|Type of paper:||Term paper|
|Categories:||United States World International business Crisis management|
The 1970s Global oil crisis was the first significant era of oil price escalation in prices which had a tremendous effect on the industries and general operations in the industrialized nations. This crisis followed a decision by the oil-producing and exporting counties in Asia to impose an embargo on countries they believed to be supporting Israel in the Yom Kippur War (Lieber 534). The action by these Arab countries operating under the umbrella organization called the Organization of Arab Petroleum Exporting Countries (OAPEC) resulted not only in fuel shortages, but the prices also skyrocketed for almost the whole decade. By the early 1970s, the United States had a high consumption of petroleum products in the form of gasoline and other products, yet the domestic oil production was falling. This implies that they highly depended on oil imports from the OPEC countries (Lieber 538). This overdependence on oil imports was the cause of their high vulnerability to the embargo. Despite the low domestic production of petroleum products at home, the United States of America was unperturbed since they were sure of adequate supply from OPEC. The policymakers were in favour of imports since they erroneously believed that even in the extremely strained relations with the OPEC countries could not consider embargoes on oil exports since it was their single most important source of revenue. The October 1973 embargo found the united states ill-prepared to respond given that its domestic production capacity was substantially too low to meet the demand. The Arab countries ordered the major American corporations operating in the middle east to immediately stop their operations and halt any further exports of oil to the United States as a retaliation for the oil of the United States in supporting Israel. This came as a shock to the Americans who believed that the country did not import old at all. They were worried that the energy crisis would adversely affect the power supply, heating and cooling systems (Kleinfield Para 10). The ensuing energy crisis hurt industrial activities and resulted in increased commodity prices. From the experience of the 1970s energy crisis, the united states embraced a new wave of energy policy aimed at ensuring energy security through different ambitious interventions.
Escalated Domestic Exploitation and Limitations of Natural Resources (Oil, Natural Gas, Coal, and Nuclear Power)
Before the global energy crisis, the United States of America prides itself as an energy-sufficient energy country. They had limited natural resource endowments of natural gas, coal and oil, which also remained inadequately exploited. This trend continued while the country's energy policy forced on oil explorations by the big American corporations in Asia, including Exxon, Texaco, Standard Oil of California, Gulf, and Mobil. The energy crisis led to an inward-looking policy shift which encouraged the exploration of available yet limited energy reserves to make the country substantially energy secure. The administration of President Ronald Reagan was driven by the failures experienced in the energy crisis to harness the domestic production of natural gas, oil and nuclear power (Melosi 181). The United States administrations could not again subject the country to the vulnerability of oil imports. There was a full throng policy reform towards energy efficiency-focused on stimulating oil production and progressively reducing overreliance on fossil fuels. Research and development were redirected towards alternative sources of power, including solar and wind power (Melosi 182). They were convinced that an appropriate mix of fossil fuels, natural gas and renewables would guarantee the country sustained energy security. Following these concerted efforts, the American energy prices stabilized in the 1980s, but due to limited resources, it again took an upward turn.
During the progressive era characterized by industrial expansion, the United States had exploited its natural resources bases of energy which then meant that they had to improve the technologies for exploiting the deep ground oil wells as well as expand their energy portfolio. The country had to explore new technologies in nuclear power production, including the development of fast breeder nuclear reactors. Already, they were grappling with the declining domestic supply of uranium, which was the primary fuel for nuclear production. The Nixon administration reimbarked on a commitment to the development of such high-efficiency nuclear reactors but was restrained by the imminent health and environmental risks associated with nuclear power production. Furthermore, the United States lacked geothermal production capacity and technologies, which then inhibited its ability to exploit this natural source of energy and add it to the energy mix (Sovacool 4508).
The United States of America and its citizens had to live with the reality of its limited natural sources of energy which could not meet its domestic consumption in the face of an unprecedented crisis. The efforts to harness the finite energy sources could not cope with the demand, which implied that various austerity measures had to be taken to deal with the crisis. As a result, price controls and gasoline rationing was institutionalized. A national speed limit and daylight saving time were imposed throughout 1974. It was clear that the limited local production of energy could not match the demand; hence, the Americans had to forego most of their conveniences and high standards of living. They had to cult their home and personal energy consumption significantly.
Integration of Renewable Resources into the Energy Mix (Wind, Solar, Steam, Biomass)
The energy crisis confirmed to the Americans that their existing energy sources could not meet their high demand. The United States energy policy had to be redirected towards renewable sources to supplement the non-renewable ones. There were various legislative interventions in the 1970s focused on reframing America's overreliance on fossil fuels and non-renewable energy. These regulations led to the increasing consciousness towards environmentalism and renewable energy. These acts that set the country on a path towards the adaptation of green energy include the Emergency Petroleum Allocation Act of 1973 and the Energy Policy and Conservation Act of 1975 (McMillin 573). These acts culminated into the creation of the Department of Energy in 1977.
More than 10% of the energy sources in the United States of America came from renewable sources of energy. These sources of energy include biomass and hydropower. Since 1995 the amount of energy generated from renewable sources increased by more than 15.9% ("U.S. Renewable Energy Factsheet | Center For Sustainable Systems". Wind power generation has increased significantly in the United States. Since 1995, the wind energy production portfolio increased significantly and contributes about 35% of the national electricity supply despite the fact that incredible growth still contribute below 0.75% of the United States' national energy supply ("U.S. Renewable Energy Factsheet | Center For Sustainable Systems" Para 2). On the other hand, the solar power generation in the United States has grown by more than 55% since 1995 occasioned by continued fall in the price of solar panels which guaranteed capacity to harness solar energy ("U.S. Renewable Energy Factsheet | Center For Sustainable Systems" Para 3). Geothermal production has increased by 27%.
Alongside the increasing production of renewable energy, the United States instituted Renewable portfolio standards (RPS) programs which regulate the state activities towards the mainstreaming renewable energy. The RPS for the various states the minimum required a share of electricity that should come from renewable resources ("Renewable Energy Explained - Portfolio Standards - U.S. Energy Information Administration (EIA)" Para 1). These resources for the production of renewable energy include wind, solar, geothermal, biomass, and some types of hydroelectricity. Some states have even harnessed landfill gas, municipal solid waste, and ocean energy to meet their minimum supply of renewable energy. The individual states in the united states of America have taken up the renewable energy standards and entrenched them in their federal systems through setting clean energy targets and goals. The renewable energy initiatives revolve around concepts such as carbon-free, carbon-neutral, or clean energy. Today, some of the states accept integrated technologies such as carbon capture and storage in other forms of energy production to cunt into their share of minimum renewable energy. A mix of federal incentives, the RPS and market conditions that are in favour of green energy have driven private and public investments in such sources which have led to a general escalation in the renewable energy portfolio ("Renewable Energy Explained - Portfolio Standards - U.S. Energy Information Administration (EIA)" Para. 7).
Fracking And Shale Deposits in the Dakotas that Have Ended The Energy Crisis In America Since 2010
Oil fracking in the Dakotas, which involves the pumping of water, sand and chemicals into a well to open cervices for the oil or gas extraction has significantly boosted the U.S petroleum and natural gas production. New fracking fluids and sensors to locate deep oil reservoirs have enabled the country to increase its oil production dramatically. The fracking industry in the U.S is still undergoing significant changes which guarantee it of the rise in oil production. According to a 2015 Financial Times bulletin, the oil extraction innovation in the Bakken and Dakotas has turned the energy industry to the equivalence of Silicon Valley (Crooks Para 6). In 2015, the high production in oil due to fracking led to high supply and a flooded market resulting in price dip from $100 per barrel to less than $50 in less than a year (Crooks Para 9).
The oil crisis followed a decision by the oil-producing and exporting counties in Asia to impose an embargo on countries they believed to be supporting Israel in the Yom Kippur War. These countries operating under the umbrella organization called the Organization of Arab Petroleum Exporting Countries (OAPEC) resulted not only in fuel shortages, but the prices also skyrocketed for almost the whole decade. By the early 1970s, the United States had a high consumption of petroleum products in the form of gasoline and other products, yet the domestic oil production was falling. At the time of the energy crisis, the United States had limited natural resource endowments of natural gas, coal and oil which also remained inadequately exploited while the country's energy policy forced on oil explorations by the big American corporations in Asia including Exxon, Texaco, Standard Oil of California, Gulf, and Mobil. The embargo, therefore, resulting in reduced industrial productivity, power rationing and intensification in increasing the domestic production of oil while exploring renewable energy options. Today, the United States has managed to integrate a broad mix of energy sources into its mainstream supply, including biomass, geothermal, solar and hydropower. The innovation of fracking technology in oil extraction from deep wells has also made the country energy sufficient with reduced domestic prices for the product.
Crooks E.D. "The U.S shale revolution." Financial Times. 24 April 2015. Accessed from https://www.ft.com/content/2ded7416-e930-11e4-a71a-00144feab7de
Kalt, Joseph P. "Economics and politics of oil-price regulation: Federal policy in the post-embargo era." (1981).
Lieber, Robert J. "Europe and America in the World Energy Crisis." International Affairs 55.4.
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