China-Iran Economic and Security Relationships and Its Impact on the Essay

China-Iran Economic and Security Relationships and Its Impact on the Gulf Cooperation Council (GCC) - Essay Example has more than a quarter of the total world oil reserves, Iran has the fourth largest oil reserves and Iraq has huge oil deposits and is second to Saudi Arabia in terms of quantity. (10) On the other hand, DAB and Kuwait are also abundant in oil (9) and are considered as two of the leading oil producing countries in the world. What is more important around this region is that the cost of production of oil is usually low compared to the cost of production other oil producing countries. Several states in the region, including Saudi Arabia and Iraq, employs cheap labour thereby effectively reducing the cost of production even more. Since the cost of producing oil is much lower in Iraq and Saudi Arabia, these countries earn more income from their operations than most other oil producing countries. Furthermore, with low oil production cost, countries around the Gulf like Iraq and Saudi Arabia have more flexibility in the events where prices of oil in the world market dive. The instability of prices of oil in the world market makes it difficult for other oil producers to keep up with the fluctuations of prices. However, since oil is the primary source of energy all over the world and it is difficult to find alternative sources of fuel, consumers have to go through the ups and downs of prices. Every time there are disturbances in the Middle East and production of oil is affected, the prices will shoot up. For instance, if a crisis in Middle East causes a net deficit of four million barrels of oil a day – this estimate could double in just a short time.(6) This gap in the production and the consumption of oil could cause a huge imbalance in the supply and demand for oil. This means that when disturbances happen in the Gulf area, a series of economic events will be triggered as oil production in the area slow down. The United States understands the role that the oil producing countries are playing in the Gulf. It also sees the grave consequences of a slowdown in the