I’ve been trying to think of the proper metaphor for what Hank Paulson is going through, but nothing really fits, not sports, not war.

In the U.S., the financial subsectors are going into crisis one after the other, every few days.

To some degree, Paulson is able to get slightly ahead of the curve (as I think he did with Merrill last weekend), precipitating a workout before it hits the papers.  But the real problem is the roll call itself.

Next up, I expect we’ll see the mutual funds, then some more commercial banks, maybe bail out the FDIC, FSLIC, and then the Pension Guaranty Fund.

If too much liquidity is the root cause of all this, with the stuff you hear on the tube as the secondary set of causes, then it is fair to ask what led to so much money sloshing around, inflating housing and asset bubbles worldwide.

I have an answer: the transfer of money from relatively diverse, well-selected assets (stocks and bonds) into the hands of the petro-winners.

SNS members know that I am adding this to a previously-watched leak in the Japanese carry trade, which probably provided about $3T plus in liquidity, much of it over about a five year run.  But it would be silly to discount the effect of taking another $700B per year or so in wealth transfer forced by oil and gas price increases, and not ask where the money went next.

While you’re chewing on that, I think it’s only fair to ask the obvious follow-on question: now that new reports show conclusively that oil price peaks were caused by an unusual amount of speculation, isn’t it reasonable to ask whether those speculators might not have included those making the most money?

How much of the money driving up oil pricing through futures contracts and other non-user purchasers came as petro profits?  It would be hard Not to make this move, if you were, say, Saudi, or ExxonMobil, wouldn’t it?  Not only are you making obscene profits per barrel, but you make more profits on the options, which in turn drive up the price of what you’re making, by a huge percentage (let’s say, 100%).  So: you make money on the oil, you make money on the options, and you make more money on the oil price increase, which feeds the options frenzy, where you make more money —

You don’t think there was hot petro money in the oil futures market, do you?

It will be interesting to see what happens in Sen. Maria Cantwell’s hearings this week, and whether they can track back into the market, not just to speculation, but to speculators.  Martin Tobias, past CEO of Imperium Renewables, wrote a Special Letter for SNS in which he suggested finding trades (and perhaps tracking them  back) that seemed to come from oil companies, driving the price of his feedstock beyond what his business model could bear.

I don’t have any evidence, yet, that this has happened.  But it’s hard to believe that, in some quiet way (who would ever want to be discovered doing this?), someone between Putin, Chavez, the Saudis, Qatar, and Exxon, didn’t come up with this totally legal no-brainer for getting rich – and really screwing the global economy at the same time.

Shall we call this theory Osama’s Revenge?  He’s well understood to have planned to bleed the West to death.  Why not do it using the commodities markets, instead of bullets?  Of course, I don’t mean him, per se – but maybe one or two of his countless cousins and closet followers, still in favor in the Bush white house, and in Riyadh?

Now there’s an energy policy you can take to the bank.