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Friday, May 8, 2009

SEatWtC Part 13: Global Effects of Energy Policies

Our Planet
Image courtesy of the Wikimedia Commons
Our Planet

Global Effects of Energy Policies

The interplay between the energy policies of these four major states is already a major driver of world politics. The United States, while importing much of its crude oil and other energy sources, is actually sitting on huge energy reserves. It almost seems as if the U.S. is playing the waiting game to let other nations deplete their energy reserves first so that in the long run, the U.S. will be in control of whatever energy is left. That may not actually be the case, but it almost seems that way. China and India, with nearly half the world’s population between them, are growing their middle classes as phenomenal rates, meaning their energy needs are growing at phenomenal rates too. Given that producing more oil than current rates is difficult at best, the growth of China and India will lead to ever increasing fuel prices unless other sources of energy are found or developed. This is not necessarily a bad thing, in that the concern over global warming would be more quickly abated with higher fuel costs. However, higher fuel costs will have serious economic impacts on businesses and states around the globe.

Currently, relatively low fuel costs promote shipping of products around the globe. Fruit grown in South America can be shipped to Europe for sale and clothing in China is shipped to the U.S. every day. However, if fuel prices are going to rise, the prospect of shipping internationally will become much more expensive and will seriously change the business models of several firms that have globalized.

Other potential effects have to do with the stability of energy supplies that are exported/imported around the world. Political unrest in parts of the world means that energy prices increase with increased political volatility. Therefore there is a direct economic cost to businesses worldwide when political unrest and terrorism exist. It would seem that there would be a viable business case for businesses to team together and pass legislation in states around the world that promote peace. More on this later when we discuss the future balance of power in the world.

Tune in Monday for Part 14 of SEatWtC!

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