This time may be different. The fast-growing demands and tight supplies are not likely to retract to ample supplies, modest demand again - ending the cycle as we've known it. We'll probably never see cheap oil again.

Indeed, Venezuela is attempting to set $50 a barrel as the global floor price. If OPEC accepts the $50 floor as a benchmark Venezuela's reserves get recalculated to include it's Orinoco River Basin tar sands development, fully 1/3 of the world's recoverable oil at those prices.

Consider, at $50 a barrel, Venezuela's reserves are worth over $70 trillion. That's an asset that exceeds those of the World Bank. Perhaps a hint of things to come, Chavez has been buying out World Bank debt owed by countries like Argentina and Brazil.

So how does one enforce a floor of $50 a barrel? By offering 10 and 20 year contracts at $50. Although some oil companies recently cut investment in Venezuela when the National Assembly enforced higher royalties, others like Total, Chevron and Repsol are investing heavily in tar sand development.

creating a windfall for oil-producing nations that may thwart Bush's goal of promoting democracy and free markets

Excuse me. Those windfalls are prompting democracy, are an exercise of free markets, and are financing growth. In a way those profits are a tax on USA/EU wealth.

In the past these oil price spikes have had a silver lining to the cloud of doom. Oil countries don't sit on that money, they spend it in exploration, public works, manufacturing infrastructure. Their workers buy stuff - tennis shoes to Toyotas. In effect the world economy gets a Keynesian prime the pump effect. As the demand for goods percolated back our way, the 79-82 oil spike fueled 7% growth in the USA in 83 in spite of the fact that Reagan's deficits were removing $200 billion worth of investment capital from our economy "for as far as the eye can see". That wont happen this time. We'll meet much of that demand half way home from manufacturing plants we've outsourced further down the pipeline.

This of course is not how globalization is supposed to work. We're supposed to remain in control. Countries should not be able to grow their economies except through acquiring debt so we can retain political leverage. (Example: Wolfowitz is now granting debt relief to countries that agree that Americans are exempt from prosecution).

In 99 Chavez (then president of OPEC) proposed an orderly growth based on a "bands" system that would have moved oil from $11 to $35 by 06. Clinton bought into the plan when Chavez explained how those extra dollars at the pump would work their way back to demand for US manufacturing and services. Bush scraped the plan. That was probably our last chance at an orderly transition from empire to global citizen. And probably our last chance to dream of oil at only $35 a barrel.

Check out this article in today's Washington Post, it's just as you're calling it:

"Bolivia Nationalizes Natural Gas"

http://www.washingtonpost.com/wp-dyn/content/article/2006/05/01/AR2006050100583.html

Yep,the new Bolivian regime seemed to believe this was the right moment in the Petro Political Cycle to strike. And the trend we see in Bolivia is showing up across Latin America as more countries go 'back to the future' with policies to nationalize or re-nationalize natural resources.

An unspoken reality behind all this is that income growth rates for most people in Latin America have remained stagnant for 2 decades, with the failures of neo-classical policy recommendations to spur development.
SO part of figuring out the PPC is not only what's happening in the oil patch, but how conditions there intersect with other big things in the political economy.

Kache says the Petro Political Cycle may have ended...I doubt it...there is always a huge risk claiming the laws of demand and supply have been suspended. Prices will find a new equilibrium, demand will flatten out at some point, even with China in the market, and we will see an oil market softer than the one we have now. But in the meantime, its gonna be a lot of tough slogging for the U.S.