The turmoil in the Middle East is spreading as protests surge throughout the Arab world. This is not a one country phenomenon -- and it won't go away any time soon.

The great fear for the West is that the unrest will spread to other oil-producing countries. Half of Libya's oil production is shut down. Protests in Iran -- the second largest oil producer in OPEC -- are growing. Saudi Arabia's King Abdullah is giving away $36 billion to his people in the hope of warding off further unrest.

Exxon Mobil Corporation (XOM) is the largest independent oil and gas exploration and production companies in the world and competes with other major oil companies like BP, Chesapeake, Anadarko and Chevron. In our recent article titled Sizing Up Egypt's Impact on Exxon, we tried to give an idea of Egypt's importance for Exxon Mobil and how the unrest in the country could affect its stock price. We also discussed how the situation in Libya forced BP to start evacuating its staff from the country in our article Unrest in Libya Could Jeopardize BP Exploration Deal. With the political unrest spreading to more countries over the past few weeks, this may be a bigger concern for Exxon Mobil and other oil & gas majors worldwide. We have a current price estimate of $78.97, which is about 10% below the market price.

The turmoil in the Middle East is getting worse by the day. Protesters now control a good portion of Libya. The panic is spreading to Saudi Arabia where King Abdullah is handing out $36 billion in housing support and funding to offset inflation, according to the Wall Street Journal.

So the number crunchers are putting together possible "what-if" scenarios for the oil market. One such possibility is: What if Algeria joins Libya in revolt. Both countries produce 4 million barrels of oil per day. If such events develop, oil could surge to $220 per barrel, according to Nomura Securities in the Wall Street Journal.

Oil is the life blood of the world economy. The turmoil in Libya and throughout the Middle East is threatening the stability of the entire world. "Oil prices were in the danger zone and could rise further, if turmoil continued in the Middle East," Fatih Birol of the International Energy Agency said, according to Reuters. "Oil prices are a serious risk for the global economic recovery."

As of 8:30 EDT, Brent crude is trading at $106.66 per barrel, up 92 cents. West Texas Intermediate crude jumped $6.29 per barrel to $96.00. Keep in mind that while U.S. markets were closed Monday, oil traded higher across other world markets.

Crude oil has risen 52% from its December 19th low of $33 a barrel to $50. Can gasoline prices be far behind?

What's behind the move? Supply is down. For example, Kuwait and Qatar indicated they will implement the supply cuts that OPEC announced last month. A dispute between Russia and Ukraine reduced natural gas shipments to Europe -- it must be cold there. And Iran is calling for a suspension of crude exports to Israel's allies as the conflict between the Israeli army and Hamas hits its 11th day.

Will demand fall further as prices rise? That seems to be the only hope for a reversal in the price of oil. But so far there seems to be a bit of a delay between the rising price of crude and the price of gasoline. So if you're paying $1.66 now it looks like $2 won't be too far away. Maybe it's not too late to look into buying energy stocks.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Yesterday, I was pleased to pay $1.66 for mid-grade gasoline and I was wondering whether it would drop further or rise. But now I have an answer -- Israeli attacks in Gaza Strip are enriching the oil-producing countries that surround it. More specifically, oil prices have increased $3 a barrel to more than $40, while the price of gold is up 2% to $881.85 -- a 30% rise above its 13-month low two months ago.

Will the violence in the Middle East continue? If so, for how long? My guess is that Israel is planning a ground war which will last for several weeks -- the timing of the move takes advantage of the transition of power between Bush and Obama and posturing before January's Israeli election.

In the meantime, the key question for investors is whether they should buy energy stocks -- they will almost certainly rise today and will continue to go up as long as the possibility remains of escalation -- in the form of an military or economic attack, such as an oil embargo, on Israel and Western interests from other Middle Eastern countries. If there is an escalation, we could see a big spike in oil prices which would help energy investors.

But that could cause an even deeper economic slowdown which would cause oil prices to collapse even more once the violence ends.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book, You Can't Order Change: Lessons From Jim McNerney's Turnaround at Boeing, was published by Portfolio on December 26, 2008

For those of us who were dying for relief from record high gasoline prices this summer, the recent drop in oil prices comes as great news, but this is not the case for everyone. OPEC, which supplies the world with roughly 40% of its oil, would like to see prices rise higher again, and today gave a clear sign that larger than expected production cuts are on the horizon.

In an interview today, the President of OPEC, Chakib Khelil, stated that a consensus had been reached for cuts at the next meeting of the oil cartel. The next scheduled meeting is on December 17, and according to Khelil, the market will be surprised.

Khelil stated that the he felt the best way to get a quick boost in oil prices is to shock the market, and he felt that the upcoming production cuts would be able to do just that. While he did not indicate exactly how large the production cuts would come, he left no doubt that they will be substantial.

"The stronger the decision, the faster prices will pick up," Khelil said.