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62. The 2008 Oil Price "Bubble"
- Author:
- Mohsin S. Khan
- Publication Date:
- 08-2009
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- As oil prices began to rise in 2009 from a low point of about $40 a barrel in January to around $70 a barrel in July, a key question is whether the world is in for another oil price spike in the near term similar to that witnessed in early 2008. Several hypotheses were advanced when world oil prices started their inexorable climb from 2003–04 onwards, then skyrocketed from $92 a barrel in January 2008 to cross the $140 a barrel mark in June, finally hitting a record high of $147 a barrel on July 11, 2008, before collapsing to less than $40 a barrel in December (figure 1). There was the “peak oil” explanation, based on the theories of M. King Hubbert of “Hubbert's Peak” fame and his supporters, notably Colin Campbell and Matthew Simmons, that the world was running out of oil. There were the market “fundamentalists,” including importantly John Lipsky, the first deputy managing director of the International Monetary Fund (IMF), and Philip Verleger, a well-known oil expert, who argued that the fundamentals of demand and supply were primarily behind the extraordinary rise in oil prices in the first half of 2008 (Lipsky 2009a, 2009b; Verleger 2005, 2008). Interestingly, this fundamentals view was also shared by the US Treasury and was articulated by David McCormick, then undersecretary for international affairs, in a presentation in July 2008 at the Peterson Institute for International Economics. Finally, there were those who maintained that such an increase could only be a “bubble,” unexplained by peak oil theory or market fundamentals. Many financial-market participants were proponents of this third view, notably Michael Masters (2008), as well as the main oil producers, who were as surprised as anyone at the speed and size of the price increase over only a few months. Their argument was that the phenomenal increase in financialization of commodity markets during 2006–08, including in particular the oil market, led to speculation and momentum trading, which pushed oil prices way beyond their long-term equilibrium level as determined by fundamentals.
- Topic:
- Economics, International Trade and Finance, and Oil
- Political Geography:
- United States
63. Five Alternatives that Make More Sense than Offshore Oil
- Author:
- Whitney Leonard
- Publication Date:
- 11-2009
- Content Type:
- Working Paper
- Institution:
- Carnegie Endowment for International Peace
- Abstract:
- Foreign oil currently fuels 55 percent of all transportation in the United States. As it struggles to reduce its dependence on foreign oil, the United States will have to completely rethink its energy policies. Instead of replacing imported oil with domestic oil, extracted at high environmental costs from new rigs offshore and across the western states, the country could opt for cleaner alternatives like higher fuel economy standards, hybrid-electric vehicles, plugin hybrids, cellulosic ethanol, and new commuting patterns. By decreasing demand rather than increasing supply, energy alternatives could reduce or eliminate the need to expand offshore oil production. This paper explores the economic and environmental costs of offshore oil and investigates a range of cleaner energy options.
- Topic:
- Climate Change, Energy Policy, Environment, and Oil
- Political Geography:
- United States
64. The Political Economy of Oil in the U.S.-Iran Crisis: U.S. globalized oil interests vs. Iranian regional interests
- Author:
- Thomas W. O'Donnell
- Publication Date:
- 10-2009
- Content Type:
- Working Paper
- Institution:
- The New School Graduate Program in International Affairs
- Abstract:
- In the U.S.-Iran nuclear crisis, U.S. motivations stem from its role as protector of today's market-centered, global oil system, herein "The One Global Barrel." This market itself is the principal basis of global energy security today, unlike the political-economics of the old neo-colonial system. But, most light-oil reserves are in P ersian Gulf states— Saudi Arabia, Kuwait, the UAE, Iran and Iraq. U.S. Grand Strategy prevents any from projecting power affecting another's production and undermining the open market. Hence, Iraq was driven from Kuwait, placed under sanctions and the Ba'athists overthrown. Iran alone now projects power independently. Its nuclear program is a gambit for a Grand Bargain to lift oil sanctions without surrendering Regional power status, or to accomplish this asfait accompli. A future national-democratic Iran could find U.S. limits on sovereign power equally obnoxious. These underlying oil-market interests must be publically recognized to advance negotiation of the present crisis.
- Topic:
- Oil and Bilateral Relations
- Political Geography:
- United States, Iran, Middle East, Kuwait, and United Arab Emirates
65. Africa: The United States and China Court the Continent
- Author:
- David H. Shinn
- Publication Date:
- 06-2009
- Content Type:
- Journal Article
- Journal:
- Journal of International Affairs
- Institution:
- School of International and Public Affairs, Columbia University
- Abstract:
- The United States and China are the two most important bilateral, external actors in Africa today. While the United States wields more influence in most of Africa's fifty-three countries, China has surpassed it in a number of states and is challenging it in others. Both countries look to Africa as an increasingly significant source of raw materials, especially oil. China, more than the United States, views Africa from a long-term strategic perspective. Both countries seek political and economic support in international forums from African countries, which constitute more than a quarter of the membership of the United Nations. The interests of the United States and China in Africa are more similar than dissimilar. There will inevitably be some competition over access to African natural resources and political support, but there are even greater opportunities for cooperation that can benefit African nations.
- Topic:
- Oil and Political Economy
- Political Geography:
- Africa, United States, and China
66. Did Easy Money in the Dollar Bloc Fuel the Global Commodity Boom?
- Author:
- Christopher Erceg, Luca Guerrieri, and Steven B. Kamin
- Publication Date:
- 08-2009
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- Among the various explanations for the runup in oil and commodity prices of recent years, one story focuses on the role of monetary policy in the United States and in developing economies. In this view, developing countries that peg their currencies to the dollar were forced to ease their monetary policies after reductions in U.S. interest rates, leading to economic overheating, excess demand for oil and other commodities, and rising commodity prices. We assess that hypothesis using the Federal Reserve staff’s forward-looking, multi- country, dynamic general equilibrium model, SIGMA. We find that even if many developing country currencies were pegged to the dollar, an easing of U.S. monetary policy would lead to only a transitory runup in oil prices. Instead, strong economic growth in many developing economies, as well as shortfalls in oil production, better explain the sustained runup in oil prices observed until earlier this year. Moreover, a closer look at exchange rates and interest rates around the world suggests that the monetary policies of many developing economies, including in East Asia, are less closely influenced by U.S. policies than is frequently assumed.
- Topic:
- Energy Policy, Oil, Commodities, and Interest Rates
- Political Geography:
- United States and North America
67. Learning the Right Lessons from Iraq
- Author:
- Harvey Sapolsky, Christopher Preble, and Benjamin Friedman
- Publication Date:
- 02-2008
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- Foreign policy experts and policy analysts are misreading the lessons of Iraq. The emerging conventional wisdom holds that success could have been achieved in Iraq with more troops, more cooperation among U.S. government agencies, and better counterinsurgency doctrine. To analysts who share these views, Iraq is not an example of what not to do but of how not to do it. Their policy proposals aim to reform the national security bureaucracy so that we will get it right the next time.
- Topic:
- International Relations and Oil
- Political Geography:
- United States, Iraq, and Middle East
68. The US Housing Bust and Soaring Oil Prices: What next for the world economy?
- Author:
- Daniel Gros and Cecilia Frale
- Publication Date:
- 06-2008
- Content Type:
- Working Paper
- Institution:
- Centre for European Policy Studies
- Abstract:
- This paper estimates the impact of the ongoing housing bust and oil price boom on the US and European economies. It finds that large house price movements (changes in construction investment) are useful to predict exceptionally bad and good times for the US economy, but not for most large European countries. In Europe housing market developments have led to extreme values of GDP, mainly in the UK, Spain and some Nordic countries.
- Topic:
- Economics and Oil
- Political Geography:
- United States and Europe
69. Tipping Point
- Author:
- John H. Makin
- Publication Date:
- 08-2008
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- The annual report of the Bank of International Settlements (BIS)—the central bankers' central bank—which appeared in late June, was somewhat schizophrenic. On the one hand, the BIS called for world interest rates to rise in order to deal with a “clear and present threat” from global inflation while, on the other hand, it warned that the global economy may be close to a “tipping point” into a “slowdown severe enough to transform the current period of rising inflation into a period of falling prices.” The simultaneous rise in oil prices and the fall in yields in government securities occurring as the BIS released this ambivalent statement captured well the tensions inherent in the stagflationary crosscurrents facing the global economy. Against this ominous background, the release of the BIS report coincided with the onset of a global bear market in equities.
- Topic:
- Economics, Markets, Oil, and Political Economy
- Political Geography:
- United States
70. Iran: Breaking the Nuclear Deadlock
- Author:
- Richard Dalton(ed.)
- Publication Date:
- 12-2008
- Content Type:
- Working Paper
- Institution:
- Chatham House
- Abstract:
- The dispute over Iran's nuclear programme is deadlocked. Five years of negotiations, proposals, UN resolutions and sanctions have failed to achieve a breakthrough. As diplomacy struggles and Iran continues to advance its nuclear capabilities, the issue becomes ever more grave and pressing.
- Topic:
- International Relations, Foreign Policy, Oil, Weapons of Mass Destruction, and International Security
- Political Geography:
- United States, Europe, Iran, and Middle East