In 1927, Upton Sinclair published an epic novel (Oil!) about greed, religion and petroleum. Eighty years later, in the film drawn from the book, "There Will Be Blood," Daniel Day-Lewis taunts his nemesis: "Here: if you have a milkshake -- and I have a milkshake, and I have a straw -- My straw reaches across the room -- and starts to drink your milkshake: I -- drink -- your -- milkshake! (slurps) I drink it up!"

The 21st century version of this drama is now playing in a geopolitical theater -- or gas station -- near you. Using oil to fuel its nuclear aspirations, Iran is dancing circles around the West as oil prices threaten disaster for developed economies and catastrophe for developing economies by draining capital out of any promised long-term global recovery. (See James D. Hamilton's (University of California-San Diego) excellent empirical treatment of this long-proven phenomenon.

The giant slurping sound you hear is the billions of dollars draining from the U. S. to the treasuries of the nations around the Persian Gulf. Crude oil accounts for 83% of Iran's total value of exports and over half the country's income. Iran is awash in cash, and uses it to finance much of the world's terrorist activity. As the fifth-largest exporter of petroleum in the world, Iran seeks to gain geopolitical strength through the constant rise in oil prices. This steady rise in oil prices engorges the country's budget -- tens of millions of dollars a day for every $5 increase in per barrel crude prices. Last week, Brent crude prices surged to an all time high of $125 a barrel after the U. N. nuclear watchdog issued a report that flagged the military threat of Iran's nuclear program. Prices at U. S. gasoline pumps hit the highest on record, up 13% from last year -- with more increases expected to follow this summer.

Also, in reportedly refusing to load a Greek oil tanker with 500,000 barrels of oil on Friday, Iran signaled once again its ability to use oil as a political tool to destabilize the latest version of the Euro bailout and further jam the slogging global recovery.

Such tactics embody Iran's extraordinarily shrewd and, so far, hugely successful strategy in holding the world hostage to high oil prices. Iran's budget depends on ever-mounting oil prices: cash payouts to 90% of Iranian households help offset the declines in domestic consumption and productivity that are crippling the economy. Meanwhile, to pursue its geopolitical ambitions, a large chunk of the Iranian budget goes to funding its ambitious nuclear program, arming Hezbollah in Lebanon, supporting the Syrian Regime, and funding its Revolutionary Guards and internal security to suppress dissent and democracy.

Iran does have an Achilles heel. It suffers from relatively higher production costs, making it sensitive to oil price fluctuations. However, it currently has little reason for concern as oil prices continue to rise given the rigid demand for oil in transportation. Global dependence on oil is due to transportation. If there were replacement fuels to end oil's monopoly over transportation (70% of all U. S. fuel consumption is oil, over two-thirds of which is imported), Iran might start to worry.

In an attempt to overcome the barriers to entry for transportation fuels sources to compete with oil, the Milken Institute has been conducting a series of financial innovations labs in conjunction with the United States Department of Agriculture as well as a lab that led to Israel's Oil Free Initiative, a $1.4 billion effort to target game-changing technological innovations in biofuels and agro technology, synthetic fuels and gas, batteries, fuel cells, and smart grid technologies, and vehicle powertrains.

A technology portfolio strategy to reduce oil dependence in transportation could stabilize oil prices at $40-$50 a barrel. At less than half the current price, no serious harm would come to relatively moderate oil producing countries or even big oil corporations with lower production costs. The effects, however, would hugely undermine Iran's geopolitical ambitions in Syria, Lebanon, Gaza, and terror elsewhere being promoted by Iran against moderate Muslim and Western-oriented regimes seeking modernization and democracy.