Sbsp affirmative- arl lab- ndi 2011
***Economy*** Oil Dependence kills the Economy
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- Oil dependence damages economy- inevitable squo energy drop breaks the financial system
***Economy***Oil Dependence kills the EconomyOil dependence hampers economy – kills growthRampell, Rich, and Streitfeld ’11 (Catherine, Mokoto, and David. Staff Reporters for the New York Times. “Rising Oil Prices Pose New Threat to U.S. Economy” http://www.nytimes.com/2011/02/25/business/economy/25econ.html?_r=1&pagewanted=print. February 24, 2011) The American economy just can’t catch a break. Last year, as things started looking up, the European debt crisis flustered the fragile recovery. Now, under similar economic circumstances, comes the turmoil in the Middle East. Energy prices have surged in recent days, as a result of the political violence in Libya that has disrupted oil production there. Prices are also climbing because of fears the unrest may continue to spread to other oil-producing countries. If the recent rise in oil prices sticks, it will most likely slow a growth rate that is already too sluggish to produce many jobs in this country. Some economists are predicting that oil prices, just above $97 a barrel on Thursday, could be sustained well above $100 a barrel, a benchmark. Even if energy costs don’t rise higher, lingering uncertainty over the stability of the Middle East could drag down growth, not just in the United States but around the world. “We’ve gone beyond responding to the sort of brutal Technicolor of the crisis in Libya,” said Daniel H. Yergin, the oil historian and chairman of IHS Cambridge Energy Research Associates. “There’s also a strong element of fear of what’s next, and what’s next after next.” Before the outbreak of violence in Libya, the Federal Reserve had raised its forecast for United States growth in 2011, and a stronger stock market had helped consumers be more confident about the future and more willing to spend. But other sources of economic uncertainty besides oil prices have come into sharper focus in recent days. After a few false starts, housing prices have slid further. New-home sales dropped sharply in January, as did sales of big-ticket items like appliances, the government reported Thursday. Though the initial panic from last year has faded, Europe’s deep debt problems remain, creating another wild card for the global economy. Protests turned violent in Greece this week in response to new austerity measures. Budget and debt problems at all levels of American government also threaten to crimp the domestic recovery. Struggling state and local governments may dismiss more workers this year as many face their deepest shortfalls since the economic downturn began, and a Congressional stalemate over the country’s budget could even lead to a federal government shutdown. “The irony is that we just barely got ourselves up and off the ground from the devastating financial crisis,” said Bernard Baumohl, chief global economist at the Economic Outlook Group, who had been optimistic about the country’s prospects. “The recovery itself is less than two years in, and we haven’t yet seen jobs make a decent comeback. Now we’re being hit with this new, very ominous event, so the timing couldn’t be worse.” Most economists are not yet talking about the United States dipping back into recession, and it is too soon to tell how far the pro-democracy protests that have roiled Egypt, Bahrain and Libya will spread. For now, most analysts are not predicting that Iran and Saudi Arabia, repressive governments that also happen to be two of the world’s biggest oil producers, will catch the revolutionary fever. “But revolutions are notoriously difficult to forecast,” said Chris Lafakas, an economist at Moody’s Analytics who focuses on energy. Disruptions of oil supplies in Saudi Arabia and Iran in particular, he said, “would be catastrophic for prices. Saudi Arabia alone could cause maybe a 20 to 25 percent increase in oil prices overnight.” In the last week, oil prices have risen more than 10 percent and even breached $100 a barrel. A sustained $10 increase in oil prices would shave about two-tenths of a percentage point off economic growth, according to Dean Maki, chief United States economist at Barclays Capital. The Federal Reserve had forecast last week that the United States economy would grow by 3.4 to 3.9 percent in 2011, up from 2.9 percent last year. Higher oil prices restrain growth because they translate to higher fuel prices for consumers and businesses. Mr. Lafakas estimates that oil prices are on track to average $90 a barrel in 2011, from $80 in 2010, an increase that would offset nearly a quarter of the $120 billion payroll tax cut that Congress had intended to stimulate the economy this year. Rising gasoline prices have already led Jayme Webb, an office manager at a recycling center in Sioux City, Iowa, and her husband, Ken, who works at Wal-Mart, to cut back on spending. In the last month, they have canceled their satellite television subscription and their Internet service. They have also stopped driving from their home in rural Moville to Sioux City on weekends to see Ms. Webb’s parents. Along with making their commutes to work more expensive, rising oil prices have driven up the cost of food for animals and people. So the couple have stopped buying feed for their dozen sheep and goats and six chickens and instead asked neighboring farmers to let them use scraps from their corn fields. “It’s a struggle,” said Ms. Webb, 49. “We have to watch every little penny.” A cutback in consumer spending reverberates through the economy by crimping businesses, making it less likely that employers will commit to the additional hiring needed to lower the 9 percent unemployment rate. “Revenue is down, costs are up, and you can’t make any money,” said R. Jerol Kivett, the owner of Kivett’s Inc., a company that manufactures pews and other church furniture in Clinton, N.C. “You’re just trying to meet payroll and keep people working, hoping the economy will turn. But it just seems like setback after setback after setback.” And the money that consumers and businesses spend on oil often does not stay within the American economy. Nor do the expanded coffers in oil-producing countries raise demand for American exports, because they often bank it as reserves. “The countries that are getting this bonus basically get an enormous benefit,” said Raghuram G. Rajan, an economics professor at the University of Chicago. “But if they can’t spend it quickly, it doesn’t add to aggregate demand.” The rise in oil prices could also create a vicious cycle, as higher energy costs propel already rising food prices, which in turn can lead to more political unrest and more global uncertainty. Even without the Middle East, the domestic economy has a number of weaknesses that have proved hard to overcome. The recession was provoked by housing and worsened by housing, and housing is likely to remain frail in parts of the country until the end of the decade. After a couple of brief growth spurts, home prices have started declining again in earnest. This week, the Yale economist Robert Shiller speculated about another drop as large as 25 percent. Anything close to that would push millions more households to the point where they owe more on their houses than the houses are worth, generating a lot of sour moods — which can depress consumer spending — more foreclosures and potential job losses. Even absent such a decline, lenders remain cautious, punishing those who never indulged during the boom. Maria Schneider and Roger Westerman have plenty of equity in their Brooklyn home, and a 17-year record of paying on time. Last fall, the couple tried to capitalize on historically low mortgage rates and refinance. They estimated they would save $360 a month. But their lender said they were a bad credit risk. The couple, both 48, are self-employed. “We could be sending all three of our kids to camp this summer instead of just one,” Mrs. Schneider said. There are some signs that the economy could weather this latest round of buffeting. Revenue at many companies is back to prerecession levels, said Scott Bohannon, a general manager at the Corporate Executive Board, a research and advisory firm. That suggests companies may start adding equipment, factories and, eventually, workers. “Of course, if a war breaks out in a significant way or something like that happens,” he said, “then I would give you a different answer. Then you’re talking about huge shocks to the system.” Oil dependency weakens US economy Reynolds 10 (Lewis, energy consultant and author of “America the Prisoner: The Implications of Foreign Oil Addiction and a Realistic Plan to End It”, “Seven Dangerous Side Effects of the U.S. Dependency on Foreign Oil”, 8-8-10, http://peakoil.com/production/seven-dangerous-side-effects-of-the-u-s-dependency-on-foreign-oil/) OPIt causes ongoing damage to the American economy (and weakens our power in the world). Oil dependence is slowly eating away at the true source of American power (our economy) as each year the U.S. exports more and more of its wealth in exchange for oil. U.S. trade deficits have created a situation that forces reliance on overseas capital to support the economy. Much of that capital comes from the petroleum exporting countries that, in turn, get it from oil consumption by American businesses and consumers. Today the American economy is based less on producing either goods or services and more on consumption. This drives what is known as the “petrodollar” system. It begins with the purchase of oil by the U.S. consumer, which sends massive dollar-denominated cash flows to oil exporting countries. In addition, U.S. consumers buy imported goods resulting in flows of dollars to those countries. In turn, the manufacturing nations must purchase oil, which they accomplish with the dollars they obtained from selling products in the U.S. market. At this point, the oil exporters are awash in dollars, which they must either spend or invest. Oil dependence damages economy- inevitable squo energy drop breaks the financial systemHeinberg ’05 (Richard Heinberg, American journalist and educator who has written extensively on ecological issues, including oil depletion. He is the author of at least ten books. “The Party’s Over - Oil, War, and the fate of Industrial societies”. June 1, 2005) AP The lower-energy economy of the future will be characterized by lowered productivity. There could be a good side to this in that more human labor will be required in order to do the same amount of work, with human muscle-power partially replacing the power of fossil fuels. Theoretically, this could translate into near-zero unemployment rates. However, the financial system may not respond rationally. With less physical economic activity occurring, businesses would be motivated to take out fewer loans. This might predictably trigger a financial crisis, which would in turn likely undermine any attempts at a smooth economic adjustment. As Hubbert pointed out, the linkage between the money system (the financial economy) and the human matter-energy system (the physical economy) is imperfect. It is possible for a crisis to occur in the financial system even when energy, raw materials, and labor remain abundant, as happened in the 1930s. But is it also possible for the financial system to remain healthy through an energy-led decline in the physical economy? That, unfortunately, is highly unlikely, due to the dependence of the former on continued borrowing to finance activity in the latter. Rather, it is highly likely that the net-energy decline will sooner or later trigger a financial crisis through a reduction in demand for goods and services, and hence for money (via loans) with which to pay for the machinery to produce those goods and services. Thus even if human labor is sufficiently abundant to make up for some of the reduction of work performed by fuel-burning machines, the financial system may not be able to adapt quickly enough to provide employment for potential laborers. Therefore extreme dislocations in both the financial system and the human matter-energy economy are likely during the energy transition. The exact form these dislocations will take is difficult to foresee. Efforts could be made to artificially pump up the financial system through government borrowing — perhaps to finance military adventures. Such massive, inflationary borrowing might flood markets with money that would be losing its value so quickly as to become nearly worthless. On the other hand, if inflationary efforts arc not undertaken quickly or strenuously enough when needed, then the flagging rate of loans might cause money to disappear from the economy; in that case, catastrophic deflation would result. As was true in the Great Depression, what little money was available would have high purchasing power, but there would simply be too little of it to go around. Unemployment, resource and product shortages, bankruptcies, bank failures, and mortgage foreclosures would proliferate. It is entirely possible that, over a period of decades, both inflationary and deflationary episodes may occur; however, due to the lack of a stable linkage between money and energy, periods of financial stability will likely be rare and brief. Continued population growth, even at reduced rates, will put added strain on support systems and exacerbate the existing inherent requirement for economic growth. Who will feel the pain? Most likely, the poor will feel it first and hardest. This will probably be true both nationally and internationally, as rich nations will likely seek to obtain energy resources from the poorer nations that have them by financial chicanery or outright military seizure. Eventually, however, everyone will be affected. Some comforts, even luxuries, will probably continue to be available in most countries; but regardless of whether the financial environment is inflationary or deflationary, nearly everything that is genuinely useful will become relatively more expensive because the energy employed in its extraction or production will have grown more rare and valuable. Oil dependency causes dollar decline- collapses economy Reynolds 10 (Lewis, energy consultant and author of “America the Prisoner: The Implications of Foreign Oil Addiction and a Realistic Plan to End It”, “Seven Dangerous Side Effects of the U.S. Dependency on Foreign Oil”, 8-8-10, http://peakoil.com/production/seven-dangerous-side-effects-of-the-u-s-dependency-on-foreign-oil/) OPIt’s leading to the decline of the dollar. Although, in previous decades, the Federal Reserve has viewed energy prices as a component of inflation and reacted to increasing oil prices using anti-inflationary measures, the modern Federal Reserve has feared that increasing oil prices are more likely to precipitate a recession. The Fed has responded to price shocks by increasing the money supply in hopes of stimulating aggregate demand. The long-term trend of the dollar is downward, which places upward pressure on oil prices. The Fed has responded to increasing oil prices by printing more money. Increasing the money supply makes a given dollar worth less, which means that more dollars are needed to buy a given quantity of oil. The falling dollar and the increasing price of oil have elicited policies from the Fed that cause the dollar to fall still further and the price of oil to increase even more, accelerating and intensifying the effects. The increasingly unstable fiscal situation in the U.S. is not only a concern for Americans, it is also alarming to foreign holders of dollar-denominated assets. Oil exporting nations continue to accumulate dollars, but they also recognize that the lack of fiscal sanity in Washington will eventually erode the dollar’s value and, with it, their investment portfolios. Our fate is in their hands. If they begin selling oil in other currencies or divest their dollar-denominated assets, the dollar will go into free-fall, and the fallout in the U.S. economy could be far-reaching. It is vital to U.S. economic security to ensure that a breakdown in the petrodollar system, which may well be inevitable, does not precipitate an absolute economic collapse. Continued oil dependence will lead to another Great Depression Schoen 4 (John W., senior producer at MSNBC, “How long will the world's oil last?, 6-25-04, http://www.msnbc.msn.com/id/5945678/ns/business-oil_and_energy/t/how-long-will-worlds-oil-last/) OPNo one is suggesting that the world oil industry is close to pumping its last drop. But the question now being raised is whether new reserves can be discovered fast enough to both replace depleted oil fields and keep up with growing demand. Some argue that the world is rapdily approaching the point where the pace of oil depletion overtakes the growth in new supplies. “The worry is whether there is something worse than the Great Depression of the 1930s waiting for us — particularly that the United States gets heavily hurt because we burn a quarter of the world’s oil,” said Princeton University geologist Kenneth Deffeyes. Oil shocks would collapse US economy-empirically proven Hall et al 8 (Charles A.S., ESF Foundation Distinguished Professor at State University of New York in the College of Environmental Science & Forestry, “Peak Oil, EROI, Investments and the Economy in an Uncertain Future”, http://www.springerlink.com/content/q31418v301002426/) OPWhat would be the impacts of a large increase in the energy and dollar cost of getting our petroleum, or of any restriction in its availability? While it is extremely difficult to make any hard predictions, we do have the record of the impacts of the large oil price increases of the 1970s as a possible guide. These “oil shocks” had very serious impacts on our economy which we have examined empirically in past publications (e.g. Hall et al. 1986). Many economists then and now did not think that even large increases in the price of energy would affect the economy dramatically because energy costs were but three to six percent of GDP. But by 1980, following the two “oil price shocks” of the 1970s, energy costs had increased dramatically until they were 14 percent of GDP. Actual shortages would have even greater impacts, if for example sufficient petroleum to run our industries or busi- nesses were not available at any price. Other impacts included, and would include, an enhancement of our trade imbalances as more income is diverted overseas, adding to the foreign holdings of our debt and a decrease in discretionary disposable in- come as more money is diverted to access energy, whether via higher prices, more petroleum exploration or low EROI alternative fuels. This in turn would affect those sectors of the economy that are not essential. Consumer discretionary spending would probably fall dramatically, greatly effecting non-essential businesses such as tourism. 57% of US oil is foreign- recession empirically follows US Environmental Protection Agency 11 (“Reduced Oil Dependence Costs”, http://www.fueleconomy.gov/feg/oildep.shtml) OPToday, over half of the oil we use is imported (57%), and our dependence will increase as we use up domestic resources. Most of the world's oil reserves are concentrated in the Middle East, and about two-thirds are controlled by OPEC members. Oil price shocks and price manipulation by OPEC have cost our economy dearly—about $1.9 trillion from 2004 to 2008—and each major shock was followed by a recession. US dependence on oil endangers its security and economy-gulf spill proves Times of India 10 (“Dependence on foreign oil endangers US' security, economy: Obama”, 5-27-10, http://articles.timesofindia.indiatimes.com/2010-05-27/us/28297806_1_clean-energy-economy-oil-companies-barack-obama) OPWASHINGTON: The United States' dependence on foreign oil endangers its security and economy, President, Barack Obama has said. "We all know the price we pay as a country as a result of how we produce and use - and, yes, waste - energy today. We have been talking about it for decades - since the gas shortages of the 1970s. Our dependence on foreign oil endangers our security and our economy," Obama said in his speech on the economy in California. He said that climate change poses a threat to the US way of life. "In fact, we are already beginning to see its profound and costly impact. And the spill in the Gulf, which is just heartbreaking, only underscores the necessity of seeking alternative fuel sources. Directory: files files -> Answer True False 2 points Question 2 files -> Integer programming and game theory files -> 4 Integer Programming files -> Bpa vehicle Window Repair Scenario #1 task: Procure vehicle window relacement. Objective files -> Pop Warner History files -> North Carolina Inclusion Initiative Mapping Where Children with ieps are Being Served Purpose files -> Fall 2013 Spring 2014 Program Data: Standard 1 Exhibit 4d files -> Hanban – asia society confucius classrooms network 2010 request for proposal files -> Northern England’s set-jetting locations Download 1.74 Mb. Share with your friends:
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