The Middle East: A mixture of oil and politics

The concept of stability is discussed as it applies to the Middle East countries and to the international oil market. The differences in how the various players involved (such as the USA, Europe, Iran, and the Arab countries) view stability are noted. With regard to stability and the oil trade, the results of the recent Gulf war indicate that the international security of oil supply and the regional balance of power in the Gulf are inseparable. Over most of the post-1945 period, there has been a reasonable degree of oil price stability and supply security. This stability and security has not come about through management of the oil price by governments, institutions, or groups of companies. The massive discontinuities in this management process in 1973, 1979/80, and 1986 are brought forward to provide evidence that a new management system must be created to avoid such problems in the future. It is suggested that in the past few years, the management function has been slipping away from OPEC and replaced by a Saudi Arabia/USA joint interest alliance