Oil Prices Settle At Record High

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CBS/AP
Oil prices settled at a record above $76 a barrel Thursday in a market agitated by escalating conflict in the Middle East and the threat of supply disruptions there and beyond. The August futures contract surged $1.75 to close at $76.70 a barrel in New York.

The latest surge in oil shook stock-market investors' confidence, though economists said most U.S. consumers and businesses appear to be absorbing higher energy costs surprisingly well.

"Two years ago I might have said that $70 or $75 a barrel would be some kind of a tipping point. Now I'm not so sure anymore," said Nariman Behravesh, chief economist at Global Insight, a private forecasting firm.

Still, Behravesh said lower-income Americans are suffering disproportionately from higher energy costs and "I could certainly make a policy case for helping them out on a temporary basis."

American drivers, who use 40 percent of the world's gasoline, used more gas last month than ever before – over 9 and a half million barrels everyday, reports CBS News correspondent Anthony Mason.

Light sweet crude for August delivery shot up as high as $76.85 a barrel on the New York Mercantile Exchange before settling at $76.70. The rally came as fighting between Israel and Lebanon intensified, explosions hit Nigerian oil installations and a diplomatic standoff dragged on between the West and Iran over its nuclear program.

The previous Nymex settlement record of $75.19 was set July 5. The previous intraday record of $75.78 was posted two days later.

Adjusted for inflation, oil prices would need to rise to about $90 a barrel to exceed the highs set a quarter century ago when supplies tightened in the aftermath of a revolution in Iran and a war between Iraq and Iran.

In the United States, the national gas price average now hovers near $3 a gallon. Stock trader Eric Bolling said the forces driving up prices are only accelerating.

"Nothing has really changed. There's still terror. There's still geopolitics. And there's still great demand for oil and oil products. There's no question that you could see $100 barrel for oil," Bolling said.

That would push gas to more than $4 dollars a gallon. Even if political tensions eventually ease, analysts say gas prices are likely to get worse before they get better, Mason reports.

Oil prices are being pushed higher by rising global demand and worries that the world's limited supply cushion would not be adequate to offset a lengthy disruption to output in major producing countries, such as Iran or Nigeria. There are also concerns about the risks hurricanes pose to U.S. production.

The latest fear being priced into the market is that the conflict between Israel and Lebanon could spill over into other corners of the Middle East, the region that produces nearly a third the world's oil and contains almost two-thirds of its untapped reserves.

Israel intensified its attacks against Lebanon on Thursday, imposing a naval blockade, twice hitting Beirut's airport and blasting two Lebanese army air bases near Syria. Hezbollah fired more than 100 rockets into Israel, which said one also struck the port city of Haifa. More than 51 people have died in two days of violence following the capture of two Israeli soldiers by Hezbollah militants, who have financial links to Syria and Iran.