The report also weighs threats to the global energy market. It analyzes several of the leading risks that have contributed to the recent dramatic rise in fuel prices, including the debate over Iran's nuclear program, Europe's heavy dependence on Russian natural gas, the rise of resource nationalism in Latin America and the effect of international terrorism or climatic events on oil facilities, among others.
It argues that, taken individually, many of the risks that have contributed to higher energy prices may be less catastrophic than they seem at first glance and have, in some cases, actually eased over the last year. It concludes that dire predictions that markets cannot alone allocate the costs of these risks in a manner that would avoid wars among major nations are unfounded.
Another study contained in the Baker Institute report focuses on U.S. energy policy and transportation. Co-authored by Kenneth Medlock III, a Baker Institute fellow in energy studies and adjunct professor of economics, and Amy Myers Jaffe, the Wallace S. Wilson Fellow in Energy Studies at the Baker Institute, it finds that "strong U.S. import demand not only enhances OPEC's monopoly power, it also has a deleterious long-term impact on the U.S. economy."
With U.S. oil imports expected to hit $400 billion this year, the import bill accounts for a huge -- and growing -- chunk of the nation's trade deficit. That may lead to higher inflation and other challenges for the U.S. economy, the report says. Any effort to limit U.S. oil imports, however, may have the unwanted effect of accelerating climate change, the report adds.
Finally, the Baker Institute report suggests several approaches to deal with the challenges posed by today's world energy market. It calls for diversification of energy sources, greater energy efficiency -- especially higher automobile fuel-efficiency standards and greater
|Contact: David Ruth|