Mathew Maavak, The Korea Herald
Crude oil has reached a point where the skeptics of yore have become the proselytes of tomorrow, readying the world when crude tops $100 per barrel.

That day is not far away though few saw it coming.

Only just six years back, crude was hawked off for as low as $10 per barrel, when producers pumped out whatever they could for hard currency in the aftermath of a serpentine financial crisis that slithered its way from Mexico to East Asia, emptying national coffers in the process.

The barrel has steadily risen from its Davy Jones Locker to reach the $75 average today. At every stage of the climb - $40, $50, $60 and $70 - threshold limits were tested and passed, industries kept firing on all cylinders, and the global economy remained resilient.

The global economy will still stand if oil reaches $80 next week. We are ready for it; for the climb has been steady and soft, preparing us for the day as if tomorrow never comes.

Tomorrow, however, does come, at an expense of a finite resource that took aeons to form.

Oil can only climb up as the planet has already consumed more than half of its available reserves, and incremental demands by the day will result in higher prices and a supply crunch. This is phenomenon known as Peak Oil or "Hubbert's Peak." ...

The epicenter, from which major oil shocks ripple through the earth, lie in the oil and gas vault of the Persian Gulf.

Herein lies the Gordian Knot of mayhem, collusion and terror.

Saudi Arabia is the world's top producer of oil (10mbpd), but it is Iran (3.8mbpd) which effectively controls the narrow Straits of Hormuz, through which tankers carry 20 percent (15 to 16mbpd) of the world's oil.

Despite their overt Islamic solidarity, Saudi Arabia which follows the Sunni branch of Islam is a sworn enemy of Iran, guardian of the Shi'ite branch. Militants from both branches are engaged in a low-intensity civil war in Iraq, and this kept under controlled conditions - at gunpoint - by 140,000 U.S. soldiers.

Despite having its soldiers pinned down by Sunni militants, Washington plans to overthrow the regime in Tehran, purportedly over the latter's nuclear enrichment program. An outright invasion would be catastrophic to the global economy, not when the 1.0 to 1.3 million barrels of oil cushion is expected from Saudi Arabia. Iran has the capacity to take out 10-20 million barrels per day by destroying oil infrastructures in the Gulf Arab states, and sink enough tonnage to make the Straits of Hormuz impassable.

An Iranian response has to be quick, brutal and bloody as paradoxically, it is net importer of gasoline. Years of U.S.-led sanctions have left the Iranian oil complex in a decrepit state.

But this does not stop each party from laying a snare for each other. The proxy war fought in Lebanon was yet another manifestation of this game. If Washington thinks it has knocked a pawn or two from Tehran's game plan through the proposed deployment of 15,000 U.N. sanctioned troops in Southern Lebanon, it should think again.

Then of course, there is China which supplies the finest weaponry in Iran's arsenal. The world's fastest growing economy, and its fastest growing market, has already locked and secured oil and other raw materials from some of the most despotic regimes on earth.

Beijing will not tolerate any disruptions to its precarious oil supplies. And neither would those who can be regularly spotted buying discounted Chinese products when they are not crying foul over Tiananmen Square.

China alone accounts for 40 percent of global oil demand growth. The ratio between China's GDP growth and demand growth for crude oil is an alarming 10:9. On a worldwide basis, the ratio is 10:4.

If there is any disruption to oil supplies, China would be the first to reel, and that would be dangerous.
(16 Aug 2006)

The price of crude can only rise while supplies dwindle worldwide