We have been closely watching this oil chaos, and it is becoming clear that high fuel prices will be the most important issue in the upcoming presidential campaign. Our enemies now realize they can wreck the U.S. economy by creating hysteria in the oil market.

Listen to this: It costs Saudi Arabia less than $2 to produce a barrel of oil. Less than two bucks. Last week OPEC charged $138 for that barrel.

Simply put, if the escalation of oil prices continues the world will go into a steep recession, perhaps a depression.

Salaries in America can't keep pace with rising fuel prices, and every little ding in the world causes speculators to bid up oil prices. We're paying 4 bucks a gallon now. Next year the price could be much higher.

We now know that Israel will attack Iran if that country continues its nuke buildup. That kind of attack will put oil well over $200 a barrel.

We also know that radical Islamists and aggressive socialists like Hugo Chavez are using oil money to create terror and havoc. It is also apparent that Iran will continue to cause trouble in the Persian Gulf region, with the goal of destabilizing Western economies.

So, are you getting the picture here?

Congress must act and fast. There are two solutions that are possible within a few years: flex-fuel vehicles and fast tracking nuclear power plants.

Flex-fuel vehicles use a combination of alcohol-based fuels, like ethanol and methanol, combined with gasoline. The cars can run on both, and switch from one to another. This would obviously drastically cut our use of gasoline.

Brazil has millions of flex-fuel vehicles primarily running on sugar-based ethanol, which it would like to sell us. However, Congress has imposed big tariffs on fuel imports from Brazil to protect American oil companies which continue to gouge us in shameful ways.

Simply put, Americans must demand that Congress and the new president stop the nonsense, or there will be a world war over oil. That will happen and it will make Iraq look like a high school prom.

These OPEC gangsters are hurting us and they are not going to stop.

So, this is obviously a national security issue and Congress must mandate by law that American auto companies begin mass producing flex-fuel vehicles and quickly phase out gas-only products.

Also, we must begin drilling in ANWR and other places. We can't drill our way out of this mess, but we can better protect ourselves. At this point, that is much more important than environmental theory, which has slowed the U.S. use of nuclear power as well.

A combination of flex-fuel, nuclear, and increased domestic oil production could save this country in 10 years. If we don't do this now, every one of us will suffer. Every one of us.

What say you, Barack Obama and John McCain?

And that's "The Memo."

Pinheads & Patriots

First lady Laura Bush is a nice woman. If all Americans had her disposition, we'd be a much better country.

Here's what Mrs. Bush said about Michelle Obama's "proud" remark:

(BEGIN VIDEO CLIP)

LAURA BUSH, FIRST LADY OF THE UNITED STATES: I think she probably meant "I'm more proud," you know, is what she really meant. You have to be really careful in what you say, because everything you say is looked at, and in many cases, misconstrued.

(END VIDEO CLIP)

Now, the first lady did not have to do that. So she is a patriot for her kindness.

On the pinhead front, our pal Larry King may be in over his head.

(BEGIN VIDEO CLIP)

KATHY GRIFFIN, COMEDIAN: You can't just make things up on the show.

LARRY KING, HOST, "LARRY KING LIVE": We don't do it. FOX, they do that.

(END VIDEO CLIP)

FOX makes things up, Larry? Oh really?

Well I'm not making this us. "Hannity & Colmes" kick your butt every single night, man. OK? Don't be a pinhead.

You can catch Bill O'Reilly's "Talking Points Memo" and "Pinheads & Patriots" weeknights at 8 and 11 p.m. ET on the FOX News Channel and any time on foxnews.com/oreilly. Send your comments to: oreilly@foxnews.com