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Fahrenheit – Gold and Oil

By: Bill Ridley, Online Investors News

-- Posted Thursday, 7 October 2004 | Digg This ArticleDigg It!

OnlineInvestorsNews Volume M 9-12, October, 2004

a free supplement of   The Growth Stock Report  

Crude futures close above $51 for the first time ever 

Crude futures closed above $51 a barrel for the first time ever on the New York Mercantile Exchange. November crude rose $1.18 to close at $51.09 a barrel, eclipsing the previous closing record of $50.12 seen on Friday. Lingering production delays in the Gulf of Mexico, tension in Nigeria, and uncertainty ahead of Wednesday's U.S. petroleum supply updates fueled the rally.- CBS Marketwatch, October 5th, 2004

One of the optimum strategies of becoming a good investor is knowing in advance how global political agendas will shape the market in the coming months and years ahead. When George W. Bush was first elected president, I knew and publicly announced defense, gold, and oil stocks would rise.


I also knew the invasion of Iraq was on the drawing board, and I will remind you, this was before George W. Bush took power and before the tragic events of 9/11.


I’m certainly not a great psychic or political scientist – I just read the game plan in advance. The agenda was clearly spelled out back in 1997 by a group who created the Project for the New American Century (PNAC). This organization of neoconservatives includes a number of current White House insiders including Dick Cheney, Donald Rumsfeld, Richard Perle, and Paul Wolfowitz.


The PNAC believe the United States needs to take greater measures to assert its dominance as a world leader. Their belief is that by taking a more liberal or diplomatic stance, the United States and the world at large will not progress and benefit from globalization in our time. Consequently taking more active, and if need be, more forceful roles in world affairs, the objectives of attaining a new world order can be reached.


When it comes to the matter of securing Mid East oil supplies, the PNAC made their feelings known in a letter to President Clinton in 1998 where they urged his administration to set in motion a plan to remove Saddam Hussein from power which would secure “our vital interests in the Gulf” that hold “a significant portion of the world’s supply of oil.”


In 2000, a major PNAC paper was released in which they reiterated their desire that the U.S. become a dominant global force. They also acknowledged that this probably wouldn’t happen unless “some catastrophic and catalyzing event – like a new Pearl Harbor” took place.


A rather strange co-incidence wouldn’t you say? Obviously, this statement would be good reason to invoke a conspiracy theory about 9/11 however let’s stick to the facts.

In January of 2001, George W. Bush took office and his administration now had key PNAC neoconservatives running the show. Just ten days after Bush moved into the White House the National Security Council held their first meeting where plans to overthrow Iraq where at the top of the agenda.


Revelations of these meetings where gathered by Wall Street Journal reporter Ron Suskind and documented in his book: The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neill.


The book reports that former U.S. treasury secretary Paul O’Neill told of his surprise when he found out that getting rid of Saddam and a proposal for military action in Iraq were the administration’s number one priority.


O’Neill recalled that at the next National Security Council meeting just two days later, Rumsfeld had rejected an idea from Colin Powell that targeted sanctions should be brought against Saddam. Rumsfeld instead was pushing hard for an outright overthrow of the Iraqi government.


According to O’Neill, Rumsfeld reportedly stated “Imagine what the region would look like without Saddam and with a regime that’s aligned with U.S. interests.”


Then September 11th came along. You know the terrible story. The next day, Bush links al Qaeda with Saddam. The following weekend the group meets again. O’Neill recalls that Wolfowitz is urging military action against Iraq.


O’Neill’s recollections are further confirmed by Richard Clarke who served as the top counter-terrorism expert in the White House before he resigned last year. Clarke stated in his book Against All Enemies that he was shocked to discover that on the day after the 9/11 attacks, he showed up for work at the White House expecting to discuss al-Qaeda but instead the conversation centered on Iraq. Clarke states he “realized with almost a sharp physical pain that Rumsfeld and Wolfowitz were going to try and take advantage of this national tragedy to promote their agenda about Iraq.”


In 2002, the Wall Street Journal states the Cheney is meeting with executives from major oil companies including his former employer, Hallburton. Later, the Pentagon hires a subsidiary of Hallburton to establish a plan to put out oil rig fires in Iraq should a war break out.


In February of 2003 Colin Powell tries to drum up international support for invading Iraq based on the Weapons of Mass Destruction argument. Concurrently, secret government documents outline plans to privatize Iraq’s oil sector. On March 20th, the U.S. invades Iraq.


In June of this year, the 9/11 commission stated that Saddam had no links to al Qaeda. The world also now knows that the weapons of mass destruction never existed. Washington has now shifted reason for the occupation of Iraq as their determination to help bring democracy to the Middle East. It seems the topic of oil security is still too politically incorrect to mention.


This new crusade to liberate the Iraqis has come with a $200 billion bill to taxpayers, well over 1,000 serviceman’s lives and thousands more injured, a destroyed Iraqi infrastructure, greater terrorism within Iraq then Saddam would dare muster, and an unspeakable loss of life and injuries to countless thousands of innocent Iraqi civilians caught in the crossfire.


Come Election Day you can decide if it has been worth it.


The Bush administration are no dummies when it comes to the global oil economy. They know U.S. oil production has peaked and is now on a downward plunge.


In just days after the Bush administration took control of the White House, Vice President Dick Cheney headed up the new energy task force. Their acute awareness of the tightening U.S. oil supply was revealed when Cheney confirmed that U.S. production had peaked in 1970 and by 2000 output was 39% below the peak. Cheney pointed out that “dependence on foreign sources of oil is at an all-time high and is expected to grow…the U.S. and global economies remain vulnerable to a major disruption of oil supplies. The Gulf will be a primary focus of U.S. international energy policy.”


Never mind the basic fact that world supplies are already tight. The United States is far more dependent on OPEC oil today then ever in its history. Domestic oil production has dropped from 10 million barrels per day in 1970 to 5.9 million barrels last year.


At the same time, demand has risen from 17.7 million barrels to 21 million barrels. To adjust for this increased demand, imports have recently jumped to 11.3 million barrels per day. This is the first time in history that imports have exceeded 11 million per day.


The United States depends on foreign oil for 60% its needs and that amount will only get bigger over time. Just 50 years ago, America was producing half the world’s oil and today the nation can’t produce even half of its own needs.


And you may not like the way the current administration has mislead the public into why they are in Iraq. But the fact remains, The U.S. needs to secure oil flow and Iraq’s oil was the logical target.


In her current book, It’s the Crude, Dude , Linda McQuaig, interviews Fadel Gheit, a Wall Street oil analyst with Oppenheimer and Company. In regards to the global oil situation and Iraq Gheit states, "The cheap oil has already been found and developed and produced and consumed. The low-hanging fruit has already been picked."

Well, not all the low-hanging fruit has been picked observers Gheit.

Nestled into the heart of the area of heaviest oil concentration in the world is Iraq, overflowing with low-hanging fruit. No permafrost, no deep water. Just giant pools of oil, right beneath the warm ground. This is fruit sagging so low, as it were, that it
practically touches the ground under the weight of its ripeness.”

Not only does Iraq have vast quantities of easily accessible oil, but its oil is almost untouched. “Think of Iraq as virgin territory.... This is bigger than anything Exxon is involved in currently .... It is the superstar of the future,” says Gheit, “That’s why Iraq
becomes the most sought-after real estate on the face of the earth.” “This is the big dance. Everybody wants to be there.”

Gheit just smiles at the notion that oil wasn’t a factor in the U.S. invasion of Iraq. He compares Iraq to Russia, which also has large undeveloped oil reserves. But Russia has nuclear weapons. “We can’t just go over and ... occupy (Russian) oil fields,” says Gheit. “It’s a different ballgame.” Iraq, however, was defenseless, utterly lacking, ironically, in weapons of mass destruction. And its location, nestled in between Saudi Arabia and Iran, made it an ideal place for an ongoing military presence, from which the U.S. would be able to control the entire Gulf region. Gheit smiles again: “Think of Iraq as a military base with a very large oil reserve underneath .... You can’t ask for better than that.”

During last Thursday’s first televised debate between Bush and Kerry, much time was spent discussing the war in Iraq and Bush’s motivation for an invasion despite not having approval from the United Nations and many allies.


Not surprisingly, the issue of oil was never discussed. That would be too politically incorrect.


If you think gold and oil have sky rocketed this year, just wait.




Washington insiders are well aware that the U.S. needs to secure oil supplies. You may not like their methodology but the facts are facts. The days of cheap oil are over.


The report, Strategic Energy Policy Challenges for the 21st Century, concludes: “The United States remains a prisoner of its energy dilemma.


As far as the U.S. dollar is concerned, the Iraq situation will only continue to help weaken the greenback.  As Vice President Dick Cheney has pointed out, oil and gas shortages are very real. With the U.S. having a growing dependency on oil imports which are estimated to hit 90% by 2020, our economic future is at serious risk. If supplies are not maintained to keep up with the huge increased global demand our already shaky economy will be quickly derailed.


Gold as well is destined to climb further. Securing Iraqi oil fields has cost $200 billion so far and is climbing rapidly. Billions of dollars of new debt creation will be needed for this mission to be accomplished which will further dilute the U.S. dollar and it will continue to lose more ground against foreign currencies which also means gold will rise as the dollar sinks.


You may not like the tactics taken the Bush administration has taken but you can vote as your heart directs you on November 6th.


Having some exposure to gold, oil and gas investments makes complete sense no matter how the election goes.

-- Posted Thursday, 7 October 2004 | Digg This Article


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