The investment bank Goldman Sachs raised quite a few eyebrows last year when it mooted the possibility of a "super-spike" that could take oil prices to as high as $105 a barrel.
"We believe oil markets may have entered the early stages of what we have referred to as a 'super spike' period - a multi-year trading band of oil prices high enough to meaningfully reduce energy consumption and recreate a spare capacity cushion only after which will lower energy prices return,'' Goldman's analysts wrote in a now famous report.
We're not quite there yet, but that $100 barrier does not seem such an outlandish figure. Oil prices today raced past $78 a barrel setting record levels for the second day running. Analysts now see prices of $80 a barrel as a distinct possibility.
Oil prices have averaged $67.67a barrel so far this year, although for the sake of perspective we should realise that we have yet to reach the inflation adjusted $87.65 average of 1980, in the second oil shock that followed the 1979 Iranian revolution.
In terms of consumer impact, the current level of oil prices means that motorists in the UK are paying 96.85p for a litre of unleaded petrol, not far from the psychologically important level of £1 a litre.
Oil prices have been at high levels for some time because of strong demand from the US and China. But the latest jump has nothing to do with demand but with developments in the Middle East.
Israel's decision to blockade Lebanon after Hizbullah militants killed seven Israeli soldiers and kidnapped two others has unnerved oil and stock markets, amid fears that the crisis could destabilise the region. Israel has named Iran and Syria as well as Hamas and Hizbullah as part of an "axis of terror".
Not one to shy away from tough rhetoric, Iran's president, Mahmoud Ahmadinejad, has warned that any Israeli strike on Syria would be considered an attack on the whole Islamic world that would provoke "a fierce response".
In an optimistic scenario, the current crisis may well resolve itself through negotiations that will lead to a prisoner exchange, as has happened in the past. But if the situation shows signs of escalating, the Bush administration may have to drop its hands-off attitude and get more actively involved.
Unlike his predecessors, George Bush shows little inclination, to get personally involved in the thankless task of handholding Israeli and Palestinian negotiators. But that is what may be needed. If the president insists on staying away from the fray, at least the US secretary of state, Condoleezza Rice, should get stuck in to defuse a political crisis that is having a direct economic impact well beyond the region.
