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COURSE TITLE: ECON 3068 ENERGY ECONOMICS II Course Description This course is tailored for the student desiring an understanding of the relationship between the mineral sector including energy and the wider economy. It covers additional topics in Petroleum Economics, with emphasis on tracing the macroeconomic impact and implications of oil and gas sector decisions. Topics to be covered include oil price shocks and the global economy, the problems associated with managing resource generated wealth, transparency, resource based industrialization, depletion policy and environmental issues Purpose of the Course The course is intended to lead students to an appreciation of the role of the energy industry in the global economy and the issues associated with managing resource based economies. Instructor information Name of instructor(s)- Michael John Office address and phone Mobile 771-0904 E-mail address : [email protected] , [email protected] Office hours: To be advised Communication policy – preferred method of contact - E-mail Goals/Aims The main goal is to provide students with an understanding of: • How energy (oil and gas) drives the global and local economy, and • The challenges of transformation beyond the dominance of energy sector. • Issues of resource management, Climate change mitigation and adaptation and energy Unit Objectives Unit 1 Oil Price shocks and the global economy Students should be able to : o Classify and explain the types of oil price shocks o Analyze the impact on different economies o Critique the policy responses Unit 2 The Caricom Energy Challenge-The search for Solutions Students should be able to : o Describe the patterns of Caricom energy use o Explain the energy challenges facing the Caricom States o Compare the different approaches adopted o Critique the solutions applied by different states Unit 3 Petroleum and the macro economy-Concepts Students should be able to : o Explain the role of natural resources in economic development 2 o o o o Analyze the impact on different economies Identify the key theoretical perspectives on resource based economies Compare and contrast the various theoretical perspectives Critique the various policy prescriptions of these perspective Unit 4 The Challenge of macroeconomic management in Oil and Gas exporting Economies Students should be able to : o Compare the economic management strategies of different oil and gas exporting states o Explain the concepts of the resource curse thesis and Dutch disease o Analyze the approaches of economies viewed as escaping the curse o Critique the different approaches to the management of resource rents o Evaluate the merits and demerits of Heritage Funds Unit 5 The Petroleum Sector and Industrial Strategy Students should be able to : o Explain the concept of resource based industrialization o Appraise the history and significance of national ownership of energy resources in Trinidad and Tobago o Critique the policy of Local content and participation Unit 6 Energy Policy Issues Students should be able to : o Explain the concepts of depletion, Energy dependence, Peak oil o Evaluate the Extractive Industries Transparency Initiative o Analyze the impact of the energy sector on climate change o Critique the impact adaptation and mitigation strategies on energy and the economy o Assignments Students will complete three assignments during the semester. Each student must deliver two tutorial presentations on questions from the tutorial sheets. The second assignment –an Essay provides an opportunity to practice the analysis of industry issues. Thirdly students will be involved in a group project to be completed three weeks before the teaching ends. Course Assessment Assessment is designed to establish the student understanding of the material and the ability to critically treat with energy matters and issues. Students will be assessed on the following basis: Course Work 40% • Course Work Quiz 1:Multiple choice questions covering Units 1 and 2: - 5 % • Course Work Essay covering Unit 4: - 5% • Two(2) presentations of tutorial questions Units1-6 : 10 % • Group Project 20% Final Examination: 60 %. This examination will be two and a half hours long and consist of five essay questions of which students will be required to select three questions. TEACHING STRATEGIES CLASS FORMAT Students will have three (3) contact hours for lectures weekly • Lecture time -Thursday (FSS 100E), 9-12 am, Lectures 2 3 GROUP PROJECT TUTORIALS This is a lecture discussion course. Student participation is encouraged and expected. Students are encouraged to read assigned material before the scheduled class, so that they can participate meaningfully in the class discussion. From time to time additional readings may be added to the course as may be deemed to be relevant and necessary. The group project will be used an a learning tool facilitation discovery and practice in analysis of energy issues Students will have one (1) contact hour for tutorials weekly. Tutorials will normally begin two weeks after lectures. Please check the notices posted at the Department of Economics for further information. Tutorial sheets are designed to help students internalize and apply concepts taught during the lectures. It is expected that students will complement material covered in the lecture sessions with use of the recommended references. Students will be provided with tutorial questions which they are required to prepare before the weekly tutorial session. Every effort should be made to complete each tutorial sheet and please ensure that you prepare the tutorial questions to maximize your benefits from the tutorials. Each student will be expected to deliver two (2) tutorial presentation and at least an 80% tutorial attendance is expected . Attendance Students are expected to maintain at least an 80% attendance of Tutorial classes. As such attendance records will be kept. RESOURCES Recommended books Mottley,Wendell Trinidad and Tobago Industrial policy 1959-2008 :A historical and contemporary analysis , Ian Randle Publishers, 2008 IPCC Fourth Assessment Reports- The AR 4 Synthesis Report 3 4 READINGS Unit 1. Oil price Impact of price shocks on major economies and developing countries shocks and the Global Economy Berument, M. Hakan; Ceylan, Nildag Basak; Dogan, Nukhet Jacquinot, Pascal; Kuismanen, Mika; Mestre, Ricardo; Spitzer, Martin Huntington, Hillard G Nordhaus, William D Jones DW, Paul N. Leiby, Inja K. Paik Selim Elekdag, Rene Lalonde, Douglas Laxton and Dirk Muir and Paolo Pesenti IMF OECD Ali Hussain Maysoun An Bar 2. Caricom Energy Problem The Impact of Oil Price Shocks on the Economic Growth of Selected MENA Countries. Energy Journal, 2010, Vol. 31 Issue 1, p149-176, 29p; An Assessment of the Inflationary Impact of Oil Shocks in the Euro Area. Energy Journal 2009 Vol .30 Issue 1 Oil Shocks and Real U.S. Income Energy Journal, 2007, Vol. 28 Issue 4, p31-46, 16p; Who's Afraid of a Big Bad Oil Shock? Brookings Papers on Economic Activity, 2007, Issue 2, p219-238, 20p, 3 charts, 5 graphs Oil Price Shocks and the Macro economy: What Has Been Learned Since The Energy Journal 1996 Vol, 25 No 2 Oil price movements and the Global Economy: A model based assessment, IMF Staff Papers Vol. 55, No. 2, 2008 The Impact of Higher Oil Prices on the Global Economy; IMF research Department 2004. ** Oil Price Developments: Drivers , Economic Consequences and Policy Responses ; OECD Economic Outlook No. 76 Dec 2004.*** The Long Term Benefits of Higher Oil Prices Middle East Economic Survey Vol .LVII. No.11 March 2005*** Impact of Soaring Oil prices on the World Economy Al Hyat 23/1/06* Williams, James L The Coming Oil Crisis. Oil and Gas Journal Feb. 2003.** The search for solutions G McGuire G McGuire Tewarie, Dr. Bhoendradatt Government of Jamaica / Venezuela Anthony Wood Eastern Caribbean Gas Pipeline Company Caribbean Energy Condition. Mimeo UWI June 2004 Caricom Impotence on LNG dispute. Mimeo August 2005** Impact of High Oil Prices on OECS region Addressto South ChamberTrinidad and Tobago Petroleum Congress ; February 2005.* Petrocaribe Agreement; September 2005.*** The Case Against Petrocaribe. Barbados Advocate News; 18/9 05 The Eastern Caribbean Gas Pipeline: Presentation to the Trinidad and Tobago Chamber of Industry and Commerce 4 5 Phillip, D Farrell, T 3 Petroleum and the Macroeconomy The Caricom Petroleum Market MSc. Thesis UWI (1980)* Caricom Oil Market UWI St. Augustine 1982* Economic models of resource based economies Measuring Economic Impact. o Oil and Gas Taxation Regimes. o o Wright Gavin , Jesse Czelusta Macartan Humphreys, Jeffrey D. Sachs, and Joseph E. Stiglitz Auty, RM Seers, Dudley Best L and St. Cyr The Myth of the Resource Curse. Challenge vol. 47, no. 2, March/April 2004, pp. 6–38 Escaping the resource curse Chapter1 & 12 Escaping the Resource curse. Resource Abundance and Economic Development, Oxford University Press 2001.Chap.111 The Mechanism of the Open Petroleum Economy, S.E.S Modeling the Trinidad and Tobago Economy Staff paper Trinidad and Tobago Institute of the West. Indies -2004 Jobity , R Unit 4 Resource Based economies Impact of Natural Gas on the Trinidad and Tobago economy Gasco News , Vol 17.No.2 SEMP What is a Rentier State ( Mimeo) Challenges of Macroeconomic management in oil and gas exporting countries Velculescu Delia and Saqib Rizavi1 Devlin Julia and Michael Lewin Stevens Paul Auty, R: Auty R, and A Gleb Jahangir Amuzurgar: Jeffery Davis et al Karl, Terry Lynn Karl, T and Ian Gary Davis, JM (ed). Mortamen, H. Trinidad and Tobago: The Energy Boom and Proposals for a Sustainable Fiscal Policy IMF Working Papers, October 2005 Managing Oil Booms and Busts in Developing Countries in Managing Volatility and Crises -A Practitioner’s Guide Resource Impact –curse or Blessing? A Literature Survey Centre for Energy, Petroleum and Mineral Law and Policy University of Dundee, Dundee 2003 How Natural Resources affect economic development – Development Policy Review Vol18# 4 Dec 2000 Oil windfalls in a small parliamentary democracy their impact on Trinidad and Tobago (1986) World Development , Vol.14 , # 9, Managing Oil Wealth: OPEC’S Windfalls and Pitfalls. Stabilization and Savings Funds for non renewable resources, experience and fiscal policy implications International Monetary Fund: Washington DC2001 The Paradox of Plenty: Oil Boom and Petro states (University of California Press 1997.) The Global Record Foreign Policy in Focus Petro Politics Special Report Jan. 2004 Fiscal Policy Formulation and Implementation in Oil Producing Countries. IMF 2003 The Expenditure of Oil Revenue 5 6 Unit 5 Energy sector and Industrial Strategy o o o Production possibilities from gas. Resource based industrialization revisited. Creating sustainability from oil and gas: options and constraints Motley Wendell Auty, R.M. Barclay, L Farrell, TMA Furlonge, H Baisden , C GOTT McGuire G. Punnett, C and John B. Unit 6. Energy Policy Issues Trinidad and Tobago Industrial policy 1958-2008 Chapters 1,2 and 3. Resource –based industrialization; Sowing the oil in eight developing countries Clarendon Press, New York 1990 FDI Facilitated Development ; The case of the Natural Gas Industry in Trinidad and Tobago.( Mimeo) UWI Mona 2003 Worship of the Golden Calf. An oil exporters Industrial Strategy Technology Policy and Project Planning in the Boom Years, Dep’t Economics UWI St Augustine 1987 The Business of Developing an Integrated Gas Industry in Trinidad and Tobago. Gasco News Vol 15 # 2(2002) New Horizons for Ethylene – The challenge of implementing a local ethylene cracker Gasco News Vol 15 # 2 (2002) Vision 2020 Report of the Energy Subcommittee – Ministry of Planning, Port of Spain 2004. Chap 6-and 7 Natural Gas as the Motor of Economic Development. Gasco News Vol 14# 3 The philosophical and policy underpinnings of the local Natural Gas Industry. Gasco News Vol.14#3 1. Energy Independence and Depletion policy 2. Environmental Issues: a. Climate change and the energy sector b. Kyoto Protocol c. Alternative Energy 3. Governance Issues; Extractive Industries Transparency Initiative. Mitchell, John V. Ending Dependence : Hard Choices for Oil- Exporting States A and Paul Stevens Chatham House Report2009 Gordon Richard L. Pantin D (1980): John Hartwick (ed). Hicks, Hayek, Hotelling, Hubbert, and Hysteria : Energy, Exhaustion, Environmentalism, and Etatism in the21st Century The Energy Journal, Vol. 30, No. 2. IAEE 2009 Resource Depletion Theories and Planning in Mineral Exporting Economies with particular reference to Petroleum Exporters. OPEC Review. Vol 4 # 4 The Economics of Natural Resource Use, 2nd Ed. Addison Wesley Publishers 1998, Chapter 8 Extractive Industries Transparency Initiative www/eitransperancy.org Painuly, Jyoti The Kyoto Protocol, Emissions Trading and the CDM : An analysis from Developing Country Perspective. IAEE Journal Volume 26# 3 6 7 Daniel J.A. Johansson, Christian Azar, Kristian Lindgren and Tobias A. Persson Opec strategies and oil rents in a climate conscious world R.E.H. Sims, R.N. Schock, A. Adegbululgbe, J. Fenhann, I. Konstantinaviciute W. Moomaw, H.B. Nimir, B. Schlamadinger, Climate Change 2007: Working Group III: Mitigation of Climate Change Chapters, 4, 5, 6, 7. IPCC 2007 The Energy Journal, Vol. 30, No. 3. IAEE 2009 Additional and updated readings will be provided as lectures progress Course Calendar** Lecture no 1 2 Date Jan. 27 Feb 3 3 Feb 10 4 Feb 17 5 Feb 24 6 March 3 7 March 10 8 March 17 9 10 11 March 24 March31 April 7 12 April 14 13 April 21 Assignment Due Course Overview – Analysis and Thought Oil and the global economy – GDP Intensity , oil shocks Impact and policy responses Oil and the global economy- Impact and policy responses Caricom Energy problems and responses –San Jose to Petrocaribe. LNG Petroleum and the macro economy – Concepts and issues Petroleum and the macro economy Applications Macroeconomic management in oil producing states I- challenges Macroeconomic management in oil producing states Oil and gas and Industrial Strategy I Oil and gas and Industrial Strategy II Energy Policy Issues –Dependence Depletion and Governance Energy Policy Issues –The Environment,Kyoto, Climate Change and Alternative energy Revision Lecture 7 Quiz Project Theme selection Completion of First tutorial Presentation Project plans due Essay Group Project due Final tutorial presentation 8 Additional Information Grading System The University grading system will be followed. GRADE A+ A AB+ B BC+ C CD+ D F GPA 4.3 4.0 3.7 3.3 3.0 2.7 2.3 2.0 1.7 1.3 1.0 0.0 MARKS% 86 and Over 70 -85 67 -69 63 -66 60- 62 57- 59 53 -56 50 -52 47 -49 43 -46 40 -42 0 - 39 8