A massive tower of smoke roiled skyward above the green landscape of the Niger Delta on the west coast of Africa. Oil was burning near a ruptured pipeline, and the huge Anglo-Dutch multinational Shell Petroleum Development Co. of Nigeria reported sabotage caused the break. Were rebels behind it? Terrorists? Or just thieves trying to steal oil and scrap metal? The only clue was a hacksaw at the scene, apparently dropped in a moment of panic when the line erupted like a gusher.

International oil markets shuddered. YOUTHS TORCH OIL PIPELINE, PRICE HITS $54.45 PER BARREL, screamed the headline of Nigeria's leading paper the next day, exaggerating the connection, certainly, but not by much. The global oil supply is so tight, the market psychology so close to the brink of crisis that even small disruptions can send prices soaring to new records.

Wasn't it just last year that we heard the invasion of Iraq would help make oil cheaper, safer, more secure? President George W. Bush came to office alarmed about increasing U.S. dependence on autocratic and corrupt regimes that rule atop the world's biggest oilfields: among them the mullahs of Iran, the royal family of Saudi Arabia, the democratic yet venally corrupt government in Nigeria. And then there was Saddam Hussein. By invading Iraq, American forces would remove one dictator and the threat he posed to the interests and security of the United States. They would also stabilize one of the world's biggest oil producers, and begin spreading democracy. More oil would flow to market, and more freedom would flow to the region. Yet we've seen the opposite. The world's autocratic and corrupt oil producers are richer than they have been in years. OPEC members alone expect an estimated $300 billion in total revenues this year, much of it in windfall profits.

"The petrodollars we provide such nations contribute materially to the terrorist threats we face," said former CIA chief James Woolsey and other prominent neoconservatives in an open letter last month. The United States faces a "perfect storm" strategically and economically, they said, if it doesn't reduce its dependency on foreign oil. And there's every indication they're right. But these same pundits, passionate advocates of the Iraq invasion, now mildly insist on the need to use more hybrid cars and other technologies to reduce consumption.

Analysts point to many reasons for the huge spike in prices, more than 60 percent over the past year. In every troubled corner of the oil-producing world the list of shocks has grown, from terrorist attacks in Saudi Arabia to hurricanes in the Gulf of Mexico; the Yukos commotion in Russia; unpredictable demagoguery in Venezuela. Shipping lanes in Asia are plagued by pirates and threatened by terrorists. There's growing unrest along the African coast. All this is happening while demand from China surged 30 percent last year, beyond almost anyone's expectations. A cold winter is coming on, upping demand for heating oil, and Americans keep driving like there's no tomorrow.

Yet it's the untamed insurgency in Iraq that has had the most pernicious impact on energy supplies and price speculation. The country should be a major oil producer. Under Saddam Hussein, despite sanctions, it was able to pump almost 3 million barrels a day. Now, because of widespread sabotage, it has to work very hard to export 2 million. In a tribute to the bravery of its workers, it reached 2.5 million barrels on Sept. 27. But illusions that Iraq could finance its own occupation evanesced like a mirage last year. Officials estimate pipeline sabotage alone is costing the country $7 million a day.

The hard-line mullahs of Iran, however, are awash in cash. "Up through last year, they had come up with something like $20 billion extra they did not have to spend [on the regular budget]," says Azadeh Kian-Thiebaut, author of several studies of modern Iran. "They are rich," she says. And prices have jumped dramatically since then. At the same time, Grand Ayatollah Ali Khamenei and his close allies have marginalized, brutalized and eliminated whatever was left of the democratic and reformist spirit that flourished in the country during the late 1990s.

Resentment of the mullahs' corruption is still widespread. But money helps buy quiet. A reign of fear is returning under the Revolutionary Guard Corps, or Pasdaran, now in de facto control of all major ministries. But protest and unrest are also subdued because of patronage: windfall billions channeled through the mullahs' charitable foundations. "The major problem is Iran's youth unemployment," says Kian-Thiebaut. The Iranian leadership can pump money into the black economy, where little is accounted for, but where most young people earn their living. In rural areas and in many slums, says Kian-Thiebaut, "there are people who really do survive only because of what they get from the government."

Russian President Vladimir Putin has seen the price of a barrel of oil quintuple since 1999, and he's used the income to shore up his own power as he prods the country toward ever more severe autocracy. "Putin has had the money to raise pensions a bit, pay salaries and keep taxes down," says Vladimir Pribylovsky, a political analyst at Moscow's Panorama think tank. By helping ordinary workers in this way, Putin cut the legs out from under his main political opponents, the Communists. Meanwhile, the high price of a barrel also puts him in a strong position when criticized from abroad for rolling back democratic freedoms. "At $50 a barrel," says Pribylovsky, "Putin can do whatever he wants with Bush and Europe." Everybody is knocking at his door, wanting a piece of the action--and a sure supply of petroleum.

But the biggest winner of all is Saudi Arabia. Many in the United States see the kingdom as a problematic ally, with a shaky, geriatric monarchy and a deep tradition of patronizing radical fundamentalism. It was the birthplace of 15 of the 19 hijackers on September 11. Since last year, terrorist groups trying to overthrow the regime have staged several suicide bombings and murdered foreign workers. Yet the desert kingdom accounts for a quarter of the entire world's proven reserves, and it's usually the only country that can inject an extra 2 million or 3 million barrels a day into the market by turning on the tap. The Saudis' own projected windfall is estimated upwards of $50 billion over the next year.

What the Saudi government does with that money is critical, says Rachel Bronson of the Council on Foreign Relations: "The answers will tell us how serious they are about reform." Crown Prince Abdullah, the de facto ruler, has said a large part of the money will go into paying down the country's huge debts. More billions are supposed to go into vocational training for young Saudis, who've been easy recruits for the likes of Osama bin Laden. And there will also be foreign investments. But even Saudi officials close to the top leadership worry the flood of money will bring back the regime's old complacency. "The big risk is overconfidence," says an adviser to one of the senior princes.

In fact, the biggest risk is that the violence we've already seen in Saudi Arabia intensifies, that the Iraq war starts to spill across the border, or there's a dramatic blow to the regime that nobody could anticipate. If a villager with a hacksaw in Nigeria can move prices for a few minutes, an assassin in Arabia could change them for years to come.