Last Friday's rally was heartening, but why did it happen? I am guessing that a drop in oil and a rise in the dollar were helpful ingredients. At $115.32, oil is down 22% from its $147.27 a barrel high, and at $1.49, the dollar has strengthened 11% from its low of $1.60 per euro. But what was behind those moves? Can those factors persist? What happens to stocks if they sink?

The dollar/euro is moving based on relative economic strength and inflation policy. Some think that the dollar strengthened over recent weeks because Europe appears to be heading into a recession and the U.S. has already been in one since the fourth quarter of 2007. If the U.S. is further along, it may begin its recovery sooner.

As far as inflation policy, the U.S. has kept rates at 2%, while Europe appears more likely to raise rates to fight inflation. Bloomberg News reports that European Central bank council member Klaus Liebscher said "policy makers remain focused on the 'worrying' level of inflation." The euro has rebounded to $1.50 on this announcement.

The highways I drove this Memorial Day weekend were relatively empty thanks to people opting for a Staycation. But people I spoke with were wondering why gasoline prices were so high and whether they'll go higher. While USA Today thinks they've peaked, my answer to both questions is I don't know.

But if one source is right that 60% of the trading volume in oil is from speculators, then a rise in the dollar and a drop in consumption would force those speculators to reverse course -- and that would send oil prices plummeting. Here are five things you can do to help make this happen:

• Drive less. Many people don't have the option to do this. But carpooling is an option for many. People can also try to make many stops during a single car trip rather than doing one at a time. And they can try to telecommute more frequently.
• Take public transportation. Much has been written recently about people taking buses, trains, and other forms of public transportation to work. While this is often more time consuming and can be inconvenient. It may also save money and will certainly cut down on your gasoline consumption.
• Ride a bike or use a motorcycle. I know riding a bike would be a major inconvenience for many people. Riding a motorcycle gets better gas mileage than a car and is fun for some. During periods of dry weather these options could work fairly well. But they'd be awfully tough during a snow or rain storm.

Oil Friday closed down $1.21 to $92.50 as concern that a U.S. recession would dampen both oil and gasoline demand again weighed on the markets.

The other major energy commodities also retreated. Heating oil fell about 2 cents to $2.53, unleaded gasoline declined about 4 cents to $2.32, and natural gas fell about 7 cents to $8.20 per million BTUs.

Oil closed lower for the fourth time in five sessions amid a broad retreat in the U.S. equity markets -- sell-offs that occurred despite positive news from U.S. Federal Reserve Ben Bernanke that the Fed is ready to cut key interest rates further and the Bank of America Corporation (NYSE: BAC)'s announced buy of beleaguered mortgage lender Countrywide Financial Corporation (NYSE: CFC) for $4 billion.

The International Energy Agency Friday increased its forecast for 2008 daily global oil demand. IEA now expects daily global oil demand to increase by 2.1 million barrels to 87.8 million barrels, or an increase of 210,000 barrels per day from the group's previous estimate.

Further, the IEA also said the Organization for Economic Cooperation and Development members oil stockpiles in October 2007 fell to 52.6 days, or just below the 5-year average.

Energy prices

Energy prices cast aside the news Friday morning, at least for the time-being: oil fell 90 cents to $91.36 per barrel, heating oil fell 1 cent to $2.62 per gallon and unleaded gasoline dropped 4 cents to $2.37 per gallon.

"It's a slightly bearish report, but one that shouldn't move the markets too much," independent energy trader Jim Dietz told BloggingStocks Friday. "A 210,000 increase on a monthly revision isn't too bad, and the market expects these rough numbers to move around, so it's pretty much factored into the price." Dietz added that he remains flat and has no positions in oil, heating oil, gasoline or natural gas at this time.

Has oil's high price given you the shakes? Well relax, and leverage oil's high price by considering Marathon Oil's (NYSE: MRO) shares.

Marathon has the 'oil triple play,' of sorts, what one likes to see in an oil operation: a large, geographically-wide exploration footprint, very good production, and strong refining operations.

Further, that last tangible may be the most valuable, given the barely-adequate refinery capacity in the United States. What's more, Thursday's market sell-off that saw the Dow close down about 362 points to 13,567.87, has created a buying opportunity with Marathon. MRO's shares closed down $1.46 to $57.63. And with a p/e of 9, MRO's risk/return ratio is low.

MRO's drawbacks: Analysts are keeping an eye on costs, and healthy gasoline refining margins may narrow heading into early 2008. But unless there is a substantial increase in global oil production, or a comparable reduction in U.S. gasoline consumption, Marathon is well-positioned for the immediate years ahead. The Reuters F2007/F2008 EPS consensus estimates for MRO are $6.04/$6.44.

The First Call mean rating for MRO is: Buy. [20 firms.] Mean 2007 target: $63.75. [high: $75, low: $46.50.]

Stock Analysis: Marathon is moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 1 year should be rewarded from MRO's shares. Sell/Stop Loss: $39.