Some time ago, J P Morgan had forecasted that the price of oil could exceed $100 a barrel; with each passing day, that estimate is looking less and less fanciful than it did when the forecast was made.
The price crossed $66 a barrel recently, a record in nominal dollar terms, and close to the 1979-high in real, that is, inflation-adjusted, terms.
The currently accepted wisdom of the West is that it is the increasing demand from China and India that is fuelling the price rise. (An estimated 35 per cent of incremental demand is attributed to China and India).
While this may well be true to an extent, not too much is being talked about the vulnerabilities and deficits on the supply side. Indeed, these are serious already, and becoming increasingly so with the stance of American policy in West Asia.
For a century now, western policy in West Asia, dominated by the British in an earlier era but increasingly by the Americans after the Second World War, has had a single objective -- securing the supply of oil from producers in West Asia, such as Saudi Arabia, Iran, Iraq, Kuwait and the UAE.
The support for an ultra-orthodox Islamic regime in Saudi Arabia, the CIA-engineered coup in Iran in the early 1950s which overthrew the democratically elected Prime Minister Mossadegh and installed the Shah, the first Iraq war of 1991: all these had a single aim, namely, securing oil supplies by making sure that these countries are ruled by friendly, if not puppet, governments.
As for the second Iraq war, by now it is evident that the varying reasons cited for attacking Iraq -- existence of weapons of mass-destruction, complicity in the terrorist attacks on New York and Washington on 9/11, were/are false: as big lies as Goebells ever used.
Unless M/s Bush and Blair are to be considered as certifiably mad (or at least as evangelists following God's orders), the real objective of the exercise had to be only one -- namely control over Iraqi oil.
The hope was that the invaders would be welcomed as liberators and that Iraqi oil supplies would be restored within six months of the end of the war. And, with Iraq and Saudi Arabia under effective American control, the US could turn its eyes to Iran, another major exporter.
Things have gone wrong disastrously for the Americans, and even more so for the Iraqis. An average of 50/60 attacks by insurgents continue to occur every day; American deaths are nearing 2,000 and Iraqi deaths a hundred times more -- and the restoration of oil supplies is nowhere in sight.
Indeed, there is every chance that a freely elected government would be dominated by the Shia community and become a close ally of Iran!
If Iraq is in shambles, it is difficult to be sanguine about political stability in Saudi Arabia, the world's largest oil exporter. One geriatric ruler expired recently and has been replaced by another equally old.
The rules of succession are such that a series of old men may well succeed each other for the indefinite future. The population is young; there is no accounting of the billions of dollars spent on the 7,000-odd princes and their hangers on.
Moreover, given the dominance of the ultra orthodox Wahhabi form of Islam in Saudi Arabia, it is a fertile ground for Islamic extremists, many currently active in Iraq. They could come back any day. (Incidentally, a majority of the 9/11 hijackers were Saudis, although the Americans blamed Iraq.)
One mark of the seriousness of the security situation: American missions in Saudi Arabia were closed for many days recently because of security worries. Overall, one would hardly be surprised if Saudi Arabia degenerates into an Iraqi style quagmire.
The third major producer and exporter, Iran, is increasingly being cornered over allegations that it is endeavouring to produce nuclear grade uranium/plutonium.
In a recent election, an orthodox candidate got elected over his more liberal opponent. Indeed, the Iranians are as virulently anti-American as the Iraqis or the Saudis.
On past performance, Bush is quite capable of trying to enforce a "regime change" in Iran as well (Chancellor Schroeder of Germany recently cautioned the US against trying to do so), and that would really put the fat in the fire.
As if antagonising the West Asian exporters was not enough, the US is also after the Venezuelan president -- and Venezuela is the world's fifth largest exporter of oil.
In short, the political situation in many major exporting countries is either already so fragile, or potentially so, that disruption in supplies from one of them is a possibility.
In that case, the JP Morgan price forecast quoted above will become an underestimate, and the world will pay a heavy price for Bush's follies.