THEME: OIL
Jon D. Markman who writes for the Street.com wrote about Matthew Simmons, a Houston energy analyst and banker at Simmons & Co. International. The message that Mr. Simmons is preaching has some rather frightful implications. Here are some excerpts:

Simmons is now shouting from the rooftops -- writing think-tank white papers, giving speeches and finishing a book set for publication next year -- that the world is quickly running out of affordable oil and gas, and that no amount of Middle Eastern pumping can bail us out.

While much of the so-called "peak oil" story is well known, what's news is Simmons' startling claim, based on personal analysis, that Saudi Arabia's pumping capacity is in decline.

Aramco, the company in charge of Saudi oil operations, disputes Simmons' assertion and has debated him in public policy forums. But Simmons isn't easily dismissed, as he's no antiestablishment crank. In addition to his role as chief executive of a major energy-focused investment bank, which counts Halliburton (HAL:NYSE - commentary - research) and the World Bank among its clients, he's a member of the Council on Foreign Relations and was an adviser to President Bush's election campaign and Vice President Dick Cheney's infamous energy task force.

Simmons' point of view is especially relevant today because the price of oil appears persistently stuck at $35-plus despite Saudi officials' vows to help push it down by increasing supply. Higher energy prices act like a pervasive, regressive tax, robbing consumers of money that would otherwise go to buy discretionary goods such as cars, clothes and computers.

In a nutshell, peak-oil advocates note that U.S. oil production -- once the highest in the world -- topped out in 1970, while natural gas production topped out in 1973. Both are now in decline. With world oil consumption at about 1 billion barrels every 12 days, oil companies have pressed hard to find oil and gas in other parts of the globe.

Simmons says it's worse than that. Much like the biggest problem in the Enron fiasco was that analysts always trusted Enron managers' declarations about the strength of its financial assets, he says that the world has always taken Saudi Arabia at its word for its oil assets. He now believes that it cannot be trusted.

He notes that the six major oil fields in Saudi Arabia, all discovered between 1940 and 1967, produce about 95% of Saudi oil. The Saudis produce 10% of the world's oil from them at the world's lowest prices, and the Saudis are the only serious provider of "spare" capacity on the planet. A single field, Ghawar, which is the world's largest, was discovered in 1948 and produces up to 60% of the kingdom's total.

He believes that production at these mature fields has peaked. While that doesn't mean they'll run out tomorrow, they're becoming much harder and more expensive to exploit efficiently. It's like a person getting older and suffering from arterial sclerosis: They slow down and become increasingly less capable. The Saudis are now using intense water-injection techniques to improve production, he says, a technique that can ultimately lead to catastrophic pressure failure.

Let's be clear what the implications are. Our leader pre-emptively attacked Iraq not because they believed that there was an imminent threat, but based on the Neo-Con Grand Theory that we had better have ownership of the oil fields in the Mid-East before something really bad happened to us like having the House of Saud fall.

The funny thing is there are voices in this supposed sane society that see no problem with this Neo Con point of view. I was listening to Dennis Miller on CNBC, and what he tried to pass on as comedy was a bleak message: If the Arabs try to screw around with OUR crucial supply of oil then we would send some real guns over there and teach them a lesson. WOW! Miller used to be a comedian on SNL???

The problem with this strong armed strategy is that it is the strategy of Empire. Empires rise and fall. They conquer or are conquered. They also grow old and senile. We have reached our Viagra moment. We are no longer young, but still walk around with the hormones of a teenager. The problem is that the Arab world is young. Very young. The median age of the Arab world is below 20! Unless we recognize that Arab young men without jobs and with little prospect for wealth have a lot more hatred and adrenaline than our young men who just want to go home to the States and play with their Xboxes, then we are in for a lesson in the economics of terror that will be quite expensive. Unless we can truly create a force for social justice, which we are trying to do (lead by an Administration which has failed so far), then I am afraid we will continue to suffer from sky high oil prices.