First of all, it must be noted that the Iraq war – which is not won yet by anyone – is the principal cause of the higher price of fuel. The second main reason is the ongoing tussle between the US, EU and the UN over Iran’s nuclear programme.

Since the increase in oil price benefits the exporters of fuel and crude oil, Malaysia definitely gains but the gain is not sufficient to allow the government to maintain the huge subsidy on locally sold fuel. Iran produces oil too and it has position itself to work towards a higher increase in the price of oil for the simple reason that the richer nations (western nations) are the biggest buyers of oil put together hence oil should not be sold cheap.

The reasoning behind Iran’s thinking is that cheap oil has only benefited the western world and that any increase in the price should benefit the producer nations such as Iran itself. It is the shifting of capital from the west to the east that is the core element in the Iranian theory.

To explain this clearly is to say that Iran believes the rich nations money will come to the Middle East and in the hands of oil producing nations faster if the oil price was higher. It is a mathematical calculation that is now proving true and much to the irritation of the west.

Former Malaysian Prime Minister Mahathir Mohamad said on his blog www.chedet.com that oil production cost has not really increased in the past three years thus there is a net increase in the profit for oil producers. This resulted in a trillion dollar profit for Arab Gulf states and Saudi Arabia but Iran too registered huge profits with oil exports.

The western world is paying more while the Muslim world is registering windfall gains that is bringing cash that is flowing directly or indirectly away from the hands of the Europeans and Americans in the coffers of the Eastern nations. It is thus of interest to nations like Iran and even the Arab world to have higher oil prices on the market and to continue benefiting with windfall gains.

The logic of higher prices of oil has stopped the American war machinery from attacking Iran over its suspected nuclear weapons programme and this has resulted in the US economy heating and burning over the high cost of the Iraq war.

With the American occupation of Iraq, Teheran gained politically and this influenced the scenario of the US occupation of the neighboring state. The US planned a quick attack on Iraq, killing Saddam Hussein and having its troop’s garlaned with roses when it enters Baghdad. Iraq would be done and the next target was Iran.

It is known to international observers that Iran was next on the American conquest list but what went wrong and why did Washington have the cold feet in fulfilling the desires of the G. W. Bush administration in completing the purported 2005 invasion (attack) of Iran?

Expect higher price of oil all through 2008 beyond

One element that is little known to the rest of the world is the secret agreement between Iran and the Mujahideen forces that fought the US troops in Iraq until the calm of 2007. Iran was in a position to decide whether to prevent or to allow the Muslim soldiers from entering Iraq via its borders through the Shi’ite held Basrah province to Baghdad and other parts of Iraq.

Obviously, Iran did not prevent them and it would have been foolish for Teheran to do so. The obvious result of the Iranian opacity regarding the movements of people between its borders and that of Iraq and its borders and that of Afghanistan was the terrible war waged by the Mujahideen against the US on Iraqi soil.

It took Washington a long, very long time to find out what was happening and by then it was too late for it to strike Iran. The situation evolved so quickly that Iran became the major political player in Iraq with the Americans becoming the ones who are trapped until today in the Iraq quagmire, a game of chess that Washington failed to win from 2003 until now.

Now what does all this has to do with the record oil prices that we have today? It’s the war, stupid!

While the US was battling the Mujahideen in Baghdad, Mosul and Fallujah not forgetting Anbar, the mastermind of the Mujahideen forces (be it Osama Bin Laden or Ayman Alzharawi) planned another fight: The destruction of Iraq’s oil pipelines.

Osama is said to have issued fatwa’s urging other Mujahideens to attack pipelines in other countries where the west was sucking cheap oil from the ground to appease its thirst for the black gold. Osama also urged his troops (according to fatwa’s that can be found on the Internet) to target the western economies, the US in particular and their currencies – indeed the US dollar as a matter of fact.

Washington, in its war mongering mood and thinking that victory in Iraq was imminent continued in its Iraq policies – empowering Iran further politically – and creating a crisis never seen on the planet. The crisis is the ‘oil crisis’ which is being fed by the lack of export of Iraq oil and the stagnation of the world’s oil production tally.

Oil production is expected to face a glut while demand will increase. China in particular is targeting more oil reserves in Africa and Asia. China’s rising consumption needs alone did not impact that deeply on the oil price hike. It is unwise to point the problems towards the Chinese nation which is doing its best to improve the standard of living of its citizens.

Hence, back to the world’s production of oil. Total world oil production reached 68 million barrels per day in 2003 and has increased since then. In 2007 the production of oil was about 85 million barrels a day. It is estimated that at least a 100 million barrels a day will be needed by the year 2012 due to the increase in demand. Will production reach 100 million barrels a day in 2012? The absence of concrete positive answer makes it more difficult and has a direct impact on the price of oil, an impact that we are feeling today itself.

BP said on Wednesday (June 13, 2008) that worldwide crude oil production fell 0.2 percent last year (2007) while Global consumption climbed by 1.1 percent or one million barrels per day in 2007. In normal circumstances, this fall in production would not have sparked such frenzy about oil prices.

While Washington is congratulating itself (constantly) over its eliminating Saddam Hussein and its conquering of Iraq, Iran is fuelling the demise of America’s economy with its constant defiance of the US in Iraq and on the nuclear issues. This creates a situation of instability and an air of war which catapults the price of oil to soaring prices that has never been seen before.

The fall of the US dollar, the Iraq war scenario which is not in favor of the US and the Iranians strategy of harping at the west and taunting the US militarily contributes largely in the creation of an oil crisis that has lead the world to the brink of economic collapse.

However, wealth is leaving the west for the oil producing nations (which are mostly found in the Arab world including Iran) and this shift in the gross capital wealth of the western world affects their economies badly. The US is going thru economic quakes that it has not felt since the great economic crash of the 1930’s and it is said that the worst is to come.

The solution is in the hands of Washington: Leave Iraq or attack Teheran. Leaving Iraq will mean losing all the gains – geographical and political – that Washington made since 2003 and bowing to Iraq, which is the undoubted master in the region.

Attacking Iran will cause the oil price to rise sharply and possibly to reach Ahmadinejad’s prediction of USD200 or above. A war against Iran will probably result in the destruction of the country but not in its elimination unless the Israelis and French (Nato) joins forces in a US war on Iran. Nevertheless, the price of oil will depend on the length of the war against Iran. Since the US is adamant in keeping Iraq as its prize, it will surely not engage Iran in a short term war. It will have to go all the way out and prepare an invasion of the Shi’a nation from Iraq itself. It is a feat that even ancient Rome would not have accomplished due to the geopolitical situation that exists in Iraq. The US faces high risk in attacking Iran now, an attack that can trigger a massive anti-Western anti-US revolt and lead to the uniting of Iraqi and Iranian forces to the least resulting in a massive bloodbath.

Hence the US is today the pawn in the Iranian game of influence in the Middle East and despite G. W. Bush’s assurances; the US is not winning the war in Iraq because Iran would never allow them such a grandiose victory. The ‘oil crisis’ is the backdrop of the Iraq war and this will lead only one way: the crumbling of the US economy!

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