Some worked others did not but none notably involved

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Unformatted text preview: the United States has been effectively printing money to finance its deficit, and arguably its military ventures, with little international recourse on the value of the dollar.52For the Saudis, petrodollars reinvestedinto USgovernmentbonds allowedthem to avoid currency risks of conversion and gave them access to secure investment in the United States. The same economic benefits were to be realised by other Arab states in the Gulf as well, as they also invested heavily into the United States. 174 Oil DDW 2012 1 AT: High Prices Bad – Shocks 175 Last printed 9/4/2009 7:00:00 PM Oil DDW 2012 1 Diversification, transparent markets and institutions block chaos from oil shocks Jaffe, Wallace S. Wilson Fellow for Energy Studies at the James A. Baker III Institute for Public Policy at Rice University , 08 Amy Myers Jaffe, Wallace S. Wilson Fellow for Energy Studies at the James A. Baker III Institute for Public Policy at Rice University, 4/5-08, [“The Impending Oil Shock: An Exchange,” Survival: Global Politics and Strategy, 50:4, 61-82, http://www.tandfonline.com/doi/abs/10.1080/00396330802329048] E. Liu While the costs of the oil shocks of the 1970s have been widely debated and varied country to country, there is no doubt that the impact was severe, causing years of economic dislocation and stagnation. In the early 1980s, the costs of the oil shocks were estimated at $1.2 trillion in lost economic growth for the seven largest industrial countries.7 But the lesson of the 1970s oil crises was not that oil-hungry industrial nations went to war. The lesson was that markets can and do adjust without recourse to state violence. In response to the 1970s oil-price shocks, the industrialised oil-importing countries undertook various domestic, bilateral and multilateral efforts. Some worked, others did not; but none, notably, involved the militarisation of energy supplies. The energy efficiency and diversification Elhefnawy praises as better positioning other countries than the United States came about through key policy responses to the 1970s. It was non-military and highly replicable. The stimulus was an oil shortage, so it is hard to see how another shortage that would come with some warning and be known to be permanent would not stimulate even greater and more effective policy and market responses. Today’s investors in alternative energy must fear the possibility that cheap oil will re-emerge. Investors in Elhefnawy’s world could invest far more capital without any fear that fossil fuels would fight back. Today, we are better equipped to deal with an oil shock than in the 1970s. We have functioning, transparent global oil-futures exchanges that allow for orderly responses to sudden changes in price. We also have a much wider range of emerging technologies for energy efficiency and alternative fuel. And, most importantly, we have the experience of managing major oil shocks through multilateral institutions for diplomacy and emergency coordination that did not exist in the 1970s. We even have existing international systems for negotiating fair-m...
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This note was uploaded on 01/30/2013 for the course ECON 101 taught by Professor Burke during the Spring '13 term at Southern Arkansas University.

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