FACTBOX: Why oil prices are at a record high

(Reuters) - U.S. crude oil hit an all-time high of $130.47 a barrel.

Robust demand for crude and a weak dollar have fuelled the rally from a dip below $50 at the start of 2007.

Adjusted for inflation, oil is now above the $101.70 peak hit in April 1980, according to the International Energy Agency, a year after the Iranian revolution.

DOLLAR WEAKNESS

The fall in the value of the dollar against other major currencies has helped drive buying across commodities as investors view dollar assets as relatively cheap.

It has also reduced the purchasing power of OPEC's revenues and increased the purchasing power of some non-dollar consumers.

OPEC oil ministers have noted that although prices are rising to record nominal levels, inflation and the dollar have softened the impact.

Some analysts say investors have been using oil as a hedge against the weaker dollar.

FUNDS

Since the Federal Reserve cut U.S. interest rates in mid-August last year and central banks pumped billions of dollars into financial markets to ease a credit crunch, oil and gold have risen.

Investment flows from pension and hedge funds into commodities including oil have boomed, as has speculative trading. At the same time, the credit crunch has brought some other markets, such as the U.S. asset-backed commercial paper market, to a virtual standstill.

Some of that money has found its way into energy and commodities, analysts say.

DEMAND

While previous price spikes have been triggered by supply disruptions, demand from top consumers the United States and China is a main driver of the current rally.

Global demand growth has slowed after a surge in 2004 but is still rising and higher prices have so far had a limited effect on economic growth.

Analysts say the world is coping with high nominal prices because, adjusted for exchange rates and inflation, they have been until recently lower than during previous price spikes and some economies have become less energy intensive.