Baltimore, MD--This past weekend the U.N. was unable to implement a second resolution on Iran and its nuclear program.

But new measures are already under discussion to follow up on the December 23 action that placed trade sanctions on certain nuclear materials.

Iran's persistent refusal to suspend uranium enrichment has become entirely predictable.

And why shouldn't it refuse? Iran benefits by not halting enrichment.

Analysts say Middle Eastern tensions are mostly to blame for oil prices doubling over the last three years. And higher oil prices are essential if Iran is to meet its rising domestic consumption. So long as Iran thumbs its nose at the U.N., volatility will remain high, along with prices.

Impending Economic Collapse

Iran's economy is set to collapse under the weight of its energy situation. Despite holding the third-largest global oil reserves, Iran's rising consumer appetite is driving its energy exports down.

Over the last three decades, Iran's population doubled to almost sixty-nine million people. And due to a lack of refining capacity, they must import 40% of their gasoline demand. The rise in domestic consumption will drastically lower their future oil exports, which is why higher prices are so advantageous--they are able to sell less oil and still reap significant oil revenues.

And losing exports would be a huge deal. Since oil and gas production accounts for 80% of their total exports, losing that revenue would put a considerable strain on Iran's subsidized gas prices.

But consumption increases aren't the only thing dragging down Iran's exports. Their massive oil fields are also depleting at a rapid pace. The IEA reports that almost $165 billion will have to be invested for Iran to meet its energy demand in 2030. But Iran still fails to develop its oil and gas reserves.

Instead, it has shifted its energy focus to nuclear power.

Don't mistake a lack of action for weakness.

Although the U.N. was unable to reach a consensus on the exact details, a firmer resolution will be placed on Iran shortly. In fact, all the major powers involved are committed to a second set of U.N. sanctions.

This next round of sanctions will most likely include a travel ban on Iranian officials connected to their nuclear program, as well as an extensive list of nuclear technology Iran would be banned from importing or exporting. Additionally, the U.N. is considering freezing more Iranian assets.

One disagreement last weekend came from Russia concerning the ban on arms sales and visas for students studying nuclear technology abroad. The U.S. is looking to stop European export credits for companies doing business in Iran.

The new draft resolution is expected to be finished by the end of this week, after which it will be put to the vote. Iran's suspected nuclear weapons aspirations have been the source of debate. The chief U.N. nuclear inspector reported that Iran's peaceful nuclear intentions cannot be guaranteed until Iran begins to cooperate with inspectors.

In light of the upcoming sanctions, Iran has stated it will ration gasoline this month, a plan to be implemented upon approval by parliament.

Iran's subsidized gasoline currently costs the average citizen about nine cents per liter.

And to think I see two bucks a gallon as cheap!

An alternative solution, which is also being debated in parliament, is the possibility of hiking gas prices. But doubling the price per gallon could lead to heated opposition from Iranian citizens, who feel low oil prices are a national right. President Mahmoud Ahmadinejad would lose a lot of public support if he were forced to cut subsidies. Fuel prices are a vital target for effective sanctions.

I feel their pain--eighteen cents per gallon is an outrage!

New Barrels on the Block

Rising tension in the Middle East is nothing new in the 21^st century.

Heck, it's not even new to the last hundred years!

As an investor, there are two things you can do. The first is to sit idle and hope for the best . . . not exactly the best idea, if you ask me.

Or you can take advantage of the situation, recognize where the future is heading--and then get there before everyone else.

Many countries are desperately looking outside the Middle East for their energy sources. In his State of the Union addresses for the last two years, President Bush showed his desire for the U.S. to be free from its Middle Eastern oil addiction.

His solution is to develop renewable resources to meet future energy demand. Unfortunately, funneling millions of dollars into these projects still won't offer a short-term solution to our oil dependence.

Over the next few weeks, I'll show you where this energy crisis will lead us . . .

And the next big thing is always where you least expect it.

Until next time,

Keith Kohl