THE GLOBAL OIL GRAB OF 2007
...continued

Disaster in the Desert: The Coming U.S.-Iran War

Please look at this map of Iran and its neighbors. To Iran's west are nearly 150,000 U.S. troops in Iraq. To its east are about 20,000 U.S. troops in Afghanistan. And to its south, two U.S. naval strike groups are deployed in the Persian Gulf and the Arabian Sea - the USS Enterprise and the USS Iwo Jima Expeditionary Strike Group.

Now look at this next map. To Iran's north is a nuclear-armed Russia. To its east, a nuclear-armed Pakistan. To its west, a nuclear-armed Israel. And to its south, nuclear-armed U.S. ships in the Persian Gulf.

Now, put yourself in Ahmadinejad's shoes for just a minute. He looks around and he sees his country surrounded on all sides by nuclear powers...and on three sides by American forces. And he hears the Bush administration demand his country give up its nuclear program.

No wonder he's paranoid.

And between his paranoia...and Bush's insistence that it's "unacceptable" for Iran to have a nuclear weapon...and both countries conducting war games in the Persian Gulf...a military confrontation could break out at any minute.

In the space of just two days in late 2006, the following stories were making news:

• President Bush's close ally, U.K. Prime Minister Tony Blair, called on him to include Iran in the process of stabilizing the situation in Iraq. Bush said no dice...Iran has to give up its nuclear program first

• The same day, Ahmadinejad declared his country's nuclear fuel program would soon be completed, and the world had no choice but to "live with a nuclear Iran"

• Most ominously, a senior U.S. official the following day said if Iran refuses to abandon its nuclear program, the United States would one day have to consider a pre-emptive strike. This is not just idle chatter. This is someone high up in the Bush administration using the media to send a very clear signal to Iran: Back down or face the consequences.

But Ahmadinejad shows no sign of backing down. He can't afford to. He's not all that popular with his people, but his nuclear program is very popular...It's a source of national pride. If he gave it up, he'd look like a weakling and his claim to power would be history.

Bush has two years left in office. He's convinced Iran is pursuing nuclear weapons, and he's declared over and over that Iran can't be allowed to do so. Keeping nuclear weapons out of Ahmadinejad's hands is a job Bush won't entrust to his successor.

Airstrikes on Iran would send oil to $150 a barrel in very short order, so you know Bush won't launch an attack in 2008 - not if he wants his successor to be a Republican like himself.

So Bush has only a very limited window in which to take decisive action to put a stop to Iran's nuclear program. And that window starts right now - as you're reading this.

Airstrikes on Iran Are Nearly Inevitable in 2007

By the time you read this, two U.S. aircraft carriers will be stationed in the Persian Gulf, and a third could well be on the way. Their mission: to support an attack on Iran.

Says Vincent Cannistraro, a 27-year veteran of the CIA, "Planning is going on, in spite of public disavowals by [Defense Secretary Robert] Gates. Targets have been selected. For a bombing campaign against nuclear sites, it is quite advanced. The military assets to carry this out are being put in place."

The Pentagon is already conducting "second-stage" planning for airstrikes. The first stage is when the generals talk in hypothetical terms: "If we conducted airstrikes, what consequences would follow?"

They've moved beyond that. They're already preparing for the consequences...indeed, the worst-case scenarios:

• A vital oil route cut off. The generals are figuring out how to secure oil transport lines if Iran responds to airstrikes by moving to block the Strait of Hormuz. Look again at the maps and you can see this is one of the most critical "chokepoints" for world trade. 40% of the world's oil exports passes through this chokepoint, including oil from all of the top five Middle East oil producers - Saudi Arabia, Iran, the United Arab Emirates, Kuwait, and Iraq

• Riots threatening U.S. naval facilities. They're also figuring out how to prevent riots in nearby Bahrain, where Iran has stirred up revolts in the past by the Shiite majority against the Sunni government. Bahrain is home to the U.S. Fifth Fleet.

But there's one worst-case scenario that no amount of planning by the generals can prevent...and it spells disaster for the U.S. troops in Iraq.

This map shows the one supply route the American troops in Iraq rely on. Everything they need to survive in a hostile land - their ammunition, their food, their fuel - comes through this one route from the south, via Kuwait and other Gulf ports.

What if this supply line is cut?

It could easily happen one of two ways:

1.) Shiite militias already in Iraq could cut off our troops. After all, they won't take very kindly to seeing their fellow Shiites in Iran being bombed. One of the largest militias, the Badr Brigade, was sheltered and trained by Iran while Saddam Hussein was still in power, and the Badr Brigade's political arm makes up the largest faction in Iraq's current government. True, they wouldn't be in the government at all if the United States hadn't toppled Saddam, but if they're forced to choose between Washington and Tehran, they'll go with their Shiite brethren in a heartbeat.

2.) Iran's army could cross into Iraq to cut off our troops. True, U.S. air power could knock out large numbers of Iranian infantry in short order, but all the Iranians have to do is wait for bad weather to strike, when the planes can't fly, and make their move. Retired Col. W. Patrick Lang, who worked in the Defense Intelligence Agency, says, "The Iranians could cut those supply lines just like that - the trucks are easy to shoot at with RPGs," (rocket-propelled grenades).

Or it could be a case of both the militias and the Iranians moving to cut our troops' supply lines. But no matter who does it, the results for U.S. troops would be devastating. No ammo, no fuel, no food...There would be no choice but to evacuate, with massive loss of life.

While it's too late to prevent a showdown between the United States and Iran, it's not too late to protect yourself from the devastating economic consequences. I'll show you exactly how in just a bit. But first, I want to introduce you to the next member of our Rogues' Gallery. He's considered one of America's closest allies. But he's harboring a vital secret at the heart of the New Energy Crisis...and all the while adding fuel to the fire in Iraq.

With "Allies" Like This, Who Needs Enemies? Saudi Arabia's King Abdullah

King Abdullah ascended to Saudi Arabia's throne less than two years ago. But he'd been running the show for the better part of a decade after his half brother King Fahd had a stroke.

Abdullah is sitting on the world's biggest oil reserves. But he's also sitting on this big secret: Those reserves may not be anywhere near as big as advertised.

The U.S. government assumes that in the years to come, Saudi Arabia will be able to crank up its current output of 9 million barrels a day to something like 20 or 25 million. That's an incredible assumption when even the Saudis themselves claim the number is closer to 15 million.

But is 15 million even an accurate number? We don't know. The Saudis refuse to let anyone come in from the outside to independently verify their claims.

In other words, they're saying, "Trust us."

Take a look at the chart below. It tracks Saudi oil production from 1970 up to now. Notice when production reached its all-time peak: 25 years ago! Yes, it's perked up in the past few years as the price of oil has steadily climbed from $20 to $60 a barrel...but with all that money for them to make now, why haven't the sheikhs turned the spigots wide open?

Increasingly, the answer is becoming obvious...THEY CAN'T.

Ninety percent of all the oil Saudi Arabia's ever pumped out of the ground has come from just seven giant oil fields. And after five decades, all of them are starting to wear out. Yet they still account for 90% of Saudi Arabia's current output. And as you'll see in a moment, the country is turning to ever-more desperate measures to keep those giants going.

The Saudi Patch - Drying Up! "The kingdom's decline rate will be among the world's fastest as this decade wanes." - Donald Coxe, analyst, Bank of Montreal

The Saudis say they have lots of oil yet to come online, using new technology in old fields, along with the discovery of new fields. (Just where these fields are no one's saying...the last big one in Saudi Arabia was found in 1968!)

But again, the Saudis won't let anyone come in from outside and verify their claims! "Trust us."

Well, as Ronald Reagan once said, you need to "trust, but verify." And if you can't verify the Saudis' claims, you're left with analyzing what we know the Saudis already have.

And that's a pretty scary picture.

The World's Biggest Oil Field - Fading Fast

The world's largest oil field is in Saudi Arabia. It's called Ghawar. It pumps out about 5.5 million barrels a day - 60% of Saudi Arabia's entire output. At least that's what the Saudis say. But again, they won't let anyone confirm that.

As it turns out, they might have good reason.

Word is getting out from sources inside Saudi Arabia's oil industry that Ghawar's real production might be only 3 million barrels a day!

One Oil Field Signals a Frightening Trend "The big risk in Saudi Arabia is that Ghawar's rate of decline increases to an alarming point. That will set bells ringing all over the oil world because Ghawar underpins Saudi output and Saudi undergirds worldwide production." - Ali Morteza Sansam Bakhtiari, National Iranian Oil Co.

Even if the true number is what the Saudis claim it is, the picture's still not pretty.

Turns out that most of Ghawar's output is concentrated in a tiny area at the northern end of the field. The Saudis say there's plenty more oil to be found in the central and southern part, but what they don't say is that it's not as much oil compared with the north...and the quality of oil is a lot lower - thicker, more viscous.

But that's not the only problem.

See, in large oil fields, the natural pressure of the reservoir forces the oil to the surface. But as more and more oil is pumped out, the only way to keep the pressure up is to inject water back into the reservoir.

After a while, this starts to damage the reservoir...the water starts to contaminate the oil. Author Paul Roberts found that at Ghawar, the amount of water mixed in with the oil is now 30%. That's a dangerously high level.

How Oil and Water Do Mix - With Disastrous Consequences for Oil Production!

Investment banker Matthew Simmons has worked with the oil industry for decades. He's advised the Bush administration on energy policy. And he's studied the Saudi oil industry as closely as anyone - examining hundreds of technical papers to see how raw data square with the Saudis' extravagant claims. What he's found is that the water-injection technique that's keeping Ghawar on life support is also being used on every other major oilfield in Saudi Arabia - the fields that supply 10% of the world's oil right now.

Bottom line: Production at all of these fields has peaked. It's all downhill from here. Texas oilman Jeffrey Brown figures that at this moment, Saudi Arabia has reached the same point in ultimate recoverable reserves that Texas reached in 1972 - the year oil production there reached its peak.

The oil won't run out tomorrow, but it will run out eventually.

And there are even more disturbing signs that all is not as advertised in Saudi Arabia's oil industry.

The Saudis Drill More and More...but There's No More Oil to Show for It!

Look again at that chart of Saudi oil production. It's gone up a lot since 2001. But Saudi oil exports have stayed flat! The Saudis need oil to fuel their growing economy. So even though they're pumping out more (for the moment), it's not getting to the United States and other thirsty developed countries, because the Saudis need it for themselves!

Here's something else to think about as you look at that chart. The increase that started in 2001 was pretty much over by 2003. But since 2003, the number of drilling rigs in Saudi Arabia has tripled. Triple the drilling, triple the output, you'd think. But no...all that new drilling, and the country is still generating between 9-10 million barrels a day. So they've had to triple the number of wells just to keep running in place!

Drilling to Destruction! "If Saudi Arabia has damaged their fields, accidentally or not, by overproducing them, then we may have already passed Peak Oil." - Matthew Simmons, investment banker to the oil industry

Maybe the Saudis know that if they pump up production any more, if they start gushing more water into their aging fields, they'll only dig their own grave that much sooner. Even a retired executive vice president at Saudi Aramco, the country's state-owned oil giant, admits the most optimistic number for Saudi oil production is 12 million barrels a day - any more and the Saudis would run the risk of permanent damage to their reservoirs.

Don't get me wrong...there may still be a large amount of oil in Saudi Arabia. But it's not the kind that you can just stick a well in the ground and expect bountiful quantities of light, easy-to-refine oil to gush out. No, the stuff that's left is buried in earth that's a lot more rocky, and the oil itself is a lot harder to refine.

The days of cheap, easy oil in Saudi Arabia are just about over. But when will King Abdullah tell us?

Maybe never...not until it's too late. Some ally.

And if you think that's stabbing America in the back, wait till you see what this "ally" is doing to our troops in Iraq...all in the name of preserving his country's own dominion over its oil fields!

The Saudi Stab in the Back

The Saudi royal family belongs to the Sunni branch of Islam. Ever since the Shiite ayatollahs took over in Iran nearly 30 years ago, the Saudis have been scared to death of Iran...scared to death of Shiite fundamentalism spreading across the Middle East...and ultimately threatening their rule in Saudi Arabia.

You see, while Saudi Arabia is primarily a Sunni country, ruled by Sunnis, the majority of the population in the Saudi oil patch is Shiite!

The last thing in the world the Saudis want is Iranian influence to spread and stir up the Shiites who happen to be sitting on the Saudi oil fields. This has been the royal family's obsession for decades. They even egged on Saddam Hussein to invade Iran in 1980, launching the bloody eight-year Iran-Iraq war.

Saddam's rule in Iraq was a very good thing for the Saudis. Iraq's Sunni minority ruled over the Shiite majority, serving as a protective buffer between Iran and Saudi Arabia.

So you can imagine how the Saudis feel now that Iraq is run by Shiites, many of whom lived in exile in Iran during Saddam's rule!

When King Abdullah met with Vice President Cheney in November 2006, he had this very blunt message: If America pulls out of Iraq, we'll have to start funding the Sunni rebels in Iraq to keep the Shiites in check.

Of course, the Bush administration figures on U.S. troops staying in Iraq for years to come...but the fact of the matter is Saudi citizens are already giving millions of dollars to supply weapons to Iraq's Sunni rebels...while King Abdullah and his courtiers look the other way.

Saudi Cash for Iraqi Insurgents "They sent boxes full of dollars and asked me to deliver them to certain addresses in Iraq. I know it is being sent to the resistance, and if I don't take it with me, they will kill me." - "Hussein," Saudi truck driver

We're talking about the people who carry out most of the attacks on U.S. troops in Iraq right now - being funded by the Saudis!

This frightening fact is buried in the report from the Iraq Study Group - the bipartisan blue-ribbon panel that spent much of 2006 figuring out what's gone so wrong for America in Iraq.

Of course, the Saudi leaders will deny it all day. But the evidence is becoming overwhelming.

With little effort, the Associated Press found truckers carrying boxes of cash from Saudi Arabia into Iraq - cash they knew was destined for Iraq's Sunni insurgency. It made them very uneasy to know they were funneling cash to the rebels...but it made them more uneasy to know that if they didn't, they were dead men.

One shipment of $25 million went straight to a Sunni cleric in Iraq. Other shipments go to Sunni political leaders. And all of it winds up in the hands of Sunni fighters determined to attack U.S. forces.

Indeed, some of the money is being used to buy Strela missiles on the black market. These are shoulder-fired missiles made in Russia that can take down American aircraft.