How Crude

So what's driving the price of crude oil and gasoline on an upward spiral? It's certainly not the fundamentals of supply and demand. Supplies of crude and refined gasoline have gone up the last few weeks and sit at a 14 year high. So what gives.

Investors and hedge funds are moving money out of stocks and bonds and into commodities. Every kind of commodity from corn and wheat to oil and gold. There is demand not for the actual crude and gasoline but for the investment hedge in those commodities.

The other factor driving crude higher is the falling dollar against other currencies. Simply it takes more dollars to buy crude. Below are excerpts from Forbes and MSNBC.

"OPEC has been under a lot of pressure to increase its output," said Lawrence Poole, analyst with Global Insight, adding that he expected the cartel to freeze production on Wednesday. "But the problem is that for the first and second quarters, you usually tend to see demand fall slightly." Even if OPEC does decide to turn on the taps, argues Poole, the race into commodities like crude oil will be far from tamed. Crude prices hit a record high on Monday, just shy of $104 per barrel, with the U.S. dollar's unprecedented weakness fueling investment in safer commodities like gold and oil. (See "Boom Times For Oil, Gold") "In our opinion, oil will go as high as the dollar goes low," said Deutsche Bank analyst Paul Sankey. "Name your target."

Analysts attribute much of the recent run-up in oil prices to speculative investors driven to the market by a weak dollar. Crude futures offer a hedge against it, and oil futures bought and sold in the greenback are more attractive to foreign investors when it is falling. This view of oil futures as a safe haven during turbulent times has recently rendered reports on inventories and demand moot.