Its heating - its oil

Oil price touched $121/bbl on Tuesday, a level last seen in August 2008 - and Mahmoud Ahmadinejad has spiced up what could be a fast rally towards the $150/bbl mark in future.
The Iranian president is not the only one bullish on oil, as his views are endorsed by many commodity experts and economists around the globe - from Mark Mobius of the Templeton Asset Management to Adam Sieminski of the Deutsche Bank.
The recent oil price movement has been all about political uncertainties in the Mena (Middle East & North Africa) region with market factors taking a back seat - a view echoed by the Iranian president too. But global energy experts are of the view that Brazil, China and other emerging economies still have the engine to drive up oil prices further.
The unrest in the region may or may not spread further, but the longer it persists, the higher will be the premium demanded by oil producers. The most immediate concern is that of supply disruptions, to which leading members of Opec have reacted by using spare capacity to offset the gap.
But doubts still linger over the exact spare capacity, especially that is supposedly held by Saudi Arabia. Rumour has it that the spare oil capacity by Saudi Arabia is overstated by as much as 40 percent. Even if that is not the case, the quality of crude lost after the Libyan unrest cannot be compensated by increasing production alone.
That is where buyers are paying a huge premium on high quality crude to secure supplies. The Mena disruptions and the political unrest, other than having a short-term impact on oil prices, will also have their say in the longer run - by means of adding a permanent premium to it. "The market will see such events as real possibilities rather than abstract scenarios," the Financial Times quoted a leading oil expert.
Furthermore, shrinking spare capacity would also lead to a higher premium attached to the oil price for future uncertainties other than political unrest. Another concern amongst energy experts is that the oil producing countries in the Mena region - many of whom are witnessing the Arab Revolution - will now adopt a more populist way of governance, for which they would want more petrodollars to cover up the fiscal spending on the public.
There appears to be a visible difference amongst the Opec members as regards the oil supply - as Kuwait thinks the price is too high and should come down to normal levels. But even the normal level, it suggests, is $100/bbl - which means there is not much respite for oil importers as the downside appears limited. So, Mobiuss words that "the trend is up" do have some weight indeed.