1. Chapter 3 : Energy and the Global Economy Great Decisions

3. History The Great Depression – 1930’s New Deal – a sequence of programs from 1933 -1938 that provided government intervention to resolve the economic crisis Institutions like : Social security system; Security and Exchange Commission, Federal Housing Administration etc came out of the NEW DEAL

4. GLOBAL ECONOMY Helped build EU Helped build Asia Pacific Countries To counter soviets post world war II

5. Free Trade Following Ricardo’s Comparative advantage model FTA NAFTA

6. Era of Interdependence China produces 85% of the shoes that American wear Americans buy Chinese cheap shoes MNC’s Financial interdependence – Treasury bonds

8. Foreign Oil The Five biggest private oil companies only hold 12% of global oil production The rest is produced by sovereign countries While other sectors are becoming more globalized - the oil sector is more controlled by governments OPEC – Organization of Petroleum Exporting Countries Algeria, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, KSA, UAE, Venezuela

9. Historical Price Shocks 1973 - Yom kippur war in the ME 1979 – Revolution in Iran Nixon – Project Independence Energy self-sufficiency in the US by 1980 Free the US from dependence on Foreign oil

10. Oil and Foreign Policy

11. Oil Consumers US China Japan

12. High Oil Prices On Oct. 15, 2004 – limited supply due to many factors – prices rose to 55$ per barrel More demand ( China )– Limited supply A weakened dollar

13. As a result of 2004: Prez Bush signed the Energy Policy Act of 2005 Encourage energy efficiency Promot alternative energy sources Reduce dependence on foreign oil Increase domestic production 2006 – Advanced Energy Initiative Stated that “US had become addicted to oil “ Need to replace 75% of oil imports from the ME by 2025 by producing Clean energy Energy Independence and Security Act of 2007 Increasing the supply of alternative fuel sources by making it mandatory that fuel producers use 36 billion gallons of biofuel in 2022 Setting a national fuel economy standard

14. Research and Development Critics believe that no money is being funded in research for alternative energy 8 billion $ = 9 days of fighting in Iraq

15. Proposals Diversify Energy Providing more incentives for green friendly energy alternatives Solar power Wind power – can the US be the KSA of wind power Thomas Friedman –book HOT FLAT AND CROWDED – Green Revolution ( US) US should stop buying oil and gas from Petrodictatorships (KSA)

16. US State Governments California governor – Arnold Schwarzenegger – “California Global Warming Solutions Act – 2006 Western Climate Initiative - by 7 governors – cut regional CO2 emissions by 15%