The oil of the Persian Gulf has been of considerable interest to oil companies and
Western governments (and to Russia) for more than a century. Remaining global conventional
crude oil resources are on the order of 3 trillion barrels, with more than 50% of that amount in
the Persian Gulf. Since 1986, a price range framework has resulted in stable crude oil prices and
reliable supply. In economic terms, it is a Nash game theory equilibrium between Gulf
producers and Western (and Asian) consumers. Military support is an important part of the
system.
Given the very low cost of production in the region (about $5 per barrel) and the great
magnitude of resources, the oil wealth in the Gulf is on the order of $60 trillion. It is the
existence of past and potential efforts to seize this resource which creates a major policy problem
for the 8 countries in the region and for global security. The security framework which made a
stable world oil market possible has itself contributed to growing instability in individual
countries, the rise of Al Qaeda, and the U.S. occupation of Iraq.
There are three broad policy approaches to this dilemma. The dominant policy in the
1973-1990 period was generally a “hands off” position by the U.S. and Europe. In the years
following the Gulf War (1991-current) a security system has been organized and led by the
United States. A third type of security structure would be essentially international. The paper
concludes by discussing each approach in the context of 6 conditions or requirements for
democratic governments and a stable world oil market.
