moderate, but is $4 gasoline a high point? Probably not, if current global oil consumption trends continue. What's more likely? Additional, steady rises in gasoline, diesel and heating oil prices in the years ahead, particularly if the U.S. economy shows signs of a recovery later in 2008.

Clean coal has hit speed bump on the path to the nation's cleaner energy future.

The United States Government has canceled support for a clean coal demonstration project after the project's development costs nearly doubled, to $1.8 billion, citing the need to limit taxpayer exposure, according to a New York Times report.

Further, more than a decade into the research process, it remains an unanswered question whether the clean coal technology -- capturing and injecting carbon dioxide back into the ground -- can be executed in a safe and cost-effective manner.

Among other hurdles, scientists need to determine which soil formations are most environmentally appropriate for holding and organically processing the carbon dioxide, and that don't contain the risk of dioxide bubbling back to the surface, or polluting ground water.

American drivers, weighed-down by record-high gasoline prices, may have an unlikely ally as they seek policy responses to address the nation's current energy problems. The Associated Press reports that European drivers are joining them in fighting for lower energy costs

Drivers of private and commercial vehicles have staged protests and related demonstrations in France, Germany, Spain, and Portugal, among other European countries, as drivers deal with prices that have rocketed to the $8-10 per gallon range. In France, last week, more than 200 farmers and truck drivers blocked a fuel depot in Villette-de-Vienne, The New York Times reported.

The four-year rise in oil prices that has reduced U.S. disposable income has not exempted Europe. Given higher per gallon taxes across much of the continent, Europe may become the first major economic region in the world to see an average $10 per gallon gasoline price, if current trends continue. Taxes in Europe comprise 40-60% of the price of a gallon of gasoline, according to U.S. Energy Information Administration data; in the United States taxes account for about 12% of gasoline's retail price.

The "Totally Informal Economics Roundtable" (TIER) met this week. Readers of this space know that the esteemed Roundtable achieves a quorum whenever yours truly and my three astute economist friends from graduate school convene to discuss matters economic... or to celebrate the birthday of one our school-age children.

This week's the topic was oil's remarkable 4-year run to $135 per barrel.

The TIER agreed that, yes, speculators, traders, hedge funds, and other institutional investors had driven oil to a 'bubble' price or level -- but not due to any conspiracy or coordinated effort to push prices higher.

Rather, the TIER agreed that speculators bought oil futures and other oil instruments: because a) they believe the price of oil is headed higher, and/or b) they believe they'll benefit in some way from an oil-long position.

U.S. regulators Friday disclosed a broad nationwide investigation into potential oil-market manipulation and said they are expanding surveillance of energy markets, The Wall Street Journal reported Friday.

The Commodity Futures Trading Commission announcement of an ongoing and widening inquiry occurs amid a 4-year rise in crude oil prices in which gasoline, diesel, and heating oil prices hit record highs, Reuters reported Friday.

Oil closed Friday up 73 cents to $127.35 per barrel. Oil has risen about 100% in the past 12 months.

Many Congressional officials and consumer groups have been arguing for a systematic investigation into futures prices, asserting that institutional investors and other speculators have manipulated oil prices and driven them "artificially higher."

Others, including economists and oil executives, argue that the price increases have more to do with the sector's bullish fundamentals, including inadequate crude oil production growth amid rising demand.

Oil Analysis: Strong evidence suggests that the bulk of oil's 4-year bullish run is rooted in fundamentals, with the reduction in the global safety cushion -- the spare oil between daily global oil supply and demand -- accounting for today's near-record oil prices. Still, that's not to say a rigorous inquiry would not yield compelling data or new insights. One area of interest that the inquiry will explore: whether oil storage operators have issued misleading information about oil in their tanks to profit from oil trades, Reuters reported Friday.