Policy Responses from Four Economies
Edited by Daigee Shaw and Bih Jane Liu
Chapter 10: A Challenge to Sustainable Development: The Dual Crisis of Energy and the Economy
Daigee Shaw and Pi Chen
Daigee Shaw and Pi Chen The year 2008 witnessed two global crises of a severity unprecedented in over half a century: oil prices shot up to historical peaks, and a financial turmoil started in the United States that touched off a global economic meltdown. The energy crisis, caused by a rapid increase in demand for energy that outstripped the very limited ability of supply augmentation, created a supply shock to the world economy in early 2008. The financial crisis, initially a severe credit crunch, was turned into an economic epidemic characterized by universally falling consumption, reduced investment, rising unemployment, and deflation. Not only was the impact of these crises felt worldwide, but so also was their timing adjacent to one another. The spatial overlap and temporal adjacency displayed by the energy crisis and the global financial crisis did not occur by mere chance. The two crises had several features in common, and derived from similar causes. The energy crisis, actually, was itself one of the causes of the economic meltdown and the eventual bursting of the financial bubble. The near-collapse of the financial sector and the resulting downturn in the wider economy had led to a dramatic fall in demand for energy, and it may seem that the energy crisis was over. This, however, would probably not have been the case. Once the global economy starts to revive again, energy prices may very well start to rise again too. In fact, oil prices have regained their momentum and bounced back...
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