Econ Impact Helper –US K/ Global

Fossil Fuel Impacts

The State of the Union showcased President Obama’s leadership and the need for moderate senators of both parties to cooperate to adopt comprehensive clean-energy and global warming legislation that would create jobs, increase energy security, cut pollution, and increase economic competitiveness.

Last One Standing – The path of competition for remaining resources. If the leadership of the US continues with current policies, the next decades will be filled with war, economic crises, and environmental catastrophe. Resource depletion and population pressure are about to catch up with us, and no one is prepared. The political elites, especially in the US, are incapable of dealing with the situation. Their preferred “solution” is simply to commandeer other nations’ resources, using military force. The worst-case scenario would be the general destruction of human civilization and most of the ecological life-support system of the planet. That is, of course, a breathtakingly alarming prospect. As such, we might prefer not to contemplate it – except for the fact that considerable evidence attests to its likelihood. The notion that resource scarcity often leads to increased competition is certainly well founded. This is general true among non-human animals, among which competition for diminishing resources typically leads to aggressive behaviour.  Iraq is actually the nexus of several different kinds of conflict – between consuming nations (e.g., France and the US); between western industrial nations and “terrorist” groups; and – most obviously – between a powerful consuming nation and a weaker, troublesome, producing nation.  Politicians may find it easier to persuade their constituents to fight a common enemy than to conserve and share. War is always grim, but as resources become more scarce and valuable, as societies become more centralized and therefore more vulnerable, and as weaponry becomes more sophisticated and widely dispersed, warfare could become even more destructive that the case during the past century.  By far the greatest concern for the future of warfare must be the proliferation of nuclear weapons. The US is conducting research into new types of nuclear weapons—bunker busters, small earth-penetrators, etc. Recent US administrations have enunciated a policy of nuclear first-strike.   Chemical and biological weapons are of secondary concern, although new genetic engineering techniques may enable the creation of highly infectious and antibiotic-resistant “supergerms” cable of singling out specific ethnic groups

Fossil Fuel Impacts- Helper

US economy on the brink to collapse from energy dependence

Duncan 7 [Garry Senior Executive for Accenture Finance and Performance Management, Business Times, November 12, http://business.timesonline.co.uk/tol/business/columnists/article2852863.ece] KLS

We have all been pretty lucky so far. Over the past four years oil prices have soared ever higher, yet the world economy has just kept on motoring – literally and metaphorically. While the twin oil shocks of the Seventies brought global growth to a juddering halt and plunged the West into prolonged and painful recessions, things have been very different this time around – so far, at least. As oil prices have risen from a quite-hard-to-recall $30 a barrel as recently as the end of 2003 to $50 in 2004, $60 in 2005, $70 in 2006 and, in recent weeks, more than $90 a barrel, the global economy has cruised on almost regardless. The past few years have, in fact, marked the strongest sustained worldwide economic boom since the Seventies. Yet with analysts now sounding warnings that the cost of crude will almost inevitably breach $100 a barrel within days, the question is: can the world’s luck last? Are we, finally, reaching a tipping point where the relentless bad news from the black stuff will at last exact a real economic toll? Worryingly, it seems likely that we are, indeed, approaching just such a threshold. To understand why, we need to consider the key factors that have insulated the West’s oil-consuming nations from the impact of surging energy costs and whether we can continue to rely on these to shield our economies as crude prices climb into triple digits. The West can at least continue to draw considerable comfort from the knowledge that, essential to our economies though oil may be, our dependence on it has vastly diminished since the Seventies. What economists call the “oil intensity” of GDP – the amount of oil needed for each pound of national output we produce – has dropped to just 15 per cent of its level in 1970. Even gas-guzzling America needs only 13 per cent of the oil that it required in the Seventies for each dollar of output. And Europe’s “oil intensity” is a tenth of what it was back then. While this reduced reliance on crude is reassuring, two further vital factors that have helped the developed world to escape any serious economic fallout from dearer energy now fail to offer the protection that they have up to this point. First, the dynamic behind spiralling oil prices has shifted. Over the past few years, the driving force propelling the cost of crude to ever-greater highs has been the potent demand for energy created by a very robust global economy. Now, however, oil prices are continuing to climb even as prospects for world growth next year are deteriorating sharply. It is true that demand for oil continues to be reinforced by China’s burgeoning appetite for energy, with rising Chinese consumption taking up three quarters or more of any extra crude production. Yet it still seems apparent that, on top of this, significant concerns over supply and a very substantial speculative element are giving added impetus to prices. ING, the investment bank, notes that speculative long positions in the crude market, betting on oil reaching prices well in excess of $100, and as high as $200, are at extreme levels not seen for years. More serious than this changed dynamic behind oil’s rise, however, is that the surge in crude comes at a time when the US economy is dangerously vulnerable. The world economy’s resilience to oil’s rapid rise during this decade has owed a great deal to the ability of a robust American expansion to absorb shocks of all sorts. This time, though, this first line of defence for global growth looks very weak indeed. The US economy is already reeling from the impact of a brutal housing slump and the severe credit squeeze sparked by the resulting shake out in the sub-prime mortgage market. Now, America faces a further “double whammy” as the record cost of crude undermines growth while at the same time triggering a leap in US inflation that will seriously impede the Federal Reserve’s ability to respond with lower interest rates. As Capital Economics suggests in a timely report today, the malign combination of badly faltering growth with rising inflationary pressures now confronting the United States raises the spectre of another Seventies economic terror – stagflation. The risks to US growth are all too clear. The knock-on effects of oil prices could see the cost of gasoline for US motorists rise by as much as 50 per cent over the next couple of months. On top of that, the average American’s home heating bill is set to double this winter. Combined with the continued toll from the housing market’s downturn and the credit squeeze, it is far from implausible that these blows will see the US economy shrink in the final quarter of this year. Yet at the same time, the Fed is likely to have to grapple with a probable jump in inflation. Capital Economics forecasts that the effects of sharply increased energy costs could push headline US inflation to nearly 5 per cent, levels not seen for 16 years, by December. With the plunge in the dollar also stoking inflationary pressures in America, the almost inevitable consequence of this for the Fed will be that it will take longer to deliver the cuts in interest rates that will ultimately be necessary to shore up economic activity. In turn, that points to a more painful outcome, not just for America, but for the rest of the world.

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