Some smart "___" analyst at Morgan Stanley predicted on Friday that crude oil prices would rise to $150.00 a barrel by the July 4th weekend. Well, that's all speculators needed on Friday to take oil up $11.00 in a single day to a new high of $139.00 a barrel. By the weekend, consumers in many parts of the U.S. were already paying $4.00 a gallon for gas.

As I have been writing in these columns, the stock market does not like oil above $125.00 a barrel. And Friday, as oil hit $139.00 a barrel, The Dow Jones Industrial Average took it on the chin, falling 395 points for the day, or 3.1%. The U.S. dollar was also weak against other world currencies on Friday.

Higher oil prices and a sagging U.S. dollar present one basic threat to the United States economy: Higher interest rates. And that's something the market totally detests.

Ben Bernanke is in a tight spot. The U.S. economy lost 49,000 jobs in May, bringing the total loss so far this year to 324,000 American jobs. The unemployment rate jumped to 5.5% in May, its biggest monthly gain in 20 years.

Therefore, the Fed needs to keep interest rates low to stimulate the weak economy. On the other hand, consumers are suffering every time they fill their cars with gas. That means fewer dollars to spend at stores and literally fewer trips to the malls. (Wal-Mart isn't complaining though; its same-store sales are actually climbing, as consumers go for cheaper goods.) So the Fed needs to lower the price of oil, and the only way to achieve that is by strengthening the value of the U.S. dollar via domestic interest-rate increases.

The stock market's actions tell us that the fight for which way the Fed will go (decrease interest rates to help the economy or raise rates to bring oil prices down) is being won by the forces that are calling for higher interest rates. It's really all that simple. The European Central Bank, worried about higher oil prices and higher inflation, has already come out and said that it may have to raise interest rates soon. This will place added pressure on the Fed to raise rates.

A not so funny thing happened on the path to higher oil prices: Oil producers got rich, and car makers almost went bankrupt. Shell earned a profit of $37.0 billion in 2007 on higher oil prices, Exxon made more. GM lost $39.0 billion in 2007, as consumers stopped buying gas guzzlers and GM wasn't positioned to move fast enough to bring fuel-efficient cars to the market. Hummers? Rumor is they may even stop making them, as demand for these once popular trucks plummets.

This morning, en route to Europe, President Bush said that a strong U.S. dollar was in the interest of the United States and the global economy. The scene has been set for higher interest rates.