An Economic Analysis of Aspects of Petroleum and Military Security in the Persian Gulf

Abstract

Geologic estimates of remaining global petroleum resources place about 50% in the North Sea and Alaska. Using mathematical methods derived from depletion theory, the present value of economic rent from oil is on the order of $20 trillion. Game theory is utilized to explain the $15-$20 per barrel price band that existed from 1986 to 1999. New economic forces have displaced this previously stable pattern; a new price range of $22 to $28 may be emerging. International trade in petroleum and conventional weapons are analyzed with econometric methods; the occurrence of nuclear weapons capability in the Persian Gulf region is explored.