Great Decisions Ch 3


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Great Decisions Ch 3

  1. 1. Chapter 3 : Energy and the Global Economy<br />Great Decisions <br />
  2. 2.
  3. 3. History<br />The Great Depression – 1930’s<br />New Deal – a sequence of programs from 1933 -1938 that provided government intervention to resolve the economic crisis<br />Institutions like : Social security system; Security and Exchange Commission, Federal Housing Administration etc came out of the NEW DEAL<br />
  4. 4. GLOBAL ECONOMY<br />Helped build EU<br />Helped build Asia Pacific Countries <br />To counter soviets post world war II<br />
  5. 5. Free Trade<br />Following Ricardo’s Comparative advantage model<br />FTA<br />NAFTA<br />
  6. 6. Era of Interdependence<br />China produces 85% of the shoes that American wear<br />Americans buy Chinese cheap shoes<br />MNC’s <br />Financial interdependence – Treasury bonds <br />
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  8. 8. Foreign Oil<br />The Five biggest private oil companies only hold 12% of global oil production<br />The rest is produced by sovereign countries<br />While other sectors are becoming more globalized - the oil sector is more controlled by governments <br />OPEC – Organization of Petroleum Exporting Countries<br />Algeria, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, KSA, UAE, Venezuela<br />
  9. 9. Historical Price Shocks<br />1973 - Yom kippur war in the ME<br />1979 – Revolution in Iran<br />Nixon – Project Independence<br />Energy self-sufficiency in the US by 1980<br />Free the US from dependence on Foreign oil<br />
  10. 10. Oil and Foreign Policy<br />
  11. 11. Oil Consumers<br />US<br />China<br />Japan<br />
  12. 12. High Oil Prices<br />On Oct. 15, 2004 – limited supply due to many factors – prices rose to 55$ per barrel <br />More demand ( China )– Limited supply<br />A weakened dollar <br />
  13. 13. As a result of 2004:<br />Prez Bush signed the Energy Policy Act of 2005<br />Encourage energy efficiency<br />Promot alternative energy sources<br />Reduce dependence on foreign oil<br />Increase domestic production<br />2006 – Advanced Energy Initiative<br />Stated that “US had become addicted to oil “<br />Need to replace 75% of oil imports from the ME by 2025 by producing Clean energy<br />Energy Independence and Security Act of 2007<br />Increasing the supply of alternative fuel sources by making it mandatory that fuel producers use 36 billion gallons of biofuel in 2022 <br />Setting a national fuel economy standard <br />
  14. 14. Research and Development<br />Critics believe that no money is being funded in research for alternative energy <br />8 billion $ = 9 days of fighting in Iraq<br />
  15. 15. Proposals <br />Diversify Energy<br />Providing more incentives for green friendly energy alternatives<br />Solar power<br />Wind power – can the US be the KSA of wind power<br />Thomas Friedman –book HOT FLAT AND CROWDED – Green Revolution ( US)<br />US should stop buying oil and gas from Petrodictatorships (KSA)<br />
  16. 16. US State Governments<br />California governor – Arnold Schwarzenegger – “California Global Warming Solutions Act – 2006 <br />Western Climate Initiative - by 7 governors – cut regional CO2 emissions by 15%<br />