The Energy System 3
Oil prices and Geopolitics
January 16, 2015
Sustainable Energy Policy
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Today’s Agenda
• Price of oil
• Oil and economic
structure
• Geopolitics
• Oil and development
• Meet your group
January 16, 2015
Sustainable Energy Policy
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Clicker question
• According to the logic of Thomas Friedman’s
the First Law of Petropolitics, the sharp
decline in oil prices should have what effect
on the behaviour of Russia’s President Putin?
A. Allow more freedom of expression
B. Repress internal dissidents
C. Reduce press freedom
D. Additional territorial expansion
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Sustainable Energy Policy
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Today’s Theme
The geographic location of
valuable energy resources,
and the price of oil, have
profound economic and
political impacts
4
Analytical Framework: Forces at work
in natural resources policy
governance
policies
environment
markets
actions
5
Environment-Market connections
through price of oil
environment
markets
6
Environment-Market connections
through price of oil
environment
markets
7
Price of oil
West Texas Intermediate
A year ago today: $93/barrel
Right now: $46/barrel
http://www.bloomberg.com/energy/
January 16, 2015
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Price of Oil 1947-2011
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1997-2015
http://www.vox.com/2014/12/16/7401705/oil-prices-falling
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What determines the price of oil?
http://www.eia.gov/finance/markets/
• Speculation
• Supply-demand balance
–
–
–
–
Rate of economic growth
War
Geopolitical tension
Costs of production
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Innovation and geopolitics
January 16, 2015
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Clicker question
Overall, what is the impact of the sharp decline
in the price of oil on Canada?
A. Positive
B. Negative
C. It depends on where you live
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What does the price of oil influence?
Currencies – and subsequent
impact on other industries
Demand for (use of) oil economic impacts;
Environmental impacts
Innovation to reduce costs,
increase supply
Competitiveness of
alternatives
Geopolitics
January 16, 2015
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Today’s Agenda
• Price of oil
• Oil and economic
structure
• Geopolitics
• Oil and development
• Meet your group
January 16, 2015
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Oil and Economic Structure
“Dutch
disease”
January 16, 2015
• Early 60s discovery of North
Sea gas
• Currency rises
• decreasing competitiveness
of manufacturing exports
• Increasing imports
• Deindustrialization
Sustainable Energy Policy
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Does Canada Have Dutch Disease?
•
“It’s by definition the Dutch disease:
the Canadian dollar is being held
artificially high, which is fine if you’re
going to Walt Disney World; not so
good if you want to sell your
manufactured product because the
American client, most of the time,
can no longer afford to buy it. We’ve
hollowed out the manufacturing
sector. In six years since the
Conservatives have arrived we’ve lost
500,000 good-paying, manufacturing
jobs; more than half of them because
we’re not internalizing the
environmental costs.”
NDP leader Thomas Mulcair on CBC’s The House
January 16, 2015
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Andrew Leach
data from
Bloomberg
January 16, 2015
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Does Canada Have Dutch Disease?
What research says:
• Value of Canadian dollar is linked to price of oil, but it
is one factor among others (but an important one)
• Canadian manufacturing is in decline, but the rising
dollar is only one of a number of significant factors
driving that
• Discourse had become deeply political – Canada has
a touch of Dutch Disease
•
•
http://greenpolicyprof.org/wordpress/?p=825
http://www.ipolitics.ca/2012/09/07/mark-carney-dutch-disease-is-thewrong-diagnosis/
January 16, 2015
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How quickly things change
January 16, 2015
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How quickly things change
January 16, 2015
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Energy and Geopolitics in Analytical
Framework
governance
Quantity/quality at
physical location
environment
markets
Relative value at a
point in time
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Today’s Agenda
• Price of oil
• Oil and economic
structure
• Geopolitics
• Oil and development
• Meet your group
January 16, 2015
Sustainable Energy Policy
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Today’s Agenda
• Optimists vs pessimists
• Peak Oil
– Concept
– Social movement
• Price of oil
• Geopolitics
January 16, 2015
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Where is the world’s energy?
US Energy Information Website
January 16, 2015
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Clicker question
• According to the First Law of Petropolitics, if
the price of oil goes down in a oil rich petrolist
state.
a) foreign investors will leave
b) society will become more transparent
c) inflammatory remarks will be flung about by
heads of state
d) people will switch to riding bikes and taking
public transport
January 16, 2015
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Hot, Flat and Crowded
Thomas Friedman Chapter 4 on Petropolitics
• US oil addiction is
1. strengthening the most intolerant, antimodern, anti-Western, anti-women’s rights
and anti-pluralist strain of Islam
2. Helping to finance a reversal of democratic
trends in Russia, Latin America, and elsewhere
(First Law)
3. Fueling an ugly global scramble that brings out
the worst in nations
4. Fueling both sides in the war on terror
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Necessary Revision:
• “Tight oil” revolution – US to become self sufficient in
oil by 2020
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First Law of Petropolitics
Thomas Friedman
• Price of oil and the pace of freedom always
move in opposite directions in oil-rich petrolist
states
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petrolist states:
- economically dependent on oil production
- weak state institutions or outright authoritarian governments
Petrolist States
Oil rich non-Petrolist
Azerbaijan, Angola, Chad,
Egypt, Equatorial Guinea, Iran,
Kazakhstan, Nigeria, Russia,
Saudi Arabia, Sudan,
Uzbekistan, Venezuela
January 16, 2015
Britain
Norway
United States
(Canada?)
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January 16, 2015
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Clicker question
• Is Canada increasingly
acting like a
“petrostate”?
A. Yes
B. No
C. Unsure
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Today’s Agenda
• Price of oil
• Oil and economic
structure
• Geopolitics
• Oil and development
• Meet your group
January 16, 2015
http://georgetownsecuritystudiesreview.org/2013/12/10/beyond-oilthe-new-energy-geopolitics-of-the-middle-east/
Sustainable Energy Policy
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Oil and Development:
Resource Curse
Scale
Source
Stability
Secrecy
January 16, 2015
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Michael Ross, “Does Oil Hinder Democracy?”
World Politics April 2001
• Taxation effect: relieve measures that provoke
demands for accountability
• Spending effect: patronage spending undermines
democratization
• Group formation effect: prevent independent groups
from forming
• Repression effect: allows excessive spending on policy
• Modernization effect: oil wealth diminishes pressure
for modernization
January 16, 2015
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Oil, Islam, and Women
Michael Ross, APSR, February 2008
• gender equality lowest in Middle East – Islamic
traditions ?
• oil, not Islam, is at fault
• oil production reduces the number of women in
the labor force, reducing their political influence
• oil states are left with atypically strong patriarchal
norms and policies
• Based on data analysis, comparison of oil-rich
Algeria to oil-poor Morocco, Tunisia
January 16. 2014
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Clicker question
• The tendency for sudden resource wealth to
lead to deindustrialization and economic
malaise is known as
A. Elasticity of supply
B. Negative externality
C. First law of petropolitics
D. Dutch Disease
E. Addition to oil
January 16, 2015
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Clicker question
• The U.S. is becoming more dependent on
foreign oil
A. True
B. False
January 16, 2015
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Themes from previous classes
Fossil fuels dominate world energy use (82%)
Increased population and per capita income create persistent
pressure for increased energy use
Canada is a significant producer and exporter of energy; and its
economy is energy and pollution intensive.
The sustainability of the energy system is threatened less by
supply shortages and more by troubling environmental effects
January 8, 2015
Sustainable Energy Policy
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Today’s Theme
The geographic location of
valuable energy resources,
and the price of oil, have
profound economic and
political impacts
40
Tuesday
• Governance!
• Monica Gattinger, “A National Energy Strategy for
Canada: Golden Age or Golden Cage of Energy
Federalism?” Forthcoming Canada: The State of
the Federation 2012-13
• Hoberg energy policy course brief on Aboriginal
law (posted on connect by Monday)
January 16, 2015
Sustainable Energy Policy
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Meet your group
• Exchange contact info
• Who is your group and how would you define
their interest in your case?
• Set next meeting time
January 16, 2015
Sustainable Energy Policy
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