Still in a speculative frenzy, oil prices continue to churn upward, heading for $109 bbl. Meanwhile, the cost of a gallon of gasoline is likely to hit $4 a gallon by Memorial Day in many parts of the country:

Gasoline prices could break the $4 barrier in some places this summer despite falling demand in the United States, the world's largest oil consumer, the government's energy forecasting agency said yesterday.

Diesel prices already have soared past $4 a gallon, and prices for regular gas are verging on $4 in high-cost states like California. By Memorial Day, more regions will see spikes above $4, the Energy Information Administration (EIA) said, although the average price nationwide will probably peak around $3.60 in May or June.

The U.S. has rarely had to contend with record gas prices at a time when the economy is in recession. Demand for fuel already is falling at a 1 percent rate because of an economic contraction in the first half of the year, the agency said, and that will continue through the summer.

While the government forecaster foresees high fuel prices as a permanent fixture of the world economy, many private forecasters say they are befuddled by the relentless rise in prices which they think are defying the laws of economics, particularly with slumping demand in the U.S.

Many private forecasters attribute high prices to manipulation by the Organization of Petroleum Exporting Countries and speculation in the oil market, which reached record levels in the first quarter. Joe Stanislaw, an independent energy adviser to Deloitte & Touche, calculates that the physical realities of supply and demand point to an oil price of $50 a barrel.

The possibility of supply disruptions due to political strife in Iran, Venezuela and Nigeria might add another $10. Anything above that, he argues, is due to oil's popularity as an investment.