Are you ready for oil to skyrocket to $200 a barrel?
And they’re prepared to play their trump card to send it there.
Faced with a rash of mysterious explosions, military drones caught flying overhead, and renewed promises to end their nuclear ambitions, the Iranians are threatening to close the Strait of Hormuz — otherwise known as “the economic jugular vein of the world” — again.
As Iranian lawmaker Parviz Sarvari said yesterday, “Soon we will hold a military maneuver on how to close the Strait of Hormuz. If the world wants to make the region insecure, we will make the world insecure.”
The announcement came just weeks after Iran’s energy minister told Al Jazeera television that Tehran was prepared to use oil as a political tool in any “conflict over its nuclear program.”
Given Iran’s dominance over this bottleneck for oil exports from the Persian Gulf, this is a promise they can likely keep…
Today’s price of $100 a barrel doesn’t even come close to pricing in the geopolitical calamity closing the Persian Gulf would present.
Just 34 miles wide, thirteen tankers carrying 15.5 million barrels of crude oil pass through the Strait each day, making it one of the world’s most important waterways.
In all, 33% of the oil shipped via tankers passes through the Strait of Hormuz.
The Strait is so vital to the world economy, its closure would be considered an act of war that only the U.S. Navy has the power to fix…
Not So Short, Not So Simple
But believe it or not, thanks to the cunning of Lt. General Paul Van Riper (USMC), this is an area where the vaunted U.S. Navy could prove most vulnerable.
You see, the General is something of a modern-day Billy Mitchell…
In one of the biggest war games ever conceived and played out in the Persian Gulf, General Van Riper sent 16 U.S. warships to the bottom of the Persian Gulf in 2002 as the leader of a “rogue Middle Eastern state.”
His “Red Force” was well on its way to winning the whole shooting match when higher-ups suspended the game, put a stop to his tactics, and “re-floated” their ships — but not before the real damage had been done…
Exposing the fleet’s weakness, Van Riper had secretly armed numerous civilian pleasure boats and deployed them near the U.S. 5th Fleet.
When faced with an ultimatum to surrender his Red Force, he achieved complete tactical surprise as they suddenly went on the offensive. On cue, his small force swarmed the fleet, making kamikaze attacks while other boats fired Silkworm cruise missiles from close range.
In the end, Von Riper’s team had sunk a carrier, an Aegis Cruiser, six amphibious ships, and eight other vessels.
His massive first salvo of missiles was so effective, most of the fleet sunk to the bottom as thousands of American sailors suddenly became casualties. Had the encounter been real, it would have been the worst U.S. Naval defeat since Pearl Harbor.
In short, by employing the same type of asymmetrical warfare our adversaries are likely to use, General Van Riper poked a giant hole in the theory of U.S. Naval invulnerability.
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Missiles vs. Ships
Like Billy Mitchell before him, Van Riper proved that the fleet was vulnerable — particularly to anti-ship missiles.
It’s no secret that Iran has armed themselves to the teeth with these types of weapons, which they have been mass producing since last February.
On top of that, the Iranians are known to have thousands of Russian and Chinese anti-ship missiles built specifically to defeat the U.S. Navy.
At speeds of Mach 3, the Navy would have less than 30 seconds to react to an attack. As Van Riper has shown, some of these missiles could get through and likely paralyze the Gulf in a stunning first strike.
The point is their missiles may be able to trump our ships — at least in the short term.
And because of this fact, Iran’s threat to close the Gulf is very real… and serious enough that some experts believe the Persian Gulf could be shut down for months before the U.S. Navy could gain control.
As Crisis and Opportunity Editor Christian DeHaemer tell us, “That would double oil prices in a blink until the free flow of crude is finally restored.”
“Smart investors,” DeHaemer says, “are moving out of the Persian Gulf entirely.”
Out of Africa
That’s a path the United States has been following for years now as it works to buy crude in friendlier places…
In fact, imports from the Persian Gulf are down by 23% since 2005. And only 16% of U.S. imports travel through the Strait of Hormuz today.
According to DeHaemer, the next big oil story is going to be Africa — not West Africa, but the East Coast, where investors are lining up to cash in on a discovery that rivals oil found in nearby Saudi Arabia.
As Christian explains, “Of the seven places on earth that have yet to be fully explored for oil, East African oil is the cheapest and easiest to pull out of the ground.”
Anadarko Petroleum (NYSE: APC) recently announced its largest-ever discovery of hydrocarbons in this very region.
“In the world of fossil fuel exploration,” DeHaemer says, “sweetheart deals like this one come around maybe once in a career.”
In the meantime, as Americans prepare for the holidays and await a visit from Saint Nick, the Iranians are preparing for a visit from Uncle Sam and the Israelis…
As Hossein Alaie, a shopkeeper in central Tehran, told Reuters last week: “It will be a terrible war. They will destroy everything. I am stockpiling goods and have told my relatives to do so.”
Needless to say, if push actually comes to shove, the price of oil is going to skyrocket.
Two-hundred dollars a barrel could actually be on the light side.
Your bargain-hunting analyst,
Editor, Wealth Daily