22._Fifty-Fifty_Revised_SP10

22._Fifty-Fifty_Revised_SP10 - 22.FiftyFifty...

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1 22. Fifty-Fifty The New Deal in Oil
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2 Major Themes Role of economic rents critical US foreign policy encouraged more oil  players – cold war focus Increase competition Counter image of big oil companies More competition brought ever higher  royalties for producers 
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3 Economic Rent David Ricardo developed concept of  economic rent . Rent is amount of profit above and beyond that  amount necessary to keep oil in production. A return from nature’s bounty The question is, who should receive  this rent? The oil company (risk, capital, contracts, value  creation where there was none etc) Consuming  country (tax) Host country (sovereignty, power, status,  nationalism, influence, significance etc) John Maynard Keynes:  “ Practical men, who believe themselves to be  quite exempt from any intellectual influences are usually the slaves of  some defunct economist .”
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4 Post-War Hunger Countries harboring American oil companies  or subsidiaries wanted more from their foreign  visitors. Countries, particularly Saudi Arabia, were  entrenched in financial crises  The presence of foreign oil investments  represented colonialism Nationalists felt as if they were being robbed  of wealth due to them from the land. Money was not the only thing at stake. So  was power.
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5 Venezuela Tyrant dictator Gomez died in 1935.  Gomez had  focused the country’s entire economy around oil. 90% of export value derived from oil.
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22._Fifty-Fifty_Revised_SP10 - 22.FiftyFifty...

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