Two alternative schools of thought exist with regard to how the supply and pricing of energy commodities will respond to the current global economic downturn:
Energy prices will fall as economies cannot sustain demand.
Energy prices will hold, or continue to rise, despite the economic downturn due to a relatively inelastic demand for most energy commodities within developed and developing economies.
We suggest a third alternative -- that supply and price of energy is being, and will continue to be, gamed within pockets of the global economy. If these marketplace manipulations go unfettered, we face a potential “domino effect” of global risk implications:
Create a short-term shift in economic power from a handful of developed, service economies to a handful of developing, manufacturing economies; Create political and social turmoil in economies that suffer from this shift; and Further complicate the already-complex problems of political risk assessment, mitigation and financing since pockets of political risk (bribery, terrorism, war) could be expected to increase in number and geographic diversity as a result of the turmoil.
|Keywords:||Global Energy Crisis, Energy and the Global Economy, Economics and Politics, Economics, Energy and Global Risk, Gaming the Economy|
Assistant Professor, Department of Risk Management & Insurance, Robinson College of Business, Georgia State University, Atlanta, Georgia, USA
Graduate Student, Department of Risk Management and Insurance, Robinson College of Business, Georgia State University, Atlanta, Georgia, USA
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