Federal government can’t solve alone

EXT – Shocks Inevitable/Drilling Doesn’t Solve

Despite Oil Boom the U.S is still extremely vulnerable to Oil Shocks

Brad Plumer January 16^th 2014, reporter on energy for Washington Post, “How the oil boom could change U.S. foreign policy “, The Washington Post, http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/16/how-the-u-s-oil-boom-is-changing-the-world-in-6-charts/ //RD

The United States is suddenly awash in crude oil. From 2008 to 2013, domestic oil production rose by 2.5 million barrels per day — the biggest five-year increase in the country's history. Last year, U.S. produced more oil than it imported for the first time since 1995. So what does that mean for the rest of the world? Or for U.S. foreign policy? Well, for starters, it probably doesn't mean that Americans can now safely ignore the Middle East. The U.S. economy is still heavily reliant on oil, and prices are still largely swayed by what goes on in the global markets. Disruptions in places like Saudi Arabia, Iran or Iraq still have a big impact. That's one conclusion of a major new report by a commission of former generals and senior officials, backed by Securing America's Energy Future (SAFE). "The oil boom has sparked a lot of loose talk about how we can now ignore what goes on in the Middle East," said Adm. Dennis Blair, a former director of National Intelligence who led the commission, in an interview Tuesday. "But that's just not true." Blair pointed out that the oil boom has already had some impact on U.S. foreign policy. For example, increased North American oil production likely allowed the United States and Europe to impose stricter sanctions on Iran without worrying as much about resulting price spikes. There are also early, tentative signs that China could become more cooperative on Middle East issues now that the fast-growing nation has displaced the United States as the biggest oil importer from the region. But what's arguably more telling is how much hasn't changed. Even with the boom, the United States is still quite vulnerable to oil shocks. As such, the SAFE report proposes a number of policy steps to deal with that, from working with China to protect global oil shipping lanes to developing more predictable guidelines for using strategic petroleum reserves. It also calls for a renewed push to curtail the U.S. economy's dependence on oil, such as shifting to alternative vehicle fuels such as electricity and natural gas. After all, even with the shale boom, U.S. production is still expected to peak by 2020 or so.

More domestic oil production still leaves the US vulnerable to oil shocks. Can’t solve without renewables.

John Aziz ’14, economics and business correspondent at The Week, 6-20-14, The Week, “The lessons of Iraq: The U.S. economy is still way too vulnerable to oil price shocks”, http://theweek.com/article/index/263515/the-lessons-of-iraq-the-us-economy-is-still-way-too-vulnerable-to-oil-price-shocks

With Iraq facing an incipient civil war, the issue is coming back into focus. A big enough oil spike translating into soaring energy prices could once again squeeze American consumers and businesses, leaving the economy vulnerable to a recession. Of course, the U.S. is in a better position to weather the storm than in 2007. Interest rates remain near historic lows, giving debtors some breathing room. The total level of debt relative to the size of the economy is lower, too. And the U.S. — thanks to a shale oil and natural gas boom — is much less dependent on energy brought in from abroad. But just because the U.S. is importing a lower proportion of its energy doesn't mean that it isn't vulnerable to energy shocks. The U.S. energy market is part of the global energy market. If oil supplies are cut off or impeded in the Middle East (or elsewhere) the U.S. will still be affected, because the rest of the global marketplace will still need to buy oil. That means that the price of oil for Americans will still rise. All of which is to say that true energy independence isn't as simple as pumping more hydrocarbons at home. That may relieve both American and global energy pressures to a certain degree, but only in a transitional sense. It is not a real solution. A real solution would be a renewable energy economy in which energy and transportation are fuelled by local sunlight, wind, and water. If you're capturing the bulk of your energy needs on your rooftop, driving an electric car, and storing excess power in a battery in your garage, you're far more insulated against geopolitical turmoil in oil-producing regions.

Reliance on domestic oil doesn’t shield price shocks

GAL LUFT & ANNE KORIN july/august 2012 (Gal Luft and Anne Korin are co-directors of the Institute for the Analysis of Global Security (IAGS) and senior advisers to the United States Energy Security Council., “The Folly of Energy Independence” http://www.the-american-interest.com/article.cfm?piece=1266)

Cost, Not Volume¶ A¶ s we have already noted, dreams of autarky in oil still dominate U.S. energy policy discourse. The pledge to cut a third of oil imports by 2020 is at the core of President Obama’s energy policy, and talk about reducing imports from the Middle East continues to be one of the best applause lines of all presidential and congressional candidates across the political spectrum. ¶ This rhetoric relies on two false premises. First, America is not dependent on the Persian Gulf for its oil supply. Imports from the Persian Gulf never exceeded 15 percent of total U.S. petroleum consumption; currently, the figure stands at 9 percent. And again, these numbers are really nominal, since oil is fungible and swap arrangements the oil companies employ to reduce transportation costs make it impossible to know where any given barrel of oil really came from. Most U.S. oil imports originate in North America.¶ Second, even if all U.S. oil imports originated from Canada and Mexico, America would be just as vulnerable to the impact of oil price spikes due to volatility in the Persian Gulf and other unstable regions as it is today. Self-sufficiency in oil would not, indeed cannot, shield U.S. consumers from oil price shocks. In 2008, when oil prices reached an historic high, the United Kingdom produced most of the oil it needed, yet the price spike affected its citizens just as much as it did Americans. When the price of oil spikes, it spikes for everyone. The United States imports hardly any oil from Libya, but when the 2011 Libyan upheavals caused a supply disruption, American motorists were as affected by the resulting $25 per barrel price hike as the motorists of Libya’s major oil purchasers. ¶ The inability to keep the price of oil at bay, not the volume of imports, is the crux of America’s vulnerability. But—and this is the critical yet still generally unrecognized key to the solving the energy puzzle—the price is what it is because virtually all the cars and trucks in the world are unable to run on anything but petroleum-based fuels. Oil faces no competition from other energy commodities in the sector from which its strategic importance stems, namely transportation. Since consumers are unable to choose between different commodities, suppliers do not need to compete for market share by increasing production capacity and supplying lower prices. And that, in turn, leads us to OPEC.

Plan is not sufficient to isolate the US from the global oil market and even if it does prices will still reflect the international market

CBO may 2012 (congressional budget office, seems pretty qualled, “Energy Security¶ in the¶ United States” http://www.cbo.gov/sites/default/files/cbofiles/attachments/05-09-EnergySecurity.pdf)

Attempts to isolate the United States from the global ¶ market for oil would almost certainly fail, because ¶ demand for oil in the United States exceeds domestic ¶ supply and because isolation would require a fundamentally different energy market, with restrictions on prices ¶ and exports that would probably not be feasible (see ¶ Box 1). Unless all imports and exports of oil were ¶ banned, any imports of oil from abroad—such as from ¶ Canada or Mexico—would still allow the world price to ¶ be transmitted through such countries to the United ¶ States. The United States’ trading partners would choose ¶ to sell oil to the United States only when the U.S. price ¶ was higher than the world price (causing the U.S. price to ¶ fall toward the world price) and deliver it elsewhere when ¶ the U.S. price was lower than the world price (causing the ¶ U.S. price to rise toward the world price). Without such imports from abroad, demand for oil in the United States ¶ could be met only with prices sufficiently high to cause ¶ demand to fall to the level of domestic production.

EXT – No Shocks

Consensus of economists agree that oil shocks are exaggerated

Kahn 11 (Jeremy, 2/13, “Crude reality”, http://www.boston.com/bostonglobe/ideas/articles/2011/02/13/crude_reality/)

There is no denying that the 1973 oil shock was bad — the stock market crashed in response to the sudden spike in oil prices, inflation jumped, and unemployment hit levels not seen since the Great Depression. The 1979 oil shock also had deep and lasting economic effects. Economists now argue, however, that the economic damage was more directly attributable to bad government policy than to the actual supply shortage. Among those who have studied past oil shocks is Ben Bernanke, the current chairman of the Federal Reserve. In 1997, Bernanke analyzed the effects of a sharp rise in fuel prices during three different oil shocks — 1973-75, 1980-82, and 1990-91. He concluded that the major economic damage was caused not by the oil price increases but by the Federal Reserve overreacting and sharply increasing interest rates to head off what it wrongly feared would be a wave of inflation. Today, his view is accepted by most mainstream economists. Gholz and Press are hardly the only researchers who have concluded that we are far too worried about oil shocks. The economy also faced a large increase in prices in the mid-2000s, largely as the result of surging demand from emerging markets, with no ill effects. “If you take any economics textbook written before 2000, it would talk about what a calamitous effect a doubling in oil prices would have,” said Philip Auerald, an associate professor at George Mason University’s School of Public Policy who has written about oil shocks and their implications for US foreign policy. “Well, we had a price quadrupling from 2003 and 2007 and nothing bad happened.” (The recession of 2008-9 was triggered by factors unrelated to oil prices.) Auerald also points out that when Hurricane Katrina slammed into the Gulf Coast in 2005, it did tremendous damage to offshore oil rigs, refineries, and pipelines, as well as the rail lines and roads that transport petroleum to the rest of the country. The United States gets about 12 percent of its oil from the Gulf of Mexico region, and, more significantly, 40 percent of its refining capacity is located there. “Al Qaeda times 1,000 could not deliver this sort of blow to the oil industry’s physical infrastructure,” Auerald said. And yet the only impact was about five days of gas lines in Georgia, and unusually high prices at the pump for a few weeks.

EXT – No Impact to Shocks

The economy had adapted since the 70s—oil shocks no longer have a substantial impact.

Blanchard & Gali 7

Oliver Blanchard and Jordi Gali, 11/8/2007. The Class of 1941 Professor of Economics, is a former MIT economics department head and Research Associate in the NBER's Program on Economic Fluctuations and Growth and the Program on Monetary Economics. “The Macroeconomic Effects of Oil Shocks: Why are the 2000s So Different from the 1970s?” National Bureau of Economic Research, http://www.nber.org/papers/w13368.

Since the 1970s, and at least until recently, macroeconomists have viewed changes in the price of oil as as an important source of economic fluc- tuations, as well as a paradigm of a global shock, likely to affect many economies simultaneously. Such a perception is largely due to the two episodes of low growth, high unemployment, and high inflation that char- acterized most industrialized economies in the mid and late 1970s. Con- ventional accounts of those episodes of stagflation blame them on the large increases in the price of oil triggered by the Yom Kippur war in 1973, and the Iranian revolution of 1979, respectively.1 The events of the past decade, however, seem to call into question the rel- evance of oil price changes as a significant source of economic fluctuations. The reason: Since the late 1990s, the global economy has experienced two oil shocks of sign and magnitude comparable to those of the 1970s but, in contrast with the latter episodes, GDP growth and inflation have remained relatively stable in much of the industrialized world. Our goal in this paper is to shed light on the nature of the apparent changes in the macroeconomic effects of oil shocks, as well as on some of its possible causes. Disentangling the factors behind those changes is obviously key to assessing the extent to which the episodes of stagflation of the 1970s can reoccur in response to future oils shocks and, if so, to understanding the role that monetary policy can play in order to mitigate their adverse effects. One plausible hypothesis is that the effects of the increase in the price of oil proper have been similar across episodes, but have coincided in time with large shocks of a very different nature (e.g. large rises in other commodity prices in the 1970s, high productivity growth and world demand in the 2000s). That coincidence could significantly distort any assessment of the impact of oil shocks based on a simple observation of the movements in aggregate variables around each episode. In order to evaluate this hypothesis one must isolate the component of macroeconomic fluctuations associated with exogenous changes in the price of oil. To do so, we identify and estimate the effects of an oil price shock using structural VAR techniques. We report and compare estimates for different sample periods and discuss how they have changed over time. We follow two alternative approaches. The first one is based on a large VAR, and allows for a break in the sample in the mid 1980s. The second approach is based on rolling bivariate VARs, including the price of oil and one other variable at a time. The latter approach allows for a gradual change in the estimated effects of oil price shocks, without imposing a discrete break in a single period. Two conclusions clearly emerge from this analysis: First, there were indeed other adverse shocks at work in the 1970s; the price of oil explains only part of the stagflation episodes of the 1970s. Second, and importantly, the effects of a given change in the price of oil have changed substantially over time. Our estimates point to much larger effects of oil price shocks on inflation and activity in the early part of the sample, i.e. the one that includes the two oil shock episodes of the 1970s. Our basic empirical findings are summarized graphically in Figure 1 (we postpone a description of the underlying assumptions to Section 3). The left-hand graph shows the responses of U.S. (log) GDP and the (log) CPI to a 10 percent increase in the price of oil, estimated using pre-1984 data. The right-hand graph displays the corresponding responses, based on post-1984 data. As the Figure makes clear, the response of both variables has become more muted in the more recent period. As we show below, that pattern can also be observed for other variables (prices and quantities) and many (though not all) other countries considered. In sum, the evidence suggests that economies face an improved trade-off in the more recent period, in the face of oil price shocks of a similar magnitude.

Oil shocks don’t destroy the economy—wage flexibility, strong monetary policy and reduced dependence make our economy less vulnerable.

Blanchard & Gali 7

Oliver Blanchard and Jordi Gali, 11/8/2007. The Class of 1941 Professor of Economics, is a former MIT economics department head and Research Associate in the NBER's Program on Economic Fluctuations and Growth and the Program on Monetary Economics. “The Macroeconomic Effects of Oil Shocks: Why are the 2000s So Different from the 1970s?” National Bureau of Economic Research, http://www.nber.org/papers/w13368.

First, real wage rigidities may have decreased over time. The presence of real wage rigidities generates a trade off between stabilization of inflation and stabilization of the output gap. As a result, and in response to an adverse supply shock and for a given money rule, inflation will generally rise more and output will decline more, the slower real wages adjust. A trend towards more flexible labor markets, including more flexible wages, could thus explain the smaller impact of the more recent oil shocks. Second, changes in the way monetary policy is conducted may be responsi- 4 ble for the differential response of the economy to the oil shocks. In partic- ular, the stronger commitment by central banks to maintaining a low and stable rate of inflation, reflected in the widespread adoption of more or less explicit inflation targeting strategies, may have led to an improvement in the policy tradeoff that make it possible to have a smaller impact of a given oil price increase on both inflation and output simultaneously. Third, the share of oil in the economy may have declined sufficiently since the 1970s to account for the decrease in the effects of its price changes. Under that hypothesis, changes in the price of oil have increasingly turned into a sideshow, with no significant macroeconomic effects (not unlike fluc- tuations in the price of caviar).

Oil shocks don’t hurt the US economy- Market adaption and lack of dependence on Persia Gulf Oil

Kahn, 11 (2/13/11, Jeremy, Boston Globe, “Crude reality”, http://articles.boston.com/2011-02-13/news/29336191_1_crude-oil-shocks-major-oil-producers )

But a growing body of economic research suggests that this conventional view of oil shocks is wrong. The US economy is far less susceptible to interruptions in the oil supply than previously assumed, according to these studies. Scholars examining the recent history of oil disruptions have found the worldwide oil market to be remarkably adaptable and surprisingly quick at compensating for shortfalls. Economists have found that much of the damage once attributed to oil shocks can more persuasively be laid at the feet of bad government policies. The US economy, meanwhile, has become less dependent on Persian Gulf oil and less sensitive to changes in crude prices overall than it was in 1973.

Oil markets adapt to shocks and internally stabilize – no negative effects

Gholz and Press, 10 * Associate professor at the LBJ School of Public Affairs at the University of Texas at Austin, AND ** Associate professor of government at Dartmouth College and coordinator of War and Peace Studies at the John Sloan Dickey Center for International Understanding (Eugene and Daryl G., Security Studies, “Protecting “The Prize”: Oil and the U.S. National Interest”, 19: 3, 453 — 485 http://www.luiss.it/mes/wp content/uploads/2010/02/SecurityStudies_ProtectingThePrizeOilandtheUSNationalInterest.pdf )

Note: Tables removed

HOW MARKETS RESPOND TO SHOCKS Each day, twenty-four million barrels of crude are pumped from the Persian Gulf region, most of which are loaded onto supertankers to feed refineries around the world.8 The immediate effect of a major supply disruption in the Gulf would leave one or more consumers wondering where their next expected oil delivery will come from. But the oil market, like most others, adjusts to shocks via a variety of mechanisms. These adaptations do not require careful coordination, unusually wise stewardship, or benign motives. Individuals’ drive for profit triggers most of them. The details of each oil shock are unique, so each crisis triggers a different mix of adaptations. Some adjustments would begin within hours of a disruption; others would take weeks or longer to implement. Similarly, some could only supply the market for short periods of time, and others could be sustained indefinitely. But the net result of the adaptations softens the disruptions’ effects on consumers. Increased Production Any event that reduces oil supply—for example, a fire at a pumping sta- tion in Kuwait or a labor strike in Venezuela—will spur other producers around the world to increase output. Disruptions draw new oil into the market through two distinct mechanisms. First, producers not part of the OPEC cartel (including major players such as Russia, the United States, and Canada) increase output to respond to short-term price spikes. Firms in these countries typically produce as much oil as they can, as long as the expected price exceeds their costs.9 They will see an opportunity to profit from the higher price during a spike, and so after a disruption, they pump more than they did before. In most cases, these non-OPEC countries have only modest amounts of ready-to-pump “spare capacity,” but their additional output can help eliminate temporary shortages.10 The second mechanism is based on politics rather than economics: oil market shocks tend to disrupt delicate cartel agreements, leading to increased global production.11 The purpose of cartels like OPEC is to limit the total amount of product on the market. Members of a cartel agree to produce less than they otherwise would, thereby raising the price. Not surprisingly, cartels rarely function smoothly: billions of dollars are at stake as members squabble over total cartel output and the size of each country’s assigned quota.12 Furthermore, whatever the cartel decides, every member has a short-term incentive to cheat (and an even stronger incentive to suspect everyone else of cheating).13 Although successful cartels can reduce output and enrich their members, the process is often acrimonious, and disputes among members are common. The international negotiations among cartel members facilitate adaptation to oil supply shocks for three reasons. The first is simply the raison d’etre of any cartel: when members produce less than they could, they create spare capacity. Cartel members can turn on that slack relatively quickly in response to a supply disruption elsewhere. Second, because cartel mem- bers always have an incentive to cheat by exceeding their output quota, cartel leaders like Saudi Arabia in OPEC usually maintain significant slack capacity to discipline wayward members: too much cheating may arouse the leader to flood the market, driving down prices for everyone.14 The cartel leader’s spare capacity is available to replace barrels of supply lost in a disruption. Finally, oil shocks impede smooth cartel management.15 Global production has dropped, so someone ought to replace it, but who? Each member will want a share. When supply conditions change substantially, the cartel must reopen its delicate, zero-sum negotiations, dividing shares among its members. Every reallocation is an opportunity for disputes, and while the ne- gotiations proceed (often slowly), many members will act on their incentive to exceed their pre-shock production quota. Furthermore, if the disruption is caused by infighting among cartel members—as it was during the Iran-Iraq War and after Iraq’s invasion of Kuwait—the odds of a smooth, coordinated cartel response are slim.16 Because OPEC cartel members tend to possess most of the world’s spare capacity, the breakdown of cartel discipline in the wake of a shock can trigger major increases in global oil production.17 Of course, increased production alone is no panacea for consumers. Spare capacity cannot be tapped instantly, and in rare circumstances, the world’s producers max out their pumping capacity, leaving little slack for crises.18 But market incentives and the political challenges of cartel management mitigate the consequences of most disruptions.19

US economy is not dependent

Kahn, 11 (2/13/11, Jeremy, Boston Globe, “Crude reality”, http://articles.boston.com/2011-02-13/news/29336191_1_crude-oil-shocks-major-oil-producers )

Compared to the 1970s, too, the structure of the US economy offers better insulation from oil price shocks. Today, the country uses half as much energy per dollar of gross domestic product as it did in 1973, according to data from the US Energy Information Administration. Remarkably, the economy consumed less total energy in 2009 than in 1997, even though its GDP rose and the population grew. When it comes time to fill up at the pump, the average US consumer today spends less than 4 percent of his or her disposable income on gasoline, compared with more than 6 percent in 1980. Oil, though crucial, is simply a smaller part of the economy than it once was.

Adaptation solves

Gholz and Press, 10 * Associate professor at the LBJ School of Public Affairs at the University of Texas at Austin, AND ** Associate professor of government at Dartmouth College and coordinator of War and Peace Studies at the John Sloan Dickey Center for International Understanding (Eugene and Daryl G., Security Studies, “Protecting “The Prize”: Oil and the U.S. National Interest”, 19: 3, 453 — 485 http://www.luiss.it/mes/wp content/uploads/2010/02/SecurityStudies_ProtectingThePrizeOilandtheUSNationalInterest.pdf )

Note: Tables removed

Many analyses exaggerate America’s vulnerability to political shocks in the Persian Gulf region because they underestimate the flexibility of the global economy. Producers, wholesalers, shippers, and governments rapidly respond to disruptions, mitigating their effects on consumers. In some respects the cartelized nature of the oil industry facilitates adaptation: cartels seek to preserve spare capacity, and shocks tend to complicate cartel management, leading members to exceed their quotas. These arguments find broad support in our case studies of every major oil shock in the OPEC era.

Empirics go neg

Kahn, 11 (2/13/11, Jeremy, Boston Globe, “Crude reality”, http://articles.boston.com/2011-02-13/news/29336191_1_crude-oil-shocks-major-oil-producers )

There is no denying that the 1973 oil shock was bad — the stock market crashed in response to the sudden spike in oil prices, inflation jumped, and unemployment hit levels not seen since the Great Depression. The 1979 oil shock also had deep and lasting economic effects. Economists now argue, however, that the economic damage was more directly attributable to bad government policy than to the actual supply shortage. Among those who have studied past oil shocks is Ben Bernanke, the current chairman of the Federal Reserve. In 1997, Bernanke analyzed the effects of a sharp rise in fuel prices during three different oil shocks — 1973-75, 1980-82, and 1990-91. He concluded that the major economic damage was caused not by the oil price increases but by the Federal Reserve overreacting and sharply increasing interest rates to head off what it wrongly feared would be a wave of inflation. Today, his view is accepted by most mainstream economists.

No impact to oil shocks

Schulz ‘6

(Max, Senior Fellow @ Manhattan Institute and Former Senior Policy Advisor to the Secretary of Energy, National Review, “Iran's Oil-Weapon Threat Rings Hollow”, 9-19, L/N)

Does Iran have us over a barrel? As the Iranian nuclear crisis worsens, the mullahs in Tehran are trying to forestall American or Israeli military action by threatening to use the "oil weapon." Last month Iran's top nuclear negotiator suggested the country might pull from the world market the 2.5 million barrels of oil it exports daily -- a reprise of the Arab oil embargo of the early 1970s. Another possibility Iran has proposed would be to shut down the Strait of Hormuz, the shipping lane through which other nations' Persian Gulf oil must pass. The implication is that such actions would set off a depth charge in the international energy economy, so the U.S. and its allies should back down. Don't believe it. Certainly Iran's leaders are unhinged enough to try making good on one of those two promises. Either action would send oil soaring, perhaps well over $100 per barrel. Gasoline would spike too, perhaps to $5 or $6 per gallon. The dirty little secret about Iran's threats, however, is though they might cause some pain, they wouldn't cripple our economy. The American economic engine is too strong to be brought to its knees by Iran's machinations, and the weapon Tehran threatens to wield is not as menacing as they would have us believe. Energy Secretary Samuel Bodman noted recently that the United States could weather a hypothetical Iranian oil disruption and foil Tehran's efforts at nuclear blackmail. The United States Strategic Petroleum Reserve currently holds upward of 700 million barrels. The Bush administration would not hesitate to release oil from the reserve if Iran closed its taps. That's the sort of leverage we didn't have during the 1973 energy crisis. But the chief reason this is not your father's oil embargo is that the U.S. economy is much less susceptible to being harmed by an oil shock today than it was during the 1970s. The economy is running at unparalleled strength. It has demonstrated great resilience after taking blows from 9/11, last year's hurricanes, and the general run-up in energy prices over the last five years brought on by increased demand from China and India. We take the hits, absorb them, and move on with little substantial damage incurred. Moreover, the economy is less dependent on oil today than during the Arab oil embargo. We truly are moving beyond the petroleum economy. More than 85 percent of the growth in U.S. energy demand in the last quarter century has been met by electricity, most notably in information technology and telecom. Today, nearly three of every five dollars of GDP come from industries and services that run on electricity. In 1950, just one in five dollars of GDP was electric; the remaining 80 percent of the economy was powered by petroleum. Oil is still vitally important to the American economy, of course, but each year it gets a little less so. And each year, we become more insulated from the sort of economic terrorism Tehran is proposing. While oil prices in excess of $100 per barrel would undoubtedly hurt, particularly at first, the long-term damage would be nowhere as severe as pessimists predict. None of this is to minimize the effect of rising energy prices, which harm consumers and businesses and do have some drag on the economy. But the economic numbers month after month have continued to impress. Clearly skyrocketing petroleum prices so far have not crippled the American economic engine.

Even in the worst case oil shocks real GDP would barely get dented

The Washington Times ‘7 (Helle Dale, “Stopping Iran; Don't ignore regime's vulnerabilities”, 7-25, L/N)

Players in the war game took several steps that mitigated the resulting energy shock within weeks. Quick military action reopened the Strait of Hormuz, the U.S. government employed the Strategic Petroleum Reserve and Congress lifted tariffs on ethanol and temporarily eased regulatory burdens. In addition, legislation to open up ANWR and offshore reserves west of Florida was considered. Even in the worst-case scenario - when the oil shock would send prices of crude to $135 per barrel with the resulting loss of one million U.S. jobs - these relatively modest government actions all but nullified the crisis within six weeks. The resulting increase in the price of crude oil would be a mere $12 per barrel and there would be no job loss. Real U.S. GDP would remain at baseline level and there would be no change in disposable personal income. The lesson clearly is that U.S. government actions have as much to do with the economic consequences of an oil shock as anything else, or even more. In other words, while Iran does hold a set of picture cards in this energy game, it may not hold the winning hand if we play our own cards correctly. Furthermore, there is no doubt that sanctions already in place, imperfect though they are, have done damage to the Iranian economy, and further sanctions cutting off the supply of equipment needed to keep the Iranian oil fields producing at capacity would be crippling. Iraq had a very young population, high unemployment rates and practically no other economic assets beyond its energy sector.

EXT – Drilling Bad for the Economy

Expanding offshore drilling would harm the US economy – poor investment, harms coastal economies, and weather

Zipf 13. Cindy Zipf, executive director of Clean Ocean Action Inc. Wall Street Journal. April 14, 2013. Should the U.S. Expand Offshore Oil Drilling? http://online.wsj.com/news/articles/SB10001424127887324020504578398610851042612 //NM

Expanded offshore drilling for oil in the U.S. would be an unnecessary, harmful step in the wrong direction.¶ Recent trends in U.S. energy consumption and production suggest we don't need to find more oil offshore. Our investment dollars and energies are better spent on renewable energy, conservation and efficiencies such as improved mass transit, smart grids and clean-emission vehicles—an approach that creates jobs, doesn't damage the environment and addresses fossil-fuel-driven climate change.¶ Along the Atlantic, Pacific, Alaskan and Gulf coasts, entire state budgets are built on revenues from clean-ocean economies. Fishing, boating, beach-going, surfing and tourism businesses rely on clean, healthy ecosystems. These businesses bring billions of dollars to coastal economies and provide jobs for millions of people. In light of recent superstorms and increasingly hostile ocean conditions, driven by climate change, shore-based economies are under enough stress without the added burdens imposed by offshore drilling.

No offense - Drilling doesn’t create jobs or help the economy any positive effects are temporary

Zipf 13. Cindy Zipf, executive director of Clean Ocean Action Inc. Wall Street Journal. April 14, 2013. Should the U.S. Expand Offshore Oil Drilling? http://online.wsj.com/news/articles/SB10001424127887324020504578398610851042612 //NM

What would be our reward for knowingly taking these risks? Forget about lower gasoline prices. The U.S. Energy Information Administration estimates that if oil drilling was expanded in all the ocean areas of the lower 48 states, we would only see a three-cent reduction in the price of a gallon of gasoline by 2030.¶ The promise of oil jobs boosting local economies is a hollow one. History is replete with examples of energy companies coming into areas with supposedly struggling economies, claiming to be the solution. Once the extraction infrastructure is built or energy reservoirs are depleted, jobs vanish. This is beginning to play out in the Bakken oil fields in the Dakotas. Areas with already vibrant economies will also lo se when the pollution footprint of expanded oil and gas drilling crowds out clean ocean uses. Investments in renewable energy, efficiency and conservation will produce lasting employment and a higher standard of living throughout the economy without incurring the same risks.¶ Offshore drilling yields too little benefit at too great a cost to our coastal communities, their economies and the environment. Instead, we should be working to build a smarter energy future.

AT: Jobs Internal Link

Not enough jobs are created

Krugman 12 (Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed Page and continues as professor of Economics and International Affairs at Princeton University. Mr. Krugman received his B.A. from Yale University in 1974 and his Ph.D. from MIT in 1977. He has taught at Yale, MIT and Stanford. At MIT he became the Ford International Professor of Economics., 3/15/2012, "Natural Born Drillers", www.nytimes.com/2012/03/16/opinion/krugman-natural-born-drillers.html?_r=2&partner=rss&emc=rss)

Meanwhile, what about jobs? I have to admit that I started laughing when I saw The Wall Street Journal offering North Dakota as a role model. Yes, the oil boom there has pushed unemployment down to 3.2 percent, but that’s only possible because the whole state has fewer residents than metropolitan Albany — so few residents that adding a few thousand jobs in the state’s extractive sector is a really big deal. The comparable-sized fracking boom in Pennsylvania has had hardly any effect on the state’s overall employment picture, because, in the end, not that many jobs are involved. And this tells us that giving the oil companies carte blanche isn’t a serious jobs program. Put it this way: Employment in oil and gas extraction has risen more than 50 percent since the middle of the last decade, but that amounts to only 70,000 jobs, around one-twentieth of 1 percent of total U.S. employment. So the idea that drill, baby, drill can cure our jobs deficit is basically a joke.

doesn’t solve unemployment – aff data biased, too small, too slow, steals from other sectors,

Levi 11 (Michael Levi, CFR Energy Security and Climate Change Program Director, Senior Fellow, 10/18/11, “New Energy Jobs Won't Solve the U.S. Unemployment Problem”, www.foreignaffairs.com/articles/136599/michael-levi/new-energy-jobs-wont-solve-the-us-unemployment-problem)

U.S. President Barack Obama and the leading Republican candidates for president don't agree on much, particularly when it comes to jobs and energy. But they do appear to share a conviction that a vibrant energy sector is central to solving the U.S. unemployment problem. Obama has put clean energy jobs at the center of his economic message. On the Republican side, both Texas Governor Rick Perry and Mitt Romney, his rival, claim that the oil, gas, and coal industries is where the real future of American job growth lies, contrasting their approach with one that has produced the recent Solyndra debacle. Alas, on the one point on which everyone seemingly agrees, they are all wrong. There is no doubt the energy sector could employ many more Americans. But exactly how many matters. The Republican candidates have made bold and concrete predictions. Perry is running on his record of job creation in Texas, which included a big boost from the booming oil and gas sector employment. Romney claims that expanded drilling could create 1.2 million energy jobs and that shale gas operations in the Northeast could add another 280,000 and Perry offers similar numbers. This is an exaggeration. The American Petroleum Institute, which is hardly an impartial arbiter (it is the oil industry lobby), projects that opening all U.S. lands to drilling while loosening a range of regulations would create 400,000 new energy-sector jobs and perhaps one million support and spinoff jobs by 2030. The real potential for oil and gas jobs is smaller. For his part, Obama placed clean-energy jobs at the core of his economic recovery plans, promising five million by 2030 if his energy plans were enacted into law. The Center for American Progress, a liberal-leaning think tank that is inclined to be favorable to the president, estimated that his plans could have actually created about 1.8 million jobs at clean-energy businesses and their suppliers. Either way, Republicans and some Democrats have blocked most of the clean energy policies that the president advocated. The problem is that even if Obama, Perry, and Romney all had their way and, in fact, created millions of energy sector jobs, these numbers would be incommensurate with the scale of the United States' current employment challenge. In a country where 14 million job seekers are unemployed and an additional 9.3 million are involuntarily working part time, energy jobs will not bridge the gap. And many, if not most, of the promised jobs -- whether in oil drilling or turbine manufacturing -- would take more than a decade to materialize. Setting aside such problems, the full complement of jobs promised by the American Petroleum Institute and the Center for American Progress would tweak unemployment by about one percent. All of this also fails to mention that in the longer term, many if not most of the new jobs would come at the expense of employment in other sectors, pushing those job creation numbers down even further. The underwhelming numbers should not be surprising. After all, energy production is not a large part of the U.S. economy. The mining sector -- which includes oil, gas, and coal production -- makes up only 1.9 percent of U.S. GDP. The utilities sector, which includes both clean and traditional energy production as well as a wide range of other activities, adds another 1.9 percent. Motor vehicle manufacturing accounts for 0.9 percent more. This is nothing to scoff at -- in real terms it means nearly a trillion dollars per year -- but national prosperity will not come from jobs growth in sectors that collectively make up less than five percent of the economy.

Doesn’t solve jobs – they only cause job shifting and structural factors are key

Levi 12 – Senior Fellow (at CFR) for Energy and the Environment and Director of the Program on Energy Security and Climate Change (Michael, July/August, “Think Again: The American Energy Boom” http://www.foreignpolicy.com/articles/2012/06/18/think_again_the_american_energy_boom?page=full) Jacome

"The U.S. Energy Boom Will Create Millions of New Jobs."

Overstated. The U.S. oil and gas boom has come at an auspicious time. With record numbers of Americans out of work, hydrocarbon production is helping create much-needed jobs in communities from Pennsylvania to North Dakota. Shale gas production alone accounted for an estimated 600,000 U.S. jobs as of 2010, according to the consultancy IHS CERA.

It's much harder, though, to extrapolate into the future. In a deeply depressed economy, new development can put people to work without reducing employment elsewhere. That's why boom states have benefited massively in recent years. The same is not true, though, in a more normal economy. Unemployment rates are typically determined by fundamental factors such as the ease of hiring and firing and the match between skills that employers need and that workers have. The oil and gas boom won't change these much.

That's why we should be skeptical about rosy projections of millions of new jobs. Wood MacKenzie, for example, claims that the energy boom could deliver as many as 1.1 million jobs by 2020, while Citigroup forecasts a whopping 3.6 million. Unless the U.S. economy remains deep in the doldrums for another decade, these will mostly come at the expense of jobs elsewhere.

EXT – No War

Economic decline doesn’t cause war

Jervis, 11 (Professor PolSci Columbia, ’11 (Robert, December, “Force in Our Times” Survival, Vol 25 No 4, p 403-425)

Even if war is still seen as evil, the security community could be dissolved if severe conflicts of interest were to arise. Could the more peaceful world generate new interests that would bring the members of the community into sharp disputes? 45 A zero-sum sense of status would be one example, perhaps linked to a steep rise in nationalism. More likely would be a worsening of the current economic difficulties, which could itself produce greater nationalism, undermine democracy and bring back old-fashioned beggar-my-neighbor economic policies. While these dangers are real, it is hard to believe that the conflicts could be great enough to lead the members of the community to contemplate fighting each other. It is not so much that economic interdependence has proceeded to the point where it could not be reversed – states that were more internally interdependent than anything seen internationally have fought bloody civil wars. Rather it is that even if the more extreme versions of free trade and economic liberalism become discredited, it is hard to see how without building on a preexisting high level of political conflict leaders and mass opinion would come to believe that their countries could prosper by impoverishing or even attacking others. Is it possible that problems will not only become severe, but that people will entertain the thought that they have to be solved by war? While a pessimist could note that this argument does not appear as outlandish as it did before the financial crisis, an optimist could reply (correctly, in my view) that the very fact that we have seen such a sharp economic down-turn without anyone suggesting that force of arms is the solution shows that even if bad times bring about greater economic conflict, it will not make war thinkable.

Economic collapse doesn’t cause instability

Zakaria, 9 (Fareed Zakaria was named editor of Newsweek International in October 2000, overseeing all Newsweek editions abroad, December 12, 2009, “The Secrets of Stability,” http://www.newsweek.com/2009/12 /11/the-secrets-of-stability.html)

Others predicted that these economic shocks would lead to political instability and violence in the worst-hit countries. At his confirmation hearing in February, the new U.S. director of national intelligence, Adm. Dennis Blair, cautioned the Senate that "the financial crisis and global recession are likely to produce a wave of economic crises in emerging-market nations over the next year." Hillary Clinton endorsed this grim view. And she was hardly alone. Foreign Policy ran a cover story predicting serious unrest in several emerging markets. Of one thing everyone was sure: nothing would ever be the same again. Not the financial industry, not capitalism, not globalization. One year later, how much has the world really changed? Well, Wall Street is home to two fewer investment banks (three, if you count Merrill Lynch). Some regional banks have gone bust. There was some turmoil in Moldova and (entirely unrelated to the financial crisis) in Iran. Severe problems remain, like high unemployment in the West, and we face new problems caused by responses to the crisis—soaring debt and fears of inflation. But overall, things look nothing like they did in the 1930s. The predictions of economic and political collapse have not materialized at all.

AT: Peak Oil

No impact to peak oil or $125 a barrel

Luskin 3/29 (Donald L, chief investment officer at Trend Macrolytics LLC and the co-author with Andrew Greta of "I Am John Galt," out in May by Wiley & Sons, “Oil Prices Won't Kill the Recovery”, 2011, http://online.wsj.com/article/SB10001424052748704893604576200392973262006.html?mod=googlenews_wsj)

Will the spike in oil prices emanating from instability in the Middle East be enough to derail the U.S. economic recovery, just when it's finally building up a head of steam? Surely it's not helpful. But while our collective memory and intuition about oil shocks may cause us to fear the worst, a clear-eyed look at the data suggests that oil prices may have to rise considerably higher to trigger a U.S. recession. The oil shocks of the 1970s and early '80s, which caused deep recessions, were so epochal that we're conditioned to assume that any rise in oil prices is bad for growth and any fall is good. Yet historical data tells us that most oil-price changes are not correlated with future changes in real output growth. For example, oil prices rose steadily throughout the mid-2000s while growth remained strong. Where oil prices do matter to growth is in extremis, in those rare cases when an extraordinary and rapid oil-price change creates an economic shock. But it's difficult to come up with a simple rule that tells us when an oil shock is enough to cause a recession—or not. Crude oil prices as high as $147 a barrel in the summer of 2008, for instance, aren't seen as the cause of the Great Recession. Most observers would cite instead the fall of Lehman Brothers and the banking crisis that immediately followed, events that occurred at roughly the same time. Let's just accept that oil shocks matter. Is today's oil price of about $104 a barrel in the U.S. (and $115 globally) a shock? To be a shock, it has to be big. And "big" is a matter of context. Yes, today's oil prices are more than 30% higher than they were a year ago. That sounds big. But at the same time, they are more than 30% lower than they were less than three years ago. That's big, too, but in the opposite direction. Which context counts? Research by economist James Hamilton of the University of California, San Diego suggests that oil prices imperil the economy when they reach a new three-year high. Steven Kopits, managing director of the energy consulting firm Douglas-Westwood, says the overall economy is threatened when the 12-month average oil price exceeds the year-ago 12-month average price by more than half. Below those levels consumer and investor expectations aren't sufficiently disrupted to make a difference. Both conditions are very far from being triggered at today's prices. To be a shock, it has to be a surprise, and in one sense the current situation is: Despite all the pessimistic narratives that have overhung the economy during the last six quarters of recovery—housing double-dip, insolvent states and municipalities, collapse of the euro zone, real estate bubble in China, and so on—virtually nobody was predicting that the Middle East would be ept with contagious regime change spread via Facebook and Twitter. That said, should anyone really be surprised to learn that the Middle East is politically volatile? No, and things there might get crazier. But if the history of the region has taught us anything, it is that whoever controls the oil always eventually ends up selling it to the developed world, often despite their ravings about the developed world's imperialist evils. In the meantime, Saudi Arabia has committed to make up for any transitory shortfalls. Pumping an additional one million barrels a day would not be a stretch for the Saudis—doing so would merely bring the Kingdom's production levels back up to mid-2008 levels. So even if we now face a shock, it will be transitory, and it will be buffered. That's why, for all the uncertainty, oil is now $104 a barrel, not $1,000 a barrel. More importantly, the U.S. economy is today well-positioned to absorb an oil spike without experiencing it as an oil shock. First, we're nowhere near peak oil consumption, which we hit in August 2005 at 21.7 million barrels per day. We're now 9% below that, even though consumption has recovered substantially since its worst levels of the Great Recession in September 2008. The last three recessions—those that started in 1990, 2001 and 2008—began only after oil consumption reached new peak levels. Economies in the early stages of recovery, like ours today, are less vulnerable to oil shocks than those in the late stages of expansion. As a business cycle matures, the economy experiences diminishing returns from any given factor of production—labor, credit, oil or anything else. When a recovery is still new, large gains can be levered from relatively modest increases in inputs, so the economy can afford to pay more for those inputs. We've also grown much more efficient when it comes to energy consumption. It may come as a surprise to many, but today in the U.S. we're consuming the same amount of crude oil that we did 12 years ago and real output is more than 25% higher. For all the talk of our being the planet's most villainous energy hog, we've become remarkably oil efficient. Finally, this oil spike is coming at a fortuitous moment in American politics. President Obama, tacking to the political center after his party's self-described "shellacking" in last year's midterm elections, said earlier this month that he wants to "increase domestic oil production in the short and medium term." That may be the most shocking thing about this oil spike.