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Blue-chip stocks declined on Tuesday as oil rose to another record and underscored concerns about inflation, while the Federal Reserve chairman said financial markets are still troubled.

Crude oil futures came within a whisker of $127 per barrel after Iran said it was mulling production cuts, and several Federal Reserve officials highlighted the growing threat of inflation in speeches throughout the session.

Fed Chairman Ben Bernanke also said strong demand from financial institutions to borrow from the Fed showed “markets are still far from normal.” Shares of financial companies led declines in the S&P 500 index, with JPMorgan Chase & Co down 3.7 percent at $45.48.
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While polemics were going on on its plan to increase domestic fuel oil prices prompted by world crude price hikes, the Indonesian government came up this week with an idea to quit the Organization of Petroleum Exporting Countries (OPEC).

The idea is plausible. Indonesia is no longer a net oil exporting country. The volume of its imports has exceeded its exports. Thus, Indonesia is no longer an exporting country, which is a plausible reason to quit the OPEC.

The government`s intention to say a goodbye to the oil cartel was hailed by the House of Representatives (DPR), yet a number of analysts still saw some benefits if Indonesia maintained its membership in the organization.
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The president of Opec has warned that the price of oil could hit $200 (?100) a barrel, spelling more pain for the major crude-consuming economies.

Chakib Khelil said there was nothing that the oil producers’ cartel could do to bring down the high price, which he blamed on geopolitical tensions and market speculators.

His comments, coming as oil touched a record $120 a barrel on Nymex at one stage yesterday, are seen as rejecting pleas from America and Europe for Opec to turn on the taps and help rein in the price. Mr Khelil, Algeria’s energy minister, said there is no evidence of a shortage of oil on world markets.
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Continental Airlines and most other major carriers matched fare increases of as much as 5 percent round trip Friday, following the lead of United Airlines.

The move comes as domestic carriers are looking for new revenue to combat escalating fuel costs.

Those costs this month helped propel Delta and Northwest airlines to announce a merger and have spurred talk of broader consolidation in the industry. But it remained unclear Friday how Houston-based Continental might participate.

The airline is still considering its “strategic options” in regard to mergers, Continental Chief Executive Larry Kellner told employees Friday in his weekly recorded message. He said he wanted to address rumors that have been swirling.
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Despite fuel prices hitting record levels, a national oil-price expert told Wisconsin gas station owners Tuesday that he expects crude oil prices to fall below $80 a barrel by next year.

“I believe this is a market in transition,” said Ben Brockwell, director of the Oil Price Information Service in Wall, N.J. “I believe it is a market that will be lower in price.”

Brockwell told members of the Wisconsin Petroleum Marketers and Convenience Store Association meeting at the Madison Marriott West in Middleton that oil prices now are propped up by commodity traders and the weak U.S. dollar, and eventually oil will fall, which also will bring down pump prices.

Diesel fuel prices in Madison hit a record average high of $4.096 a gallon on Tuesday, according to the AAA Daily Fuel Gauge Report. Statewide, the diesel price also set a record of $4.118 per gallon.

AAA reported a national record average high for gasoline of $3.386 a gallon.
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US light, sweet crude rose more than $3 to $109.48 a barrel at one point, but then tracked back slightly. This came after a gain of $2.40 on Friday.

The rises were helped as producer group Opec reiterated that it saw no need to increase output.

Investors have also been looking to move out of the weak dollar and into commodities, pushing up the oil price.

London Brent crude also rose, up $2.24 to settle at $107.14 a barrel.

“Oil supply to the market is enough and high oil prices are not due to a shortage of crude but rather it is because of the decrease in the dollar’s value, shortage of refinery capacity and some political tensions in the world,” Opec secretary general Abdullah al-Badri said.

Commodities are viewed as an attractive alternative investment to dollars.
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