An Oily Mess

Every place in the world the US gets oil from is a complete mess.

I’m not just talking about the Middle East. In fact, dangerously unstable relations with Iran, Russia, Venezuela, Nigeria or Sudan could lead to an energy crisis, What kinds of problems do these countries pose?

Let’s start with Iran. The country is hell-bent on acquiring nuclear weapons. Its desire for the destruction of Israel as well as its crystal-clear disdain for the Great Satan in the United States could very well throw a wrench the size of Texas into its oil trade and rain down the negative aftereffects here at home. (As it is, a few videos of rockets fired during an Iranian military exercise can push oil prices up five bucks a barrel in a single day.)

Just this past month, Iran’s economy minister warned the world that any effort to punish his country for resuming nuclear research and testing could lead to higher oil prices. Any country that imposes sanctions on Iran, he said, would send oil prices “beyond levels the West expects.” The UN council that would decide on sanctions is made up of countries who love to sell the mullahs arms and nuclear technology, or keep pumping “developmental aid” into Tehran no matter what.

Up north, Russian president Vladimir Putin and his cronies are making a ruthless power play to control the Russian oil market. Russia’s oil reserves are conservatively estimated at 70 billion barrels - more than double those of the United States.

Production of Saudi Arabia oil, on the other hand, not only remains shrouded in mystery, it is a state secret. That means no one really knows when the country will hit peak oil (the half life of oil production). Some reports suggest that could occur in five to ten years. With some of the largest oil fields in the world dropping dramatically in production, Chris believes we could see oil soaring to US$150 a barrel.

Then there’s Venezuela. President Hugo Chavez has transformed the democratic system that had been in place since 1958 by introducing a new constitution, a new legislative assembly and supreme court, and a new electoral oversight mechanism.

Despite considerable domestic opposition and an attempted coup in 2002, President Chavez has gained complete control within Venezuela. Washington officially views Chavez as an unfriendly leader, and Chavez in turn has threatened to cut off oil supplies to the United States. Yesterday, he reneged on long-standing contracts with multinational oil conglomerates, all but nationalizing Venezuelan oil production.

These are just three the scenarios. He suggests that any one of these situations could send crude oil has high as US$300 a barrel. That might sound crazy, but not when you realize that five years ago crude oil was priced at US$12 a barrel. Today, it’s over US$60 a barrel. That’s five times the price in five years.

No matter which one of these situations causes oil to rise, here’s a question: how do you profit?

When oil goes above US$80 a barrel, alternative energy looks very attractive. No longer do solar energy, wind energy, or even bio-based energies look economically unattractive. The time has finally come for these alternatives to light the way.