Baker Institute report proposes strategies to ensure global energy security

A new policy report released by Rice University’s Baker Institute for Public Policy suggests strategies to deal with the current turmoil in the global energy markets, including the role of petrodollars in the U.S. credit bubble.

“Sharp changes in energy prices are having dramatic effects on the stability of the global economy,” the report states. “Threats to the global energy market could have dangerous corresponding impacts on the world financial system.”

“Petrodollar flows play a major role in the current credit-bubble dilemma,” according to the report. Mahmoud El-Gamal, Rice professor of economics and a scholar at the Baker Institute who helped write the report, said the excess liquidity that resulted from the run-up in oil prices after 2003 partly fueled the subprime mortgage crisis. While the money coming from East Asia also played a role, El-Gamal noted that the outflow from Saudi Arabia and Kuwait now rivals that from China.

The Baker Institute report calls for international coordination to avoid a “global meltdown.”

Rice University

Report (PDF)