VHeadline.com oil industry commentarist Andrew McKillop writes: In late 1979 and early 1980, as the CIA's Tehran bureau staffers were paraded with banded eyes by Khomeini's revolutionary guards and Islamic students — and the ritual of yellow ribbons and hostage souvenir bows started up in the USA — oil prices and gold prices hit the fan.

Stock markets went the other way, and the bases of the 1980-83 world recession were set.

In 1979, oil prices had already risen to over US$30/barrel in dollars of 1979, or close to $75/bbl in 2004 dollars.

Under the impact of US humiliation, and slow recovery in Iranian oil production due to the Khomeini revolution, oil prices then moved to around $42/bbl in 1979 dollars, or about $105/bbl in today's dollars.

Gold prices tracked this explosion, attaining well over $900/ounce in 2004 dollars.

At the time, there was in fact considerable spare oil production capacity, worldwide. In overall terms, this was a political crisis, rather than oil supply crisis. At no time was there a physical shortfall of more than about 2.5 million barrels/day … although this supply cut was particularly high in late 1979-early 1980, during the Northern hemisphere's winter.

Khomeini's Iran, triumphing in the fall of US-backed Shah Pahlavi, essentially applied a political embargo through taking its time to restore oil production and export capacity.

The main target of this political embargo was of course the US … for this alone, the US neoconservative right vowed revenge on Iran, later baptized “Axis Of Evil” by that fervent New Economy christian G. W. Bush.

Today there is precious little or no spare oil export capacity any place in the world. Oil demand growth might in fact be even higher than the IEA's shock figure of 3.3% or about 2.6 mbd-per-year … now reinforced by fast growing moves of major Asian consumer nations to constitute, or build strategic petroleum reserves.

Large new sources of oil supply are more than somewhat absent from the near-term outlook, winter stockbuild is under way in the Northern hemisphere, and the US$ is weak — these and a host of other factors help explain relentless upward price pressure.

Despite this, the last days of the Bush regime could leave the ultimate “poisoned gift” to the incoming Kerry team.

With ever stronger pressure from Sharon, who now has to placate the extreme right wing in Israel, Iran is the most natural of natural targets for 'surgical bombing' of its illegal nuclear installations and facilities … these are like Israel's Dimona A-bomb factory that churns out several new atomic weapons each year, but are also unlike them in realpolitik terms.

That is: Israel's illegal A-bomb plants are not natural targets for surgical bombing, while Iran's illegal A-bomb plants are both illegal and 'surgical bomb targetable.'

Welcome to the world of realpolitik, aka as New World Order!

This political choice was made not only by Israel and by the Bush regime, but also by EU leaders anxious to curry favor with Bush hardliners, while claiming they hope Kerry will get elected.

Will this continue if Kerry is elected?

Sharon … knowing that Bush is ever more likely to lose the coming US elections, but does not hand over power to Kerry until January 2005 … could act now.

One bottom line is that Iran will not hesitate to place an embargo on oil supply to the US and possibly on supplies to Europe, if Israeli or US fighter bombers take out its nuclear installations.

For this reason, the EU has tried to delay and prevaricate, talk out and 'rationalize' its realpolitik choice.

But the bottom line is very simple:

if the Europeans want oil at US$100/bbl they only have go along with the Israeli and US bombing spree.

The countdown is short now: by the third week of November the UN Security Council may consider “Iranian non-compliance” with the IAEA's demands.

After that, surgical bombing will be the natural option, for defenders of New World Order.

The hottest of hot potatoes will be a poisoned gift from the outgoing Bush regime to burn a hole in Kerry's Oval Office desk … and US$100 oil can be back in weeks.

Andrew McKillop is a former expert-policy and programming, Division A-Policy, DG XVII-Energy, European Commission, founder member, Asian Chapter, Intl Assocn of Energy Economists. Currently in France he is available for consultation and research assignments. You may contact Mr. McKillop by email at xtran04@yahoo.com

www.vheadline.com/mckillop More VHeadline.com commentaries by Andrew McKillop