Oil prices briefly touched a record $112 a barrel Monday before falling more than $4 on fears the troubles at Bear Stearns could spread to the rest of the market. On Tuesday, however, they rose again ahead of an expected cut in interest rates by the Federal Reserve, part of a move to shore up confidence in the economy, but one that will likely see the dollar fall to new lows against other currencies.

"Speculation has dominated oil prices," said Gary Adams, vice chair of oil and gas at Deloitte & Touche USA LLP. "The lower U.S. dollar is driving value. �� It's leading to a speculation in commodities as a hedge against the falling dollar."

The dollar, which has fallen to record lows against the euro and other currencies, has prompted investors to shift their attention from the greenback to commodities such as gold and oil, seen as safer bets. Pension funds and others are also pumping their money into oil, leaving little scope for prices to fall. The effects on the U.S. economy of the subprime mortgage meltdown led to Tuesday's expected interest rate cuts, which would in all likelihood lead to an even weaker dollar and higher oil prices, experts say.

President Bush earlier this month said he asked Cheney to urge Saudi Arabia, the world's No. 1 oil producer, to increase production in a bid to ease crude prices. Cheney is due to press the matter in Riyadh this week, but many say oil prices represent the reality of the market.

Limited global refining capacity coupled with increased demand from China and India as well the expanding economies of oil-producing states all mean that prices are at a market-determined level, experts say.

That message appears at odds with the one from the White House last week.

"Obviously, we want to see an increase in production," White House spokeswoman Dana Perino said. "The president does want OPEC to take into consideration that its biggest customer, the United States -- our economy has weakened and part of the reason is because of higher oil prices.

"We think that more supply would help, and I don't anticipate that the vice president would have any other message than that one."

Frank Verrastro, senior fellow and director of the Energy and National Security Program at the Center for Strategic & International Studies in Washington, criticized the White House position.

"He (Bush) tried it last month," he said. "It's amazing the president keeps saying this."

Verrastro attributed the price rise to the value of the dollar and noted that it's cheaper for Europeans and others to buy U.S. commodities because of the value of their currency.

"Something has to happen with monetary policy," he said. "No one else is feeling the pinch."

Global oil production and demand are about even, giving members of the Organization of Petroleum Exporting Countries little incentive to increase production despite growing pressure on the cartel to do just that. On March 5 OPEC decided to hold production steady, saying it believed the market was well-supplied. It also noted that the global economic downturn was likely to cause a fall in the demand for crude, noting: "The current price environment does not reflect market fundamentals, as crude oil prices are being strongly influenced by the weakness in the U.S. dollar, rising inflation and significant flow of funds into the commodities market."

Saudi Arabia is the only OPEC member capable of raising production because of spare capacity. Production in Nigeria, Africa's top supplier of oil to the United States, has been hampered by violence in the oil-rich Niger Delta. The leadership in Venezuela, the No. 5 U.S. supplier, sees the United States, its No. 1 customer, as a regional aggressor and has threatened to cut off supplies.

Talk on Capitol Hill of adding Venezuela to the U.S. State Department's list of states that sponsor terrorism will likely add to the animus between the two countries and result in even higher oil prices.

"Oil at $130 is a real possibility," said Adams, of Deloitte.

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