These are sinister developments, ingredients for the next tsunami to hit the already turbulent world of oil where prices have gone so high they are depressing world economies.

The trouble from insurgents blowing up oil facilities is no less dangerous than the pressures from China, India and Japan's voracious appetite for more oil.

China is a major superpower showing it will not hesitate to use pressure to secure oil. The Chinese are developing a strong foothold in Pakistan, where thousands of Chinese workers are building a new port in Baluchistan at Gwadar, right at the entrance to the Persian Gulf.

One of the main causes of friction between China and Japan now involves access to oil and gas deposits in the East China Sea. When the Security Council tried to impose sanctions on Sudan -- one of China's main oil suppliers -- over the issue of Darfur, the Chinese said no.

In May, when a massacre occurred in Uzbekistan with hundreds of people killed on the orders of President Islam Karimov, the United States and Europe asked for an international investigation. China, which had signed a $600 million gas deal with Uzbekistan, blocked it.

One needs to ring the alarm bell as this Asian pressure combines with terrorist attacks to form the elements of the perfect storm heading directly toward the Arabian Peninsula.

At the moment, Iraq is the biggest model for jihadists seeking to spread chaos, fight the pro-American government there and eventually defeat the United States invasion -- and the American project in the region by attacking oil facilities. But soon this tactic will travel to other oil-producing countries. There have already been attacks on oil installations in Chechnya, Pakistan, India, Russia, Azerbaijan, and Nigeria.

Since the American invasion of Iraq, there have been more than 300 attacks on pipelines, refineries, and other facilities. Iraqi refineries have been looted to a point that the United States and Kuwait are supplying gasoline and heating oil to Iraq, which sits on top of one of the world's largest oil reserves. Iraqi oil production has fallen drastically, and with it so have Iraqi oil revenues. The Northern pipeline that carries Iraqi oil to Turkey, which is repeatedly blown up, has never really functioned since the war.

The decreasing oil supplies, the Chinese-Japanese demand juggernaut, and insurgents targeting oil have added an "anxiety premium" to the price of oil -- a fear tax if you will -- which accounts for more than $10 a barrel, leading to the current prices of $65 per barrel. The winter may well see prices going higher.

Western intelligence agencies are particularly concerned that many of the jihadists fighting in Iraq are non-Iraqi Arabs from Arab oil-producing countries. They come from Saudi Arabia, Algeria, Sudan, Egypt, Kuwait and Qatar, among others. These jihadists will return to their countries supplied with a well-practiced model. Do the math.

The oil crisis we face today is not the supply-driven crisis we had in 1973, when the late King Faisal of Saudi Arabia led the oil boycott of the United States and the West to protest their support of Israel in the October war of that year. This is a demand-driven crisis, which leaves the world more dependent on its most politically unstable area: the Greater Middle East, where 77 percent of the world's oil reserves are located.

High prices will eventually push world economies to aggressively pursue a search for alternative sources of energy including solar, nuclear and oil sands which are very expensive to create or extract, but everything is relative.

It still takes time to get from here to there.

We are in a bottleneck that will last for five to 10 years. OPEC is not the solution, as its members are already producing all the oil they have. Nor are they spending money to increase production.

In fact, at this time, NO oil producer -- from Russia to Saudi Arabia -- is spending money on boosting its oil infrastructure to produce more oil. Instead, they are using huge new revenues to build up their economies and pay debts.

No one can blame them. They like the high prices and need the money.

As for the jihadist terrorists, they are already secure in the knowledge that blowing up an oil refinery or pipeline is much easier than ramming planes into the World Trade Center or blowing up subways in London and Madrid.

Their philosophy is guided by the likes of Osama bin Laden, whose core belief is that war against what he calls "infidels" is a war against Western economies dependent on energy. So fasten your seat belts. We are in for a rough ride on oil prices

Wilma Fails To Stir Up Energy Prices
By Andrea R. Mihailescu
UPI Energy Correspondent
Washington (UPI) Oct 20 - Energy prices remained largely unharmed by Wilma's passage as it appeared to sway away from storm-ravaged offshore oil and natural gas operations in the Gulf of Mexico.

Registering as the lowest recorded barometric pressure of any Atlantic basin hurricane, Hurricane Wilma, now a Category 4 storm, became the most intense storm of the year Wednesday.

"It would be absolutely disastrous if Wilma went through the oil platforms again," Investec analyst Bruce Evers was quoted as saying by AFX Financial News. "Wilma is supposed to hit Florida and not the Gulf of Mexico, but it could easily change direction when it hits land."

Energy prices even dropped sharply Tuesday, eliminating much of the gains from the previous trading session. Prices similarly fell ahead of Hurricanes Katrina and Rita as potential damage to offshore operations appeared to diminish during the onset of those storms.

Traders did not expect Katrina's wrath and energy prices fell Aug. 26 as the storm approached Florida. But Katrina then swallowed the Gulf of Mexico and blew ashore in Louisiana on Aug. 29, surprising traders with the damage it inflicted on petroleum production, processing, and transportation facilities.

On Monday, the storm managed to rally markets, but traders remained determined to take profits Tuesday because Wilma was no longer a threat to offshore operations.

Hurricane forecasters said Wilma would bypass operations in the Gulf of Mexico where rigs and refineries are still recovering after the damage inflicted by Hurricanes Katrina and Rita.

On Tuesday, crude and product futures plummeted on profit-taking after the U.S. National Hurricane Center said Wilma would likely spare production and refinery facilities in the Gulf of Mexico.

On the New York Mercantile Exchange, the November contract for benchmark U.S. light, sweet crudes slipped by $1.16 to $62.90 per barrel Oct. 18. The December contract dropped $1.17 to $62.40 per barrel.

As of Tuesday, nearly 1 million barrels of oil per day, or 65.5 percent of the daily oil production in the Gulf of Mexico, remained shut in, while more than 5.3 billion cubic feet of natural gas per day, or 53.5 percent of the region's daily gas production, was shut, the Minerals Management Service said.

By Wednesday, light, sweet crude for November delivery on the New York Mercantile Exchange grew by 12 cents to settle at $63.32 by afternoon in Europe after trading lower earlier.

Heating oil rose marginally to $1.9390 a gallon as gasoline slipped by nearly a cent to $1.7280 a gallon. Natural gas grew by more than 9 cents to $13.519 per 1,000 cubic feet.

Concern still surrounds heating oil supply as the U.S. Northeast could experience a colder-than-usual winter.

"All administration members, from the president to the low-ranking official, are concerned with the effects of the rise in heating oil prices on the U.S. family," Energy Secretary Samuel Bodman said.

In an interview in Moscow on Oct. 11, ExxonMobil President Rex Tillerson ruled out prices will remain at their current high levels for a long time.

"The current supplies meet the demand and nothing points out that the balance will change at the present time," Tillerson said. "Moreover, oil prices will draw back." He added, "There is enough oil in the market and we can buy all our needs of crude oil".

UPI's energy report noted last week Tillerson said Exxon remains largely unaffected in keeping its immense network of refineries flowing with oil and appeared to steer clear of any talk of building new refineries.

Shell said workers are in the process of completing final site assessments, while repairs are under way.

The oil and gas industry is still recovering slowly from the damage caused by Katrina and Rita. The Louisiana Office of Conservation reported a marginal increase in resumed production from oil and gas operations onshore. More than 45 percent of the oil and gas wells in that region still remain off line, and the office said it still has not received updates on some 25 percent of those.

A U.S. weekly petroleum report from Wednesday said crude stocks increased sharply in the week ended Oct. 14, normally a bearish indicator of U.S. demand among traders. U.S. commercial crude inventories rose 5.6 million barrels to 312 million barrels, while gasoline stocks gained 2.9 million barrels to 195.7 million barrels in the same period. Gasoline demand slipped 2.2 percent for the same four-week period last year.

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