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Oil Prices Soar Amid New Middle East Tensions

Crude oil prices hit new a new high Friday, closing at more than $91 per barrel amid news of more Middle East tensions, including expanded U.S. sanctions against Iran. An energy analyst and a government professor assess the reasons for and impact of the price jump.

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  • MARGARET WARNER:

    Oil prices have been rising steadily all year amid growing demand, but the cost of crude oil jumped sharply in recent days, above $90, closing today at more than $91 a barrel. That's just under $10 shy of the inflation-adjusted record high set in 1980 during the Iranian hostage crisis.

    This week's price hike comes amid more tensions in the Middle East, including new, expanded U.S. economic sanctions on Iran, and hostilities along the border between Turkey and Kurdish northern Iraq.

    Here to tell us more about what's happening with oil prices are Robert Lieber, professor of government and foreign service at Georgetown University. He is the author of "The Oil Decade." And John Kilduff, energy analyst at MF Global, a brokerage firm.

    Welcome to you both, gentlemen.

    John Kilduff, what do you attribute — to what do you attribute this spike we're seeing in oil prices, just close to 8 percent in the last 48 hours? Do you think it's being driven, as many have speculated today, by the combination of the Iranian situation and the Turkey-Iraq situation?

  • JOHN KILDUFF, Energy Analyst, MF Global:

    Most certainly. Good evening. It's clearly those two elements. Those are sort of the sizzle that's in this market right now that are causing various investors, speculators, and even those in the oil industry who use the tools of the New York Mercantile Exchange and other facets to hedge their exposure to buy up crude oil on paper right now in advance of what are some very serious threats to major supply outlets in Iran and northern Iraq and, for that matter, the cross-Turkey pipeline. That's another 700,000 barrels of crude oil for the Western markets.

  • MARGARET WARNER:

    Professor Lieber, what do you attribute this to?

  • ROBERT LIEBER, Georgetown University:

    It's a combination of politics and markets. On the market and economic side, the supply-demand balance is tight, but there is very little surplus capacity in the event that some of the existing supplies are somehow interrupted.

    In the past, when there's been a political crisis or even a war, as long as there were available shut-in capacity that could be brought online, then it tended to tamp down the increase in prices. But in this case, because the market is so tight, any rumor, anxiety and someone can drive prices up in a great hurry.

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