Finally, the major media has picked up on what I have been saying for years. The initial domino that drove oil to its current high level was the loss of Iraqi production. The ongoing attacks in Iraq have stripped 1.6 m barrels a day from the market. For an inelastic oil market beset by rapid growth in demand (both China and the US), this was a huge shock.
Further, the loss of production in Iraq is a demonstration (on a global scale) that guerrillas can produce sustained systems disruption -- the rapid open source evolution of my global guerrillas. This has immediate implications in Nigeria. It also generates fears that the same methodology could be applied to Saudi Arabia, the BTC pipeline (Caspian oil), and Russia (both Gazprom and Transneft). For a market caught on knife's edge of demand and supply, this is pure poison.
NOTE: This is exactly the opposite of what the US thought it was going to do in Iraq (it may not have been the primary reason for the invasion, but it was clearly in the ballpark). The US administration clearly saw the tightening of supply brought on by the rise of Chinese demand. Iraq was the only major global producer underperforming due to political problems. The invasion of Iraq was in part a way to remove the limitations of sanctions on the country and turn it into a major global supplier through western investment. If it had succeeded, Iraq would be producing 3.5 m bpd of oil today with an outlook of 5-7 m bpd by 2010. As a result, the price of oil would be closer to $30 a barrel today than $70. It is also important to note that the first targets secured by US forces in Iraq were the oil production system (which was mostly accomplish by day ~5 of the invasion).