The main reason is that crude oil prices for the latest quarter averaged double what they did one year ago.

Earnings are expected to look like this for the top five players:

1) XOM.N – Exxon to earn over $12 billion in earnings for the quarter
2) RDSa.L – Royal Dutch Shell expected to top $8.3 billion for the quarter
3) BP.L – BP should net $7.7 billion

Yes, these are the highest ever recorded profits for these three companies. It’s fair to say the higher price we’re all paying at the pump is immensely helping the bottom line at this Big Oil behemoths.

This newly found energy thrift has oil investors, many of who are hedge fund companies that have come to the game relatively late, nervous enough to thwart a potential rally.

Since Hurricane Dolly did not threaten the U.S. oil supply chain, there’s no logical reason for a run-up this week. The lower prices of oil are also being reflected at the pump in the form of somewhat lower gasoline prices.

Analysts also believe that once drivers change their habits to less fuel consumption, they’re unlikely to shift back quickly to their old gas-guzzling habits. That could spell doom for oil demand in coming years.

“We are telling those enemies who intend to distract Iran from its holy path through psychological war or real threats that we are always ready to defend the Islamic country,” said Hossein Salami, commander of the Revolutionary Guards naval forces.

Oil prices are still down from their high, which was close to $146/barrel.

The Iranian missile threats prompted divergent views from the two Presidential Candidates in the U.S. Obama said he wanted to use economic sanctions to make Iran change their mind. McCain said it’s time for a defensive missile shield that would render the Iranian threat impotent.

One thing that’s obvious: when threats from Iran are made public, oil prices go up. It almost makes one wonder if that isn’t the goal of much of the gamesmanship we see, since Iran stands to directly benefit every time oil prices surge.

Steve Forbes talks about how the weak dollar affects the economy and keeps oil prices high in this video

As Steve Forbes says in this video, a lot of the problems going on right now appear to be related to the “weak dollar” policy of Ben Bernanke’s Fed. The weak dollar means investors are much more likely to invest money in gas, which essentially costs more for people paying in dollars. Add to this the chilling affect it has on economic growth, and you have a persistent problem that just doesn’t seem to be going away.

Another bad sign for consumers is the 62,000 jobs lost by the economy in June. This makes for a trend of worse losses each month for the first six months of the year, with nearly one half million jobs lost since the start of the year.

High oil prices, a weak dollar, a credit crisis, mortgage woes, and job losses are all helping to push consumers to the weakest consumer confidence in decades. All this gloom and doom has Obama and Clinton talking economy.

“Far too many Americans will spend this holiday out of work and struggling to provide for their families because of the failed policies of the last eight years,” Obama said Thursday.

“Americans across this country are hurting and today’s jobs numbers are just the latest indication,” McCain said. “Washington can no longer abdicate its responsibility to act. Our focus must be clear: enact policies to create jobs today.”

Rep, Bart Stupak has introduced the Pump Act, to try and stop excessive speculation in the commodities market.

Rep. Bart Stupak, D-Michigan, said that oil industry experts have agreed that speculation is causing $35 a barrel of price increases. Oil is now a financial asset. Commodity trading is now a massive market that is creating havoc in the markets and high consumer prices.

Stupak wants to end excessive speculation in crude oil. Check out the whole video from C-Span. His arguments are certainly compelling. The rise in commodity index funds is driving the price of commodities up worldwide.

Stupak has received broad support for his PUMP Act.

“In the quest for alternatives to oil, our government has thrown around enough money subsidizing special interests and excusing failure,” said McCain. “From now on, we will encourage heroic efforts in engineering, and we will reward the greatest success.”

The idea is certainly interesting. The prize could help stimulate interest in alternative fuels research, and the $5,000 per car tax rebate for zero emission vehicles would certainly appeal to auto makers, who have appeared reluctant to abandon the combustion engine.

Saudi Arabian officials warn that there will likely be no quick fix to the current oil price situation. They stressed that the summit is a meeting of the minds to determine what, if anything, can be done about oil production and costs. Saudi Arabia has already agreed to a slight increase in oil production.

Saudi Arabia said it will pump at least 9.7 million barrels daily in July. This is their fastest rate of oil production in decades.

Now the big question is, will this supply side effort actually result in lower gas prices? The debate will continue this week.

Companies are reluctant to raise prices for fear of sales declines

The real issue now is that companies are paying more for everything. Normally they would just pass those prices increases along to consumers. But clearly, unless all company executives are brain dead, they can see that consumers are themselves laboring under the specter of high prices.

Consumers with less money and higher fixed costs are just not good for most businesses. Investors are very careful these days about what sector they’re playing in, because the ones effected by tight credit and consumer’s lack of cash just can’t possibly grow enough for serious returns.

That doesn’t mean that all companies are hurting. Right now the Alternative energy sector is worth looking at, and many investors are looking at alternative investments of all sorts in order to make sure they weather the current U.S. economic news.

Everything appears to hinge on oil prices right now, especially in the realm of investor sentiment. A gloomy mood from speculators today never cheered up as everyone poured over the mostly negative information concerning price increases.

At this rate, oil prices should remain key for the remainder of the Summer.

Initially traders were very bullish because of a United States Energy Department report that said inventory was reduced by 4.6 million barrels last week. Analysts has been expecting a decline in numbers, but nothing like that. Oil Analyst Steven Shorck said in his Shorck Report:

“Net stocks of crude oil fell, hard, for a fourth straight week. That is the largest one-month draw since October 1990, when imports plunged in the build up to the first Gulf War.”

Many energy experts have been expecting the current oil crisis and insist that oil production is down because of fundamental supply problems.

The international community is pushing Asian nations to dump their subsidies to consumers, in order to quell the demand in OECD countries. Both India and Malaysia cut some subsidies, leaving consumers to pay higher prices for gasoline.

With energy being such a hot play these days, billions of dollars are being invested in Alternative Fuel Sources. One of the biggest deals of the week involved XTO Energy buying out Hunt Petroleum. What was the prize in that deal? Access to BILLIONS of gallons of natural gas in the Bakken Shale.

Energy remains hot in 2008. As the US Governments experiments with E85, Coal to Liquid, and Hydrogen as gas alternatives, investments in that category tend to outperform the market. Now is the time to educate yourself on the many alternatives that exist to gas, as well as gaining a deeper understanding of what is really happening when it comes to Oil Supply. The returns on your investments will be huge if you make the effort.