Skeptics seemingly are worried about just about everything these days, be it a falling dollar, overly accommodative monetary policy, equity valuations, deficits, deflation and/or bubbles in housing and Treasuries.

Almost invariably, however, it's the things people


worry about that gets them, which brings us to crude prices.

On Tuesday,

Federal Reserve

Chairman Alan Greenspan highlighted the risks of higher natural gas prices. Conversely, scant few seem terribly concerned about oil prices, Greenspan included. But those believing robust economic growth is imminent, and thus higher stock prices are justified, have reason to be at least a little concerned.

Crude futures did retreat from their prewar highs near $40 per barrel, but have risen steadily since late April and are up 13% in the past month. On Wednesday, crude futures rose another 2% to $32.36 per barrel, the highest close since March 17, after OPEC decided to leave production quotas unchanged at its meeting in Doha, Qatar.

Anticipation of OPEC keeping the status quo was but one factor pushing up oil prices recently, according to Mark Baxter, director of Southern Methodist University's Cox Maguire Energy Institute. Others include struggles getting Iraqi production back on line, concerns about possible conflict with Iran, supply glitches from Venezuela and Nigeria, and concerns about terror attacks on oil facilities.

"All that is keeping people nervous and is going to keep us around the $28-to-$35

per barrel range for the next six months," Baxter said.

Oil at those levels is not factored into the bullish forecast of equity strategists. "We still anticipate upside surprises because of a weaker dollar, lower energy prices and fiscal stimulus," Thomas McManus, equity portfolio strategist at Banc of America Securities, wrote on May 19 when he implored clients to "buy the dips." On Wednesday, McManus conceded crude has "moved up so much it's not as much of a positive," and that natural gas prices are "potentially a fly in the ointment."

Still, he remains bullish and sustained higher energy prices aren't even mentioned as a "downside risk" to most optimists' prognostications. (Some optimists are, however, citing higher energy prices as reasons to be bullish on energy stocks, which did rally sharply onWednesday.)

Baxter expressed particular concern about Venezuela, where production is still off by some 15% to 20% from prestrike levels. "It's difficult to lay off thousands

of state oil workers for the company to run smoothly and endure without future conflict," he said of Petroleos de Venezuela.

Just as few are overtly worried about future disruption to Venezuelan supply, there's little consternation on Wall Street about the effect of higher energy prices on the economy. This is curious because higher energy prices "directly attack consumer discretionary spending,

which is the big thing driving the economy," according to Anirvan Banerji, director of research at the Economy Cycle Research Institute and a

contributor. "At the margins," the benefits of tax cuts and, more especially, refinancing activity "are eroded by higher oil prices."

At the margins may not sound like a big deal, but every little bit hurts, considering consumer spending remained strong throughout the downturn, meaning there's little pent-up demand. Any downturn in consumer spending is critical because business expenditures are likely to remain moribund due to low capacity utilization rates and high corporate debt burdens.

The ECRI has factored energy prices into its forecast for a subpar economic recovery. But there's been little acknowledgement of higher energy prices on Wall Street, where there's no natural constituency to fret about them.

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For obvious reasons, "this oil price spike story doesn't fit the bullish story too well," Banerji quipped. But higher oil prices are also "not consistent with deflation," so hardcore bears don't want to talk about it either.

A World of Uncertainty

Like it or not, some factors -- beyond pure supply and demand -- that are contributing to energy's rise will be with us for some time.

Although damage to Iraqi oil fields was minimal, in contrast to prewar fears, crude prices haven't followed the bullish postwar script.

"We did very well with the war, but not as well with the peace," said Fadel Gheit, energy analyst at Fahnestock. "Unfortunately, it's the little things,

like looters cutting power lines for copper. With all the focus on preventing sabotage we forgot the little things could be just as damaging."

On Tuesday, Thamer Ghadhban, the U.S.-installed interim head of Iraq's oil ministry, said oil production wouldn't hit prewar levels until mid-2004, about six months later than previously expected.

The loss of Iraq's official prewar production of 2 million barrels per day has depleted inventories, even though Saudia Arabia and other OPEC members have increased their output, Gheit said. He also observed that soaring natural gas prices are giving OPEC a false sense of the sustainability of higher oil prices. "We have to break this cycle" of one pushing the other higher, he said, suggesting natural gas prices should be about $4 per million British thermal units (vs. the current price around $6.22 per mmBtu) and oil not much above $24.

ECRI's Banerji agreed that with lackluster global growth demand for $30-plus crude is unlikely to last very long. Those who aren't worried about current prices "are probably betting this is temporary noise, which will go away," he said.

Perhaps investors are right not to worry. But what's not going away is a stealthy contributor to higher energy prices: anti-American sentiment in the Middle East, something the latest setbacks on the Palestinian-Israeli "road map" to peace are likely to inflame.

Setting aside the contentious issue of the whereabouts of Iraqi weapons of mass destruction, "the war isn't over," according to Steve Dinero, professor of Middle Eastern studies at Philadelphia University. Most troubling, more than 30 U.S. soldiers have died in Iraq, according to


, since President Bush declared on May 1 that "major combat operations in Iraq have ended."

Prior to the war, Dinero correctly

forecast some elements would continue to fight U.S. forces even after Saddam Hussein's regime fell. "Were it only so simple as toppling Saddam," he lamented. "We are viewed increasingly as a bully, a threat, and you're going to have resistance to that."

While so much went better than feared during the war, "the Iraq situation has not gone particularly well in the aftermath of the regime's fall," he said. "I think people are still sensing and questioning and wondering what's next? We're in an interim period, waiting for the next shoe to drop."

The Middle East scholar expressed concern about both fundamentalist elements within Iraq's Shiite majority, as well as the whereabouts of Saddam Hussein. Earlier this week, Ahmed Chalabi, head of the Pentagon-backed Iraqi National Congress, claimed Hussein is alive.

Few experts believe Hussein's regime will revive or offer much of a threat to coalition forces. Nor do many worry about an Iranian-style revolution in Iraq. Steve Yetiv, associate professor of political science at Old Dominion University, observed the majority of Shiites would not want religious/clerical leadership. "It's not Iran 1979 and, even then they'd want to pump their oil, too," he said.

Dinero agreed Iraq 2003 is a long way from Iran circa 1979, suggesting the Iranian experience would likely curtail Iraq's ardor for fundamentalist rule.

Still, "I can envision down the pike some kind of unified uprising, whether it's Shiites or Kurds, or both," he said. "The U.S. went in, freed Iraq from Saddam. Now they're going to want to be freed from us and may refer back to more indigenous values. Who in 1975 would have imagined the Iran of 1979?"

Unfortunately, the only certainty is that uncertainty about the oil-rich Middle East will be with us for the foreseeable future. Whether it's the effect of energy prices on the economy or geopolitical instability in the region, there's plenty to worry about. Even if few traders seem overtly concerned right now.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.