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Fracking Policy, Environmental Justice and Vulnerable communities



Fracking Policy, Environmental Justice and

Vulnerable communities

Carol Blenda Ilievski


Like most industries in our country, fracking has good and imperfect points. Fracking is a technological breakthrough that has dramatically increased the energy supply to the entire economy and has led to substantial increases in U.S.A. domestic oil and gas production, thereby remarkably lessening the need for fossil fuel imports. In the latter, it has been linked with contaminated drinking water due to the chemicals injected in the process. The process itself increased the incidence of earthquakes, which is undoubtedly harmful. There is also some evidence that fracking would not exist, at least not to the present extent, were it not for the lack of policies regulating this industry, government subsidies, and misallocated resources. Despite the benefits of energy security for the nation, job creation, and economic gains, there are potential environmental and socio-economic risks to communities along the path of this industry associated with this unconventional extraction of oil and gas.


            Fracking nowadays has become a controversial industry around the world. While most European countries have banned this practice, the United States has economically benefited from fracking. In later years, researchers laid out scientific evidence linking fracking to adverse health outcomes. At the same time, policy experts examined the extent to which the public’s health is considered in the development and operation of fracking regulation and the impediments to further regulation on both the state and federal levels. In recent years, comprehensive research has shown that communities living near hydraulic fracturing wells and their surrounding infrastructure are at risk of multiple health problems. With the knowledge of fracking’s harmful effects comes the ethical question of who bears these risks and what legislation is doing to correct or create change for the affected communities.

            The lack of federal policies and regulations has created a boom in the industry which has helped the U.S.A.’s oil dependency. Nevertheless, public health and environmental justice advocates speak about effective policy solutions and partnering with affected communities to correct this industry’s responsibilities and flaws. This briefing aims to propose federal laws and fracking regulations that Federal, State governments, EPA, and independent consulting companies should execute. Fracking policy proposals and regulations on this issue have been fueled by its exemption in the Safe Drinking Water Act. The development of this policy issue involves the introduction of proposals by several sponsors, committee discussions and reports, and floor debates in both houses of Congress. Nonetheless, policymakers have faced numerous difficulties and failed to date in enacting federal regulations on fracking. Furthermore, this paper looks to explores the leadership of Indigenous advocates, scientists, and policy experts addressing the impact of fracking on their nations and communities trying to suggest innovative legal and advocacy strategies and alternative solutions. This brief examines the ethical concerns created by the fracking industry and how they relate to the three main types of environmental justice for the communities affected by fracking.


Fracking or hydraulic fracturing constitutes a significant issue plaguing America’s energy industry over the last two decades. It may be described as increasing natural gas and oil well production by opening or breaking rock formations through high-pressure fluid injections (Finkel, Hays & Law, 2013). The above extraction mode has garnered significant focus within America as it allows the extraction of gas and oil from shale rock. The process has elevated gas and oil yields in the nation, rendering it one of the world’s largest natural gas and oil producers. Hydraulic fracturing has received considerable attention in policy development. Thus, the United States federal government has embarked on several legislative and administrative initiatives relating to fracking operations for over two decades (Hill, 2021). This practice has been exempted from federal reach, leaving regulation to the states, which appear vulnerable to capture by economic and energy interests.

Likewise, litigation about fracking for coal-bed methane (CBM) gas was not regulated under the Safe Drinking Water Act (SDWA). This act controls and regulates underground injection activities through its Underground Injection Control Program, which includes Class II wells linked to oil production and natural gas. While fracking is a national issue, it is currently exempted from national environmental laws and all requirements of the Safe Drinking Water Act  (Cupas, 2008). Given this exemption, the regulation of hydraulic fracturing or fracking has primarily been made at the state level. However, the U.S. energy sector has generated a need for changes in the regulation of hydraulic fracturing. The needs surrounding fracking policy have, in turn, acted as the historical and political context for formulating federal regulations on this issue. Most federal laws put forward on fracking have yet to be ratified. Sponsored by several senators and House Representatives, appropriate committees have taken up these laws. These committees have been acquainted with and received referrals of recommended fracking-related resolutions, discussed before being forwarded to the entire chamber. Since the first introduction of the 2009 Fracturing Responsibility and Awareness of Chemicals Act, it has yet to be ratified despite being re-introduced four more times (Coton, 2017). Challenges to implementing these federal rules may be ascribed to state policy establishment and control over drilling undertakings (Spence, 2014). The Fracking policy history is plagued with controversy and constant delays. To better understand the negligence over the issue, a timeline is disclosed below.


  • In 1950, hydraulic fracturing was used for the first time in Canada in the Carmiun oil field in central Alberta.
  • Fracking legislation in the nation dates back to 1974, the year of enactment of the Safe Drinking Water Act SDWA, which instituted novel rules and standards for safeguarding underground drinking water sources. Despite its 25- year- long commercial use, SDWA failed to take fracking into account and was never taken into account for regulations under SDWA.
  • In 1986, SDWA was amended to regulate more than 100 specific contaminants. Hydraulic fracturing, now commercially utilized for nearly forty years, is not considered for any new regulations and amendments.
  • In 1994, the LEAF (Legal Environmental Assistance Foundation) appealed to the E.P.A.for the withdrawal of authorization to conduct underground injection control in Alabama, contending that SDWA necessitated E.P.A. regulation of fracking (Rahm, 2011). ThenEPA Administrator (and later President Obama’s climate and energy advisor) Carol Browner stated that “E.P.A. does not regulate – and does not believe it is legally required to regulate – the hydraulic fracturing of methane gas production wells under its U.I.C. program (under the Safe Drinking Water Act).” ( Fisher, 2010). In that same document, Browner says there was “no evidence” of hydraulic fracturing contaminating groundwater.
  • In August 1996: SDWA was amended again to emphasize sound science and standards. Hydraulic fracturing is not considered for regulation.
  • In 1997, LEAF appealed E.P.A.’s position (in LEAF v. U.S.A. E.P.A.) on Alabama’s U.I.C. program, arguing once again that the Safe Drinking Water Act requires E.P.A. to regulate hydraulic fracturing of coalbed methane.
  • By 1999: In reply to the LEAF decision, the State Oil and Gas Board of the State of Alabama promulgated new rules and regulations on hydraulic fracturing, which the E.P.A. approved a year later. LEAF appeals the Board’s new regulations to the 11th U.S. Circuit Court of Appeals. The Court ultimately sides with E.P.A. and the State Oil and Gas Board of Alabama, agreeing that the state’s regulatory system is an “effective program to prevent endangerment of underground drinking water sources.”
  • P.A., in 2000, initiated its study of fracking. Using only 0.5 trillion cubic feet (tcf) of production, natural gas from shale (Kbledsoe,2013) roughly accounts for one percent of America’s total natural gas production.
  • In August 2002, E.P.A. released a draft of its study of hydraulic fracturing, which affirms that the technology does not pose a risk to drinking water. E.P.A.’s conclusion that fracking did not merit further research. (Wise. 2009)
  • In June 2004: E.P.A. completed a four years study on hydraulic fracturing. This study began under the previous administration, which determined that fracking technology poses only a “minimal” threat to water supplies and that there are “no confirmed cases” linking hydraulic fracturing to drinking water contamination. (Peiserich, 2012)
  • The 2005 Energy Policy Act provides for the unintentional codification of fracking regulation by the SDWA. Three years later, large-scale sampling and examinations by the COGCC (Colorado Oil & Gas Conservation Commission) indicated no drinking water effects of gas and oil (Davis, 2012). This year also witnesses the “Halliburton loophole’, which exempts fracking from the Safe Drinking Water Act. This loophole established that in a two-hectare site, up to 16 wells can be drilled, servicing up to 1.5 square kilometers in area and using more than 300 million liters of water and additives. It also enables around one-fifth of the fracking fluid to flow back up the well to the surface in the first two weeks, with more continuing to flow out over the lifetime of the well.
  • The year 2009 witnessed several house representatives, with Democrat Colorado representative Diana DeGette, at the head, introducing FRAC, intended to rewrite SDWA goals. However, it was rendered unsuccessful by opponents who claimed the proposal aimed at creating a novel, possibly- intrusive regulatory initiative (Heikkila et al., 2014). Meanwhile, state regulators from across the country defend the safety record of hydraulic fracturing. The U.S. House of Representatives introduced the Fracking Responsibility and Awareness of Chemicals Act to repeal fracking’s other exemption from the SDWA, Clean Air, and Clean Water Acts in 2005. The act never came to a vote.
  • In 2010, Wyoming ratified legislation necessitating disclosing additives utilized in fracking. In the same year, Arkansas implemented novel regulations necessitating disclosing additives utilized in the fracking process, a step taken by Pennsylvania, Louisiana, Michigan, and Montana in the following year.
  • In 2011, Pennsylvania, Louisiana, and Montana opted for regulations to disclose hydraulic fracturing fluids and additives used during hydraulic fracturing. Colorado and Texas utilize the FracFocus website to implement their laws regulating fracking.
  • During President Obama’s State of the Union address in 2012, natural gas production from shale was strongly supported. A few months later, the E.P.A. issued a draft report claiming no proof of fracking contaminating drinking water (Konschnik & Boling, 2014).
  • In December 2019, E.P.A. temporarily expanded the voluntary self-audit and disclosure program for upstream oil and natural gas facilities (E.P.A., 2012), allowing existing owners to find, correct, and self-disclose Clean Air Act violations.
  • In 2022, Biden’s administration allowed fracking in all offshore oil and gas wells leased in federal waters off California. The 9th Circuit’s June ruling uncovered that the federal government violated the National Environmental Policy Act, Endangered Species Act, and Coastal Zone Management Act. The appeals court order prohibits the Department of the Interior from allocating fracking permits until it completes the Endangered Species Act consultation and an environmental impact statement that “fully and fairly evaluate[s] all reasonable alternatives.” The decision resulted from three separate lawsuits filed by the Center, the state of California, and other organizations. (Center for Biological Research, 2022) .Center scientists have found that over ten fracking chemicals routinely used in offshore fracking can kill or harm diverse marine species, including sea otters and fish. The California Council on Science and Technology identified some fracking chemicals as the most toxic in the world to marine animals.
  • As November 7, 2022, SB 112-02: Fuel Inflation Reduction Act, considered the most significant climate legislation in U.S. history, is under debate. Section 3 about fracking states that: Beginning on January 1, 2025, the practice of hydraulic fracturing for oil and natural gas is prohibited on all onshore and offshore land in the USA. Nevertheless, the president may suspend this section during a declared state of emergency.


            One of the primary pollutants released in fracking is methane, a greenhouse gas that traps 25 times more heat than carbon dioxide. Research indicates that the U.S. oil and gas industry emits 16.9 million metric tons of methane yearly, according to the International Energy Agency (IEA, 2022). Some methane is inadvertently leaked via defective equipment or intentionally released into the atmosphere between extractions. E.P.A. estimates that the U.S. accounts for more methane emissions than 164 countries combined. (E.P.A., 2021). Without a comprehensive policy, these irregularities continue unchecked throughout the nation.


The following Ishikawa diagram illustrated in figure 1, exposes the problems, causes, and sub-causes of the policy problem. Fracking, to date, is not federally regulated. The Ishikawa diagram reflects directly on the government and its capability to create comprehensive regulations at the federal level. All this lack of regulations is fueled by the market, the high demand for energy in the USA, and lower oil prices. The primary federal environmental laws regulating hazardous waste, air, and water pollution have vital loopholes and several exemptions for fracking and other oil and gas enterprises.

As we have seen from the Fracking timeline, EPA does not control nor regulate hydraulic fracturing under its groundwater protection laws or Safe Drinking Water Act due to an amendment to the 2005 Energy Policy Act. the “Halliburton Loophole.” (Alcanzare, 2015). This loophole protects companies like Halliburton from regulations requiring them to disclose the chemicals they inject underground. State agencies that regulate fracking are understaffed, creating a lack of control and inspections. Fracking grows exponentially while agency member remains, usually the same over the years.

Figure 1: Ishikawa Diagram


Environmental impact assessment should be done before all fracking and even exploration operations. Faulty wells pose a significant risk of pollution. Consequently, the quality of construction of a well must be regulated effectively. Toxic substances and effects from fracking activities, such as radioactive elements, need proper disposal; thus, the US government needs adequate regulation. For instance, disposing of water underground should be outlawed.

In order to make the policy stronger, fracking companies should be required to deposit enough bonds to cover possible compensation claims in the future. Such bonds should also be sufficient to cover the cost of cleaning up once the well’s lifecycle ends. Failure to have such bonds and resources for restoring and cleaning open coal mines is already a major environmental and social problem that fracking can use as a guide. The local governments, federal and environmental institutions like the EPA should work together to build water management plans specific to projects to prevent the wastage of water, taking into account communities, their needs and afflictions. They should be required to ensure that water flows can be traced. Such plans should consider the effect of the various seasons on water availability. Design plans to manage emissions into the air and minimize their operations’ negative impact on the communities and biodiversity. Harness gases for later use, reduce flaring, and prevent venting. Operations need to ensure that emissions of air at the stages of explorations and production are reduced by gas capturing and using it subsequently. Air pollutants such as methane should be restricted to critical operational purposes for the sake of safety (Jackson et al., 2011). An explicit disclosure of chemicals used and a ban on using trade secrets to conceal chemicals used in oil and gas extraction are necessary to create mitigation plans and guarantee the communities’ safety.

Create risk management plans and institute measures to mitigate and reduce effects, including response plans. Report any incidences and accidents that would affect the communities to the competent authorities immediately when they happen. Such a report should incorporate the cause of the incidence, the effects, and the remedial steps. Finally, those agencies regulating fracking operations at State and Federal level need an injection of trained human capital to supervise better and enforce all possible changes.


Hydraulic fracturing, horizontal drilling, and shale-gas extraction would gain from:

  • Better scientific study and coordination of all stakeholders.
  • Reviewing possible health consequences of methane and similar hydrocarbons found in drinking water.
  • Industry-guided approaches for the development of safer and consistent technologies for extraction.
  • Possible strengthening of federal and state regulation. Other related areas of interest not discussed in this paper but would gain from further research include the disposal and treatment of wastewater. The practices include the treatment of wastewater and release into rivers and surface streams or injecting waste into the earth.

As the USA continues to invent new methods of accessing energy resources that have not been used before, methods such as hydraulic fracturing increase in usage for the extraction of oil and gas reserves. Questions raised in this paper are set to be asked more frequently. A holistic approach to industry regulation and supervision using empirical data based on relevant federal and state oversight will chart a positive direction for energy extraction technologies for the future.


Maintenance of the current state of affairs about free market rules and governmental policies will potentially continually check short-run public expenses. However, it will not contribute sufficiently to furthering response to concerns about hydraulic fracturing’s possible negative impacts on communities and nature. Natural gas supplies will constantly grow, constraining the growth of energy rates or lowering them and possibly generating income from forex. If the community and environmental concerns go unsubstantiated, at the very least, economic growth will not be impacted, and public expenditure will have been curbed.

Nevertheless, the substantiation of the above concerns will render extant policies too little too late, leading to potential acute environmental damage or bankruptcy of communities addressing bust-boom impacts. Relevant policy alternatives include federal laws, conditions mandatory for fracking operators, chemical disclosure conditions, Environmental Protection Agency (EPA) supervision and monitoring, drilling site limitations, water supply-linked requisites, and the procurement of an ample number of competent regulators. Fracking’s continued air pollution leads to climate change and health risks.  Table 1 shows risk identification for stakeholders.

Who is involved? Describe the vulnerability
Federal Government •       Lobbyists working for large oil companies pouring millions into traditional fuel energy.

•       Congress people and their alliance with the oil companies.

•       Companies which get government subsidies, and misallocated resources.  •             Previous regulations and existent loopholes that benefit oil companies.  Increase reliance in foreign fossil fuels.

State Governments •     Lost of income from the fracking industry  •       Jeopardizes newfound ways of energy securities

Shortage of oil and gas production and distribution

APA and other

Environmental Agencies.

•       Zero control over fracking

•       Lack of accountability of oil companies

Lack of disclosure about chemicals used and methods

Oil and gas Industry •     New regulations can decrease earnings making the industry unprofitable under their standards.

Lack of innovation to ensure a transition that abides to possible change on policy.

Communities and People •       Contaminated water,

•       Seismic problems in fracking regions

•       Low power compared to oil companies

Most people don’t care as long as gas price is low in the pump.

 Table 1: Risk Identification of stakeholders


The country, especially those communities affected by fracking, needs a policy change at all power levels. By amending the SDWA to change the frustratingly and nearsighted  Energy Policy Act of 2005,  the EPA would be given the discretion to set rules for acceptable parameters on contamination levels for chemicals and technology used in fracking and control gas-oil companies’ activity. A new bill to regulate the fracking industry would also be a reasonable option. Nevertheless, small steps are welcome, considering the speed of changes in the last decades. For consideration, we present the recap of the solutions analysis on table 2 and the solution matrix on table 3.

Solution Analysis Table 


Stakeholders Implementation


Required Capabilities
Federal Regulation


Congress, Legislative, executive and judicial branches


Create comprehensive regulations for fracking so they are part of the clear act water.


State Governments


Governors, legislative branch of the State’s



Enforce the federal regulations and avoid loopholes. Train human capital, create a bonds system to guarantee safe operations. Train human resources and hire more supervisors.



Protection Agency –


EPA board, General Administrator, State administrators Assessment of the potential impacts of oil and gas hydraulic fracturing activities on the quality and quantity of drinking water resources in the United States


Communities Affected



activists, advocates.

Communities need more involvement in opposition to unregulated practices. There are plenty of ways to make their voice heard at the

federal, state, and local levels to create awareness of Environmental Justice.

 Table 2: Recap of the solution analysis

Solution Matrix

Politically Supportable
Organizationally Implementable
Solution 1
A federal regulation to which all States abide to and it is equal for all.
To date, the government has not been able to implement a fracking policy. At this point, something radical will need to
happen to motivate the change
In the USA, we have environmental agencies capable to take care to implement a federal policy that right now, cannot act or do not have a saying in the subject like EPA
Solution 2
Federal Disclosure of procedures and chemicals used
Disclosure of chemicals and procedures used so we know what it is getting injected in our soil and its effects.
Companies have found loopholes in previous regulations to continue perforations and do not disclose their procedures, it will all depend in the lobbyist and initiative that congress people may take
Once companies are enforced to disclose procedures and chemicals used in all fracking fields, environmental agencies and regulation can change their operations to meet the best interest of the people
Solution 3
The local  governments, federal
and institution like the
EPA, The
Department of  Energy (DOE), The
Department of the Interior- The U.S.  Fish and Wildlife
Service (FWS),
National Park Service, USGS should work together so they can build water management plans
It will be easier to implement a federal policy or changes in the regulation if the federal environmental agencies like the  Department of Agriculture, Department of Energy, U.S. Environmental Protection
Agency,  Fish and Wildlife Service,
Forest Service, Geological Survey,
National Oceanic and Atmospheric
Administration, National Weather
Service, the federal government and State governments work together. They will get all the support needed to implement a possible policy implementation and change.
They should be required to ensure that water flows can be traced. Such plans should consider the effect of the various seasons on water availability. Design plans to manage emissions into the air and minimize their operations’ negative impact on the communities and biodiversity. Harness gases for later use, reduce flaring, and prevent venting. Operations need to ensure that emissions of air at the stages of explorations and production are reduced by gas capturing and using it subsequently. Water deserves special attention, not only the ground currents but also those underground.
Status Quo
Keep the regulations as they are so every State is responsible to execute and implement their own policies.
Each State should be responsible for the outcome of its regulations, and the central government should keep a Status Quo in the current regulations or the lack of regulations.
Everything remains the same, and it is up to each State government to generate changes and regulations or keep the Status Quo.

Table 3: Solution Matrix



In order to complement federal and state laws, additional complexity materializes when jurisdictions overlap or even work together, which makes the policy weak. Concerning hydraulic fracturing, federal laws are usually administered by the B.L.M. (Bureau of Land Management) and E.P.A. Nevertheless, E.P.A. might assign some of its power to state-level legislation making a solid move toward a federal policy. The fracking sector in the U.S.A. requires a federal law designed to regulate and govern it. One of the possible laws that should be turned into legislation is the FRAC Act. If there is no legally binding and effective legislation, communities and the environment in the U.S.A. are bound to remain unprotected creating uncertainty. Below, in table 4 we present the log frame in the theory of change

Federal regulations on fracking
Congress approves a federal regulation, all states and companies involved change their operations within the assigned time frame.
Equal regulations in all states, regulation on chemicals and procedures used.
Change in legislation stops the already existent loopholes used by energy companies. Disclosure or chemicals used
Output or Outcome
EPA gets involved at a federal level. Clean water act regulates fracking.
The clean water act and intervention of EPA should create a more comprehensive policy in the country.
Companies stop the loopholes in regulations and disclose valuable information about the chemical used.
Knowing procedures and chemicals used, helps mitigate the pollution and penalizes any wrongdoing by companies.
Stop pollution of underground water and soils, decrees air pollution, preserve nature.
Pollution reduces, earthquakes are not generated, water remain clean, new technology develops to comply regulations. Communities have a better chance for Environmental Justice.

 Table 4: Log frame in the theory of change


When it comes to fracking, we encounter several stakeholders. Each holds different interests, and they get motivated by different outcomes regarding the future of fracking. Table 6 exposes how these players get affected by possible solutions that may be adapted when changing the fracking policy and their interests in the solutions.

Stakeholder How is this stakeholder affected by the solution? How can this stakeholder affect its adoption? Interests/Incentives: What does the stakeholder care about? Is their interest in the solution high, medium, or low?
Federal government
The federal government wants to wash its hands and leave fracking regulation to State governments.
The federal government’s interests and incentives to find a solution are low. Too often, Washington ignores the complexities inherent in our vast and diverse nation and reverts its decisions to a one-size-fits-all approach in which Washington “knows” best.
For them, the fundamental question is: Who is best suited to protect the health and safety of each region — State regulations, experienced regulators, geologists, or somebody in Washington? Unfortunately, anyone but them.
Local governments
Local governments enjoy the status quo expecting more funding and the generation of more revenue for their States.
The state government’s interests and incentives to find a solution are low. In the Eyes of State regulators, they assume that they know their natural resources. They know the local geology, geography, and production characteristics, making them better suited to regulate local energy producers than remote federal bureaucrats. Their interest is focused on bigger and better revenues and more federal funding to take care of the issues generated by fracking
EPA and other



EPA and other environmental agencies need to have enough power to control fracking. Right now, it has none, and the industry has found loopholes and benefits from the lack of federal regulations.
The environmental interests and incentives to find a solution is high. EPA and other agencies should regulate and track many fracking wells, which will challenge current industries. There is a need to deploy enough staff to provide resources for practical work. It has been noted with concern recently that EPA staff have been reduced over the years. Regulators should also have enough expertise in all fracking-related issues, including well safety (Heikkila et al., 2014). More funding will be allocated to environmental agencies.




EPA needs to have enough power to control fracking, right now, it has non and the industry has found loopholes all over.
The environmental interests and incentives to find a solution is high. Public health, districts affected by fracking, and environmental justice supporters demand adequate policy solutions and partnering with affected communities. The solutions should feature the leadership of Indigenous advocates, scientists, and policy experts addressing the disparate impact of fracking on their nations and communities by designing innovative legal and advocacy approaches and alternative resolutions in which they are involved directly.
Companies involved in Fracking
Any possible regulation, affects the economic gain of oil-gas companies involved in the fracking industry
The environmental interests and incentives to find a solution is extremely low. They are interested to delay any possible regulations to maximize profits.

Table 6: Stakeholders interests and incentives


  • Companies producing oil through fracking – Federal government. The country needs more oil to stop depending on foreign energy’s the companies are willing to help as long as regulations make the endeavor highly profitable. A similar situation occurs with state governments.
  • The federal government – state government. No explicit agreement on who is in charge of the regulations. Local Governments cannot go against the federally created loopholes in the regulations, which companies take advantage of.
  • EPA and Environmental Agencies- Local and Federal governments. EPA needs more power and new regulations to tackle the issue. They have the Environmental expertise but need more power or resources allocated to make the changes.
  • Communities – Everybody else. Communities have the lower hand at the bargaining table. Minority communities are disproportionately located near and thus negatively impacted by shale oil. Communities and activists have pursued redress through the court system and their government representatives. The story of fracking illustrates the critical role played by regulated interests that prefer the state to federal regulation, resulting in a variable, often weak state or federal regulatory regime.


The political supportability solution based on the stakeholder analysis can be interpreted in the Power/ Support Matrix analysis below. The Federal government is the “big player.” Nevertheless, for decades they have shown negligence in supporting any change. They have not explicitly opposed changes but just made themselves invisible at the time to create modifications. That attitude alone makes them stand at the top of the opposition. State Governments and OilGas companies enjoy the Status Quo, which benefits their revenue. Oil companies lobby to keep the federal government bouncing around regulations that never come to effect or find loopholes to operate. With a low power of influence and the most benefit from possible changes in fracking policies are the communities and activists who have created enough buzz to modify several states’ regulations. Still, their power and economic-lobby importance have yet to reach the ears  of the federal government. We can deduce that fracking policy proposals and regulations on this issue have been fueled by its exemption from the Safe Drinking Water Act. The development of this policy involves the introduction of proposals by several sponsors, committee discussions, reports, and floor debates in both houses of Congress. However, policymakers have faced numerous difficulties and failed to date in enacting federal regulations on fracking, as seen in the timeline exposed above. The policy recommendations in this paper are made to make the extraction of natural gas consistent and safer among the extracting companies, communities, and regulating entities at all times and locations. Making decisions relating to the extent of extraction of natural gas regulation must incorporate safety, public health, the need for more energy, and regulation bureaucracy. Research shows that hydraulic fracturing, horizontal drilling, and shale gas extraction would gain from

  • Better scientific study and coordination.
  • Reviewing possible health consequences of methane and similar hydrocarbons found in water for drinking.
  • Industry-guided approaches for the development   Involvement of the affected communities.


Graphic 2: Power Support Matrix


Currently, several environmental laws are seen as having their origins in the federal sphere. Though numerous federal environmental legislations would typically include fracking, several include general gas, oil operational exemptions, and even fracking-specific ones. Exemptions to produce natural gas are authorized under SDWA regulations, the CWA or Clean Water Act, RCRA (Resource Conservation and Recovery Act), and the SDWA’s UIC (Underground

Injection Control) – a regulatory system to inject fluids underground (Obold, 2012). In the same way, Naturally Occurring Radioactive Materials (NORM) do not, as a rule, come under federal regulatory limitations for radioactive material disposal. Thus far, natural gas production emissions were generally below the necessary thresholds for triggering federal air regulation as part of the CAA (Clean Air Act. However, the newly implemented gas well-targeted NSPS (New Source Performance Standards) would need to employ emission control techniques at wells. Its implementation is, at present, pending litigation, with specific provisions in the reassessment phase (Linkov et al., 2014; Ferrell & Sanders, 2013). No federal requisites are in place to mandate disclosure of fracking fluid contents. Still, the BLM (Bureau of Land Management) has put forward a regulation requiring disclosing these fluids’ contents if they are to be utilized on lands it manages.

Furthermore, no less than three congressional bills have been put forward. These bills delegate authority to state governments for the imposition of conditions. The FRESH (Fracturing Regulations are Effective in State Hands) Act) or creating federal disclosure conditions (i.e., the FRAC (Fracturing Responsibility and. Awareness of Chemicals) Act).

Exemption of these facets of natural gas extraction from federal regulation paves the way for state directives. Except for federal law preemptions and prohibitions, states can enact environmental laws, which are, at the very least, as environmentally appropriate as the federal regulations. Municipalities, counties, regional authorities, and some states have enacted “moratoria” on natural gas mining undertakings (Romo, 2014; Sanders & Ferrell, 2013). Such moratoria are generally phrased as short-term and pending the result of specific state reports on the green impacts of methods like hydraulic fracturing. Some other states in the US regulate particular components involving gas extraction procedures.

In addition to federal and state laws, additional complexity materializes when jurisdictions overlap or work together. Regarding hydraulic fracturing, federal laws are usually administered by the BLM and EPA. Nevertheless, EPA might assign some of its power to demand states, described as “collaborative federalism” (Romo, 2014; Sanders & Ferrell, 2013). Finally, municipalities and counties might also have experts in environmental regulatory issues through state regulatory authority. These specialists will help to act through not only health units but also other environmental departments or, in some cases, as “de facto” environmental authorities acquired indirectly via zoning, land usage, along with construction permitting activities (Theodori et al., 2014, pp. 44-46).


The Safe Drinking Water Act (SDWA) Underground Injection Control Program is intended to preserve drinking water from contamination by requiring the EPA or EPA‐authorized states to implement programs that prevent the underground injection of fluids from endangering drinking water. Even though hydraulic fracturing involves the underground injection of fluids, the EPA has never regulated hydraulic fracturing under the SDWA. The 2005 Energy Policy Act codified this by specifically excluding “the underground injection of fluids or propping agents (other than diesel fuels) under hydraulic fracturing operations related to oil, gas, or geothermal production activities” from the definition of “underground injection. Even though diesel was the one explicit additive that still required an underground injection control (UIC) permit when the US congress exempted all other additives from the SDWA, in 2005, diesel was still heavily used between 2005 and 2009 (Elsner, 2016). The use of diesel was discontinued after 2011.

Natural gas companies are not required to disclose the identity of the chemical constituents in hydraulic fracturing fluid under federal law or most state laws and guard the makeup of hydraulic fracturing fluids as a trade secret. Requesting information on the chemical composition of hydraulic fracturing fluids as part of their ongoing study of hydraulic fracturing, indicating that they had the legal authority to compel disclosure if necessary. At this point, it becomes crucial that a federal regulation can be enacted to complete this policy.


  • One of the possible laws that should be turned into legislation is the FRAC Act.
  • The fracking sector in the USA requires a federal law designed to regulate and govern it. If there is no legally binding and effective legislation, communities and the environment in the USA are bound to remain unprotected.
  • Better coordination by all stakeholders and sustained scientific studies
  • Environmental impact assessment should be done before all fracking and even exploration operations. Faulty wells pose a significant risk of pollution. Consequently, a well’s construction quality must be regulated effectively (Clark et al., 2012). Toxic substances and effects from fracking activities, such as radioactive elements, need proper disposal; thus, the US government needs adequate regulation. For instance, disposing of wastewater underground should be outlawed.
  • A review of the potential health consequences of methane and other hydrocarbons in drinking water is necessary.
  • Fracking companies should be required to deposit enough bonds to cover possible compensation claims in the future. Such bonds should also be sufficient to cover the cost of cleaning up once the well’s lifecycle ends. Failure to have such bonds and resources for the restoration and cleaning of open coal mines is already a major environmental and social problem in the state of Colorado (Heikkila et al., 2014).
  • Consider more vital state or federal regulations where communities can have input at all decision-making stages.
  • Industry‐driven approaches to develop safer and more consistent extraction technologies
  • Chemical risk analysis regarding fracking should also focus on the effect of leakage from wells, the piping above the ground, storage, and transportation. These are clear and predictable risks (Finkel et al., 2013).
  • Manufacturers and distributors of substances of chemical nature must disclose and communicate all the possible human exposure scenarios anticipated for substances of fracking. Clear precautionary measures must be stated on any assumptions made in the calculation of the actual adequate control, such as in the cases of storage and flow-back issues (Theodori et al., 2014).
  • There is a need to deploy enough staff to provide resources for effective work. It has been noted with concern that EPA staff have been reduced over the years. Regulators should also have enough expertise in all fracking-related issues, including well safety (Heikkila et al., 2014).
  • Fracking activities should never be carried out near key wildlife sites or underneath, including protection areas such as special protection and conservation areas, Special Scientific interest sections, and National parks (Jenner & Lamadrid, 2013; Jackson et al., 2011). Potential pollution of groundwater sources should be noted seriously, and the protected groundwater zones should be shielded from fracking operations.
  • Local communities should have input in making decisions regarding fracking in their areas.


  • Fracking operators should carry out thorough water and air monitoring within the vicinity of their working sites before, during, and after they have finished their operations. Such a measure will guarantee clear baselines and subsequent pollution is detected
  • Independent geology and groundwater protection experts should continuously inspect to oversee well construction that does not pose a pollution risk. They should ensure that toxic materials are properly disposed of (Evensen, 2015). It should be noted that even where wells are sealed after exhaustion, they are still potential groundwater polluters. Therefore, resources must ensure the remediation of problems if they arise.
  • Systems to detect emerging adverse health effects of fracking activities on the workers at the site, the area residents, wildlife, plants, and livestock should be set up (Theodori et al., 2014).




We live in the shale revolution, and new technologies are speeding up the extraction of oil and gas. However, countries worldwide, especially the USA as the biggest producer, face severe problems with their policy and regulations. The concerns raised go beyond groundwater contamination during the fracking process; they include earthquakes, harmful impacts on the air, climate stability, farming, public health, property values, and the financial vitality of communities.  These issues are likely avoidable problems as new technologies develop. Nations and politicians should be happy to have large new proven gas reserves. While these benefits are apparent, further research is still needed to establish how water is contaminated and how methane is lost to the atmosphere. Further, there is a need for extra oversight to protect the environment and communities from water contamination in areas bordering disposal and extraction sites. The scientific examination by environmental groups and activists found no evidence that fracking extraction can be practiced in a manner that does not endanger communities’ health directly and without threatening the environmental stability upon which public health depends. Nevertheless, our leaders should find a balance and review current policies.

Fracking policy proposals and regulations on this issue have been fueled by its exemption in the Safe Drinking Water Act. The development of this policy issue involves the introduction of proposals by several sponsors, committee discussions and reports, and floor debates in both houses of Congress. However, policymakers have faced numerous difficulties and failed to date in enacting federal regulations on fracking. The policy recommendations above are made to make natural gas extraction consistent and safer among the extracting companies at all times and locations. Making decisions relating to the extent of extraction of natural gas regulation must incorporate safety, public health, the need for more energy, and regulation bureaucracy. As the USA continues to develop new methods of accessing energy resources, methods such as hydraulic fracturing increase in usage for the extraction of oil and gas reserves, questions raised in this paper are set to be asked more frequently. A holistic approach to industry regulation and supervision using empirical data based on relevant federal and state oversight will chart a positive direction for energy extraction technologies for the future


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The Shale Revolution and Emerging Markets



1 Introduction

The global oil and gas shale revolution is arguably one of the largest technology discoveries in decades. What started in a field in Texas not long ago, has turned into a global phenomenon, with ramifications spreading across most  countries, commodities and industries. The high cost of energy is quickly  stimulating  research for new energy supplies, alternative fuels and efficiency gains, with technology as always at the immediate prospect of new developments. In spite of the full impact of this “game changing” revolution, somehow the future is uncertain considering that this is a new energy technology and regulations and environmental issues are not well delimited. Social, politics as well as economics difficulties, come into play regarding this industry – particularly given the perceived links to energy security or independence. With shale oil and gas, many countries can get in the situation were  “they do no longer dependent anymore on the Middle East for its energy needs.”

United States, is the leader in Shale gas and oil technology and production; nevertheless, most of this paper focus in emerging markets and countries studied through this summer class as the potential for shale gas and oil goes beyond North America and its voracious appetite for energy. The shale revolution seems set to play a crucial role today, to provide a major new energy source to facilitate global economic development particularly in emerging markets around the world.

2. Perspective on Energy Trends

The following chart ( Exhibit 1) shows that web searches related to “fracking” have been rising sharply while searches related to “peak oil” are near decade lows, a perfect setup for oil prices to surprise on the upside. The next big question is this: how much of a price increase can the fragile global economy handle at present?

Exhibit : Source Google Trends

Global Dependence on fossil fuels is presenting economic and political challenges in all nations. The high cost of oil and environmental concerns regarding coal greenhouse gas emissions  are stimulating the search for alternative fuels and mitigating technologies. The cost of energy is too high to enable unfettered use of fuels in emerging markets in the same manner as experienced in the United States and Europe during their industrialization. In particular, the heavy reliance on imports of expensive oil is a major source of concern for nations like China and India. These two nations face a dramatic impact on world energy use, and will dominate growth in use over the next 2-3 decades.

Nowadays, China and India are likely to retain an energy mix dominated by coal is the one fuel of which they have strong natural endowment. However, the quest to reduce their footprint  and become “ environmental friendly nations” is essential for  both countries’ long-term energy planning. The accident at Japan’s Fukushima nuclear power facility, is leading to a more rapid substitution of nuclear energy by gas (and coal) in Japan and many other countries, which are rethinking, on the approach to adopting nuclear power  and looking for safer alternatives. China is primarily seeking to protect economic growth and security of supply, and developed nations, which are more heavily influenced by populations now more fearful of nuclear energy and urging a stronger contribution from renewable energy sources.

According to the energy collective, USA production of crude oil and natural gas liquids grew by roughly 2 million barrels per day (MBD) from 2008-12, there is  a similar increase expected by 2020, As a result, United States oil imports are and will be shrinking, scrambling long-established supply patterns. Nonetheless, North America is not the only place where supply and regional extraction of gas and oil is expanding, and  the shale revolution alone in not responsible for this shrinkage, alternative energy from wind, solar panels, geothermal and even tides energy production are getting the world’s oil consumption reduced.

2.1 Non-OECD nations driving growth; reliance on fossil fuels

A latest report from Credit Suisse states that fossil fuels (oil, coal and gas) continue to dominate the energy mix ‒ this includes use of these fuels to generate energy directly, but also consumption as a raw material in broader uses. Hydroelectric power, nuclear power and renewable energy sources make up barely 10% of global primary energy use. Gas has grown its share of the energy mix, at the expense of oil, while coal use has grown too, led by China. energy use in the OECD nations appears to have essentially peaked, partly as a result of the Great Recession, and non-OECD countries have dominated growth in energy use, especially since the early 2000s ( Exhibit 1) the large populations of China and India, combined with rising incomes and rapid industrial development, are at the heart of this trend.


(Exhibit 1) Source: BP Statistical Review of World Energy 2012

3. Emerging Markets and their Impact on Global Gas Markets

3.1 Poland:

Poland has the largest technically recoverable resources (187 tcf according to the EIA), this country is currently the European leader in terms of making things easy for investment, granting licenses and commencing exploration, founded largely on their desire to break dependence on Russian imports. Poland has some of Europe’s most favorable infrastructure and government support for shale exploration and development. The Baltic Basin in northern Poland seems to be the most prospective region with easy accessibility and mild environmental conditions. The Podlasie and Lublin basins of this country also show potential, however, they are  complex areas, with closely spaced faults, which may limit horizontal shale drilling. A fourth area, the Fore-Sudetic Monocline in southwest  region of Poland, is less recognized but has non-marine coaly shale potential similar to Australia’s Cooper Basin. ( Exhibit 2)

From north central Poland to the south east corner is a broad strip with significant shale gas potential. To date, significant activity has developed and  the complexity of Polish legislation and tensions with the EU over the application of EU directives on energy in Poland are little but little a thing from the pass. There has been much hype over the potential but until there is some significant drilling activity all estimates of the potential are little more than guesses. Recently, after a great initial enthusiasm and initial negotiation, companies such as ExxonMobil, Talisman and Marathon Oil threw in the towel and quit the country as new regulations needed for further exploration and operations gets continuously delayed.

3.2 Ukraine

Ukraine as well as many other European nations is dependent on Russian imports, this country, recently awarded licenses to Chevron and Shell. Ukraine has been a less attractive option to foreign investors because of restrictions on the size of exploration areas, which led to Marathon Oil’s exit in 2008. A new government has begun to address these problems and has made important headway on change. Ukraine’s shale gas deposits of 42 trillion cubic feet (1.2 trillion cubic meters), according to the U.S. Energy Information Administration, holds Europe’s third-largest shale gas reserves, sees the development of its energy resources as vital for reducing its dependence on Russian gas imports. This country signed  in January  a production sharing agreement with Shell for the Yuzovka shale gas area, which is expected to eventually provide Ukraine with 20 billion cubic meters of gas a year. But so far, Shell hasn’t been involved in the exploration or development of traditional gas deposits in Ukraine. According to ExxonMobil’s estimation of Ukrainian offshore and continental gas reserves, the country may achieve annual gas production of 45 billion cubic meters by 2020


Exhibit 2 Source Credit Swiss

3.3 Russia and Europe Energy Dependency in Russia

Russian shale oil reserves are estimated at 75 billion barrels, which puts the country on top of the global standings, followed by the US and China. According to the report by (EIA). The majority of Russia’s current oil production (nearly two thirds) comes from large fields in the West Siberian Basin, located between the Ural Mountains and the Central Siberian Plateau, with the remaining oil production coming mainly from the Volga-Urals region, the Timan-Pechora Basin, the north Caucasus Region, and the Sakhelin Basin.

Almost every European country is a net gas importer, with historically high dependence on Russian supply, and increasingly, overseas liquefied natural gas, creating both economic and political imperatives for supply diversification via domestic sources.  All of the supermajors and several dozen E&Ps ( Environmental and Public Service) have grabbed acreage, often at rock-bottom valuations. Among several identified, high profile European shale plays, including the Silurian in Poland, Posidonia in Germany/Netherlands and Alum in Denmark/Sweden shales. However, hurdles have impeded commercial development, resulting in disappointingly slow progress over the past two years. Perhaps counter intuitively, the main obstacle is not the existence of outright bans on shale gas drilling and fracking, although these get a disproportionate share of attention. Only France and four smaller countries have a ban in place; whereas 18 countries have granted permits at least on a small scale. However,  permitting is not everything. Europe’s onshore rig count of ~70 pales in comparison to ~1,700 in the U.S. Trained crews and infrastructure are hard to come by or nonexistent, and the location of shale acreage near population centers presents additional challenges North American operators rarely face.

3.31 Bazhenov Shale

To date, it is too early to estimate that Russia possesses one of the biggest shale gas reserve globally. Located in Western Siberia Bazhenov shale has a territory of about 1 million square kilometers. The shale layer is about 2 km deep but only 20-30 meters thick. Due to its low permeability and very controversial exploration data the reserve estimates vary wildly, from 2 billion to 140 billion tons. Despite very high oil density in the shale the recovery is estimated only at 7%, much lower that for the oil produced at traditional fields. At the same time oil of Bazhenov shale is of high quality, its chemical composition is close to the one of Brent with very low sulfur content.  So far only Surgutneftegas has drilled about 600 wells (almost all vertical though) and the flow rates varied from 5 to 300 tons per day; 37% of the wells turned dry. Nevertheless, the Russian government and the Russian state-owned oil companies have expressed keen interest in developing Bazhenov shale, which is expected to replace falling domestic conventional oil production from 2020. ( Exhibit 3)

Exhibit 3 Source: Advanced Resources International, Inc 2013


The Russian government has already expressed it readiness to waive Mineral Extraction Tax for heavy oil production. Whether the Russian government is also ready to provide a much needed export duty reduction is still under question. Bazhenov shale is a promising region with potentially significant oil reserves. At the same time it is too early to say whether it will be commercially developed and become economically viable.

3.4 China

China has abundant shale gas and shale oil potential in seven prospective basins: Sichuan, Tarim, Junggar, Songliao, the Yangtze Platform, Jianghan and Subei ( Exhibit 4) China has an estimated 1,115 Tcf of risked, technically recoverable shale gas, mainly in marine- and lacustrine-deposited source rock shales of the Sichuan (626 Tcf), Tarim (216 Tcf), Junggar (36 Tcf), and Songliao (16 Tcf) basins. Additional risked, technically recoverable shale gas resources totaling 222 Tcf exist in the smaller, structurally more complex Yangtze Platform, Jianghan and Subei basins. The risked shale gas in-place for.


Exhibit 4 ( Source Advanced Resources International, Inc, 2013)


As the only country with more identified shale gas resources than the U.S., China offers virtually limitless running room for future development. The good news is that the government strongly supports boosting domestic gas supply: not just because coal-related pollution is causing a health/environmental crisis, but also due to old- fashioned energy nationalism. The bad news is that the state-controlled oil and gas companies, mainly CNOOC, PetroChina and Sinopec don’t yet have sufficient know-how, and  tend to be bureaucratic, slow-moving organizations with minimal risk-taking appetite. China conducted its first shale acreage auction in June 2011, with four blocks licensed to six state enterprises. A second auction in late 2012 had a broader scope: 20 blocks were awarded to 16 firms, all of them Chinese, including six state enterprises, two private exploration companies and eight investment firms backed by provincial governments.

By year-end 2012, around 80 shale gas exploration and appraisal wells have been drilled in China (mostly in the centrally located Sichuan Basin), albeit with an immaterial amount of production. Sichuan is considered to hold the greatest resource potential, along with the Tarim Basin in the sparsely populated far west. That said, Chinese shale plays are spread out among over 150 basins, with extremely limited infrastructure in nearly all of them. Formations tend to be complex and average twice as deep as most U.S. shales, with typical well costs ranging from $5 million to $12 million (an admittedly wide fairway). Water scarcity has also proven to be a major obstacle to reach the government’s 230 Bcf/year production target for 2015, this would require as much as one-third of all the water currently being used by China’s entire industrial sector. Finally, government-imposed caps on domestic gas prices are impeding private sector investment, a situation similar to Argentina’s.

For western operators, Shell’s recently approved production-sharing contract with PetroChina for the Fushun shale gas block in the Sichuan Basin marks the first contract of its kind in China. Last August, Shell committed to spending $1 billion per year on shale exploration in China. (Shell also holds significant non-shale gas acreage in the country, including producing blocks in the Ordos Basin and the Jinqiu and Zitong blocks, both in the Sichuan Basin.) A substantial drilling program is underway this year and next. Shell’s head of international oil and gas production said in April that China is the most advanced of the company’s shale gas projects outside North America, noting that at least 30 wells are needed to adequately understand a new shale play, with 23 drilled to-date and another 18 on tap for the rest of 2013. PetroChina also has a joint study agreement with Eni for cooperation on the Rongchang shale gas block (Sichuan Basin). Sinopec has multiple partnerships with western operators: Exxon on the Meigu block (Sichuan Basin), BP on the Kaili block (Qiannan Basin), and Chevron on the Longli block (Qiannan Basin). All three partnerships are in very early stages; Chevron drilled its first well in 1Q12 and has committed to an additional three wells, though there is no timetable for spudding.

While needle-moving shale gas projects for western operators appear quite distant, their international counterparts in the oil service domain arguably have more visible near-term opportunities, both conventional and unconventional. For example, Schlumberger has teamed up with the utility Huadian in addition to buying a 20% stake in Hong Kong-listed Anton Oilfield Services Group. Halliburton is working with SPT Energy Group, Baker Hughes with Honghua Group, and Weatherford with CITIC Resources. To be clear, many more service companies have a presence in China, but for the most part that is limited to manufacturing facilities.

3.5 India and Pakistan

India oil demand grew by 2.3% to 3.9 mb/d in May.  Diesel fuel fell after recent subsidy cuts.  Overall demand growth is projected to increase to 3.5% in 2014. India and Pakistan contain numerous basins with organic-rich shales. For India, the study assessed four priority basins: Cambay, Krishna-Godavari, Cauvery and Damodar Valley. The study also screened other basins in India, such as the Upper Assam, Vindhyan, Pranhita- Godavari, Rajasthan and South Rewa. However, in these basins the shales were thermally too immature or the data for conducting a rigorous resource assessment were not available. For Pakistan, the study addressed the already extensive Indus Basin. (Exhibit 5)

Evaluating the shale gas and oil resources of India and Pakistan posed a series of challenges. Only limited publically available data exist on the geologic setting and reservoir properties of the numerous shale formations in India and Pakistan. In addition, the shale basins in these two countries are geologically highly complex.  Many of the basins in India, such as the Cambay and the Cauvery, comprised a series of extensively faulted horst and graven structures. As such, the prospective areas for shale gas and oil in these basins are often restricted to a series of isolated basin depressions (sub- basins). While the shales in these basins are thick, considerable uncertainty exists on the areal extents of the prospective areas in these basins. The exploitation of shale gas resources is garnering increasing attention in India, which relies on oil imports to fuel its growing economy.

In November 2010 , India signed a memorandum of understanding with the U.S. Geological Survey for technical assistance to assess shale gas resources and advance energy cooperation between the two countries. ONGC, India’s largest upstream player, is drilling a series of pilot shale gas wells in the Damodar basin. Reliance Industries, the country’s biggest gas producer, recently spent $3.5 billion on three shale gas projects in the United States . Some say the deals were as much to acquire shale gas technology and know-how than simply the assets. But other observers believe India’s shale gas timelines are too aggressive and need to reflect the enormous differences between the evolving Indian gas market and the mature U.S. sector. Therefore, is shale gas a real opportunity for India to feed the next generation of gas power plants or is it a pipe-dream? What should regulators and operators do to avoid the experience of coal bed methane, which after several rounds of auctions is contributing only a miniscule 5 per cent of the Indian natural gas supplies? How should the regulators create a conducive regulatory environment? How should prospective shale gas operators, e.g. power generators and exploration and production companies, approach their shale gas strategy?


Exhibit 5 ( Source Advanced Resources International, Inc, 2013)

U.S.A. is not a Blueprint for India, the North American shale gas industry has been evolving over the last 20 years. Early investigations identified shale gas as a potential resource in the early 1980s, but it wasn’t until the 1990s that the technology became available to produce the gas at commercial rates. While technology is transferable, there are many significant differences between the U.S. model and conditions in India. These differences need to be identified and incorporated into business models and regulations if shale gas is to transform India’s energy balance. Shale gas requires large physical and technical resources, while in the USA, there is a deep pool of experienced field personnel and geoscientists whereas India’s skill pool is much smaller and has a longer time-to-autonomy. Accessing and ramping up the technical and project management skills is even more critical when looking at unconventional gas because the production profile of shale gas wells is shorter and steeper than for conventional wells and hence drilling campaigns have to be closely coordinated with gas evacuation projects. In case of conventional projects, a delay of six months to a year in technology

In addition, Indian operators will need to build the surface infrastructure to transport drilling rigs and pipe the water necessary in the shale gas exploitation process. Land access and local regulations. Shale gas production in the United States developed in largely sparsely 44 populated areas. In India, where the population density is tenfold that of the United States, shale gas production may face local opposition because of disruption to communities from drilling activities. There are also differences in lease agreements: the subsurface rights vest with the government in India, while the surface rights lay with the landowner. Therefore, landowners in India are unlikely to benefit directly from the development of shale gas resources. In the United States, both the surface rights and the mineral rights rest mostly with landowners, who may sell their rights to developers.

4. Policy Analysis and Environmental concerns

As with anything that seems to deal with oil or gas extraction, Shale extraction has its environmentalists who are up in arms about the fact that the attempts to extract the natural gas from the shale are tearing up the environment. Let’s move back to the USA where we have longer history of shale and oil and more records in the subject. The Catskill Mountaineer, for example, points out that the practice of “fracking” (or hydraulic fracturing), involving the injection of water, sand and chemicals into the shale layer at high pressure, leaves those chemicals underground to contaminate the groundwater (Marcellus Shale, 2009).  The publication also goes on to say that pollution from oil and gas explorations has spewed known carcinogens into the air, while the forests in both New York and Pennsylvania are suffering because of the trees and other fauna that had to be cut down to make way for roads, truck traffic and drilling pads (Marcellus Shale, 2009).  Then there are the normally occurring radio active materials, or NORMs, which are found in geological formations and brought to the surface both on drilling equipment and fluids (Marcellus Shale, 2009).  It has gotten so bad that New York City officials demanded a ban on natural gas drilling near upstate reservoirs in 2008 because of fears that drilling could contaminate the city’s drinking water (Marcellus Shale, 2009).

The Indypendent, in the meantime, reports that fracking leaves all kinds of chemicals in the groundwater, though Chesapeake Energy Corp., one of the largest leaseholders in the shale, announced that it wouldn’t drill in the New York City watershed (Lee, 2009). Still, there is no permanent protection from fracking or anything else that destroys the environment. At this time, those wanting to drill the shale and those opposing it are throwing environmental reports at each other, with each of the reports pegged to the particular interest of the particular group. In the meantime, drilling goes on, while environmentalists and the natural gas companies’ scream at one another.

One operator on the Marcellus Shale in United States was bewildered, wondering why oversight of fracking might be passed to the U.S. Environmental Protection Agency (Merritt, 2009).  The states do a “pretty darn good job,” said one of the operators, when it comes to regulating; states enforce regulations probably better than the EPA would (Merritt, 2009). As the latest Credit Suisse report shows, environmental concerns have played a big part in the quest to unlock the shale gas potential in Europe. Fracking moratoriums have been imposed in France (July 2011), Bulgaria (January 2012) and Romania (May 2012), whilst the Netherlands have put shale gas drilling on hold for a further year as an investigation is carried out into the environmental risks. While further studies are needed considering that this is a new technology, the main problems to date are:

  • Induced Seismic Activity.
  • Contamination of groundwater.
  • Greenhouse gas emissions.
  • Water sourcing and disposal.
  • The second water issue if that approximately 10-40% of the fluid will return to the surface bringing with it the natural gas and added chemicals.
  • NRDC notes that the infrastructure needed to develop oil shale would impose equally serious demands on local landscapes. The group warns that impressive arrays of wildlife would be displaced as land is set aside for oil shale development. And it says that while open pit mining would scar the land, in-situ extraction would require leveling the land and removing all vegetation.
  • In addition to the environmental impacts of oil shale, vast amounts of energy are required to support production. In Driving it Home, NRDC cites Rand Corporation estimates that generating 100,000 barrels of shale oil would require 1,200 megawatts of power—or the equivalent of a new power plant capable of serving a city of 500,000 people. Proponents of oil shale have a stated goal of producing one million barrels of the resource per day.

The fracking process uses liquid under high pressure to fracture shale rock, and the water that emerges at the end of the process is highly saline. As a result, desalinating this brackish water could play an important role in limiting the environmental damage caused by the fracking process. To minimize the environmental impact of the remaining brine from inland desalination plants, one option is to use the salt from the brine for industrial purposes, such as the production of hydrogen, chlorine and sodium hydroxide through electrolysis. China, a global leader in the production of salt, already makes extensive use of brine from desalination plants.

5. The Demand Pull From Emerging Markets Keeps Pressure Upstream

Although one would imagine that substitution and efficiency gains should undermine the pace of global oil demand growth in due time, it’s worth noting that even a long stretch of high and rising oil prices has not materially degraded the thirst for more energy across Emerging Markets (EM). Indeed, arguably, a long spell of high and rising prices last decade was required to keep the pace of global growth in check.  Global oil demand growth continues to prove much more resilient than consensus expectations. So much so, that in the short- to medium-term. Neither the technology nor policies are in place to derail the current oil demand growth dynamic.  Global oil demand trend growth has oscillated around 1% pa through a few economic cycles in the last 18-years. More important is that since 2005 oil consumption in so-called Developed Economies has begun a secular down-trend. EM oil use, however, still grows.

Coal was the clear primary energy winner during the commodities “Super Cycle,” while oil mainly priced itself out of the boom. Nevertheless, and despite high prices, between 1995 and 2010 non-OECD (ex-FSU) oil demand growth maintained a steady 4% CAGR. The lasting driver of oil demand growth has been the need for transportation in rapidly industrializing and urbanizing Asian and Middle Eastern economies, of late supplemented by growing oil use linked to expanding resource sectors in South America and Africa.

6. Conclusion

It is possible that ten years from now, the energy content in US exports of coal and natural gas will be higher than that of its much-reduced net imports of oil. As result,  US energy independence it can be a possibility. Nevertheless, even if it can be assumed that oil demand in this country enters into a structural decline and that oil supplies continue to grow dramatically in the next ten years, the US will still need to import about one-sixth of its oil, compared to one-half today. Equally important, the price of oil will probably still find a relatively high floor, which could be near  US$90 (real, 2011) per barrel of Brent for at least the next few years, which is the cost of either producing a new “marginal” barrel of oil (shale oil in the US) from out of the ground at a profit or buying it from the world’s main sovereign exporters.  While full-cycle upstream costs in the US are eventually likely to deflate, prices will need to stay elevated to elicit historically high spending for years to come. ( Exhibit 6)

In our time, we are living the shale revolution and new technologies are speeding up the extractions of oil and gas all over the world; However, and considering that this is a new way to get energy around the globe, countries face serious problems in their policy and regulations. There have been some concerns raised about contamination of ground water during the fracking process, but this is most likely an avoidable problem as new technologies develop. Nations and politicians should be happy to have large new proven reserves of gas, apart from current producers of Liquefied Natural Gas and the Russians, both of whom will be subjected to unexpected competition.

Exhibit 6 (Source NYMEX)

The need for energy security among nations is key, as is the right of emerging and developing economies to provide enough and reliable energy for their citizens to enjoy the sort of comforts that people in the developed countries  take for granted. It is also quite reasonable to expect considerable technical progress in energy generation and storage to occur over the next decade or two. Even when we face uncertainty regarding the environmental problems that shale oil and extraction may bring,  policy makers should not be unduly influenced by a single research paper or report, technology and development should not stop and the shale revolution only brings great news for all, cheap energy is always a plus.

7. Appendixes








8. References

Air hart, Marc (2008). Won’t You Be My Neighbor? Jackson School of Geosciences. Retrieved 2013, August 6th from;

Alex Mills: Shale extraction will have wide ramifications …” Insert Name of Site in Italics. N.p., n.d. Retrieved 2013, August 6th from : <


Eyeton, D., BP Group Head of Research and Technology, Xinhua, August 31, 2012.

Li, J., Xie, Z.Y., Dai, J.X., Zhang, S.C., Zhu, G.Y., and Liu, Z.L., 2005. “Geochemistry and Origin of Sour Gas Accumulations in the Northeastern Sichuan Basin, SW China.” Organic Geochemistry, vol. 36, p. 1703-1716.

Barnett Shale (2009). Barnett Shale Energy Education Council. Retrieved 2013, August 6th from

Bertola, David (2008, February 8). Researchers: Shale Holds Vast Supply of Natural Gas. Business First of Buffalo – Buffalo Business Journal. Retrieved 2013, August 7th from^1587557.

Bounty From Below (2007, May). Perryman Group. Retrieved 2013, August 3th from

Credit Suisse – The Shale Revolution – Docstoc – We Make …” N.p., n.d. Web. 7 Aug. 2013 Retrived from <  —-The-Shale-Revolution

Falchek, David (2008, May 5). Gas Drilling Firms Rush In for Riches. Times-Tribune, A1.

Durham, Louise S. (2008, March). Another Shale Making Seismic Waves. Explorer-American Association of Petroleum Geologists. Retrieved 2013, August 6th from

Fossum, B.J. et al., 2001. “New Frontiers for Hydrocarbon Production in the Timan-Pechora Basin, Russia.” Petroleum Provinces of the Twenty-First Century: AAPG Memoir 74, Chapter 13, p. 259-279.

Geoffrey Styles, Ag 7th, 2013, Oil’s Eastern Hemisphere is Shifting, Too. Retrieved from

Hao, F., Guo, T.L., Zhu, Y.M., Cai, X.Y., Zou, H.Y., and Li, P.P., 2008. “Evidence for Multiple Stages of Oil Cracking and Thermochemical Sulfate Reduction in the Puguang Gas Field, Sichuan Basin, China.” American Association of Petroleum Geologists, Bulletin, vol. 92, p. 611-637.

Kramer, Bruce M. (2004, Spring). Drilling in the Cities and Towns: Rights and Obligations of Lessees, Royalty Owners and Surface Owners in an Urban Environment. Petroleum Accounting and Financial Management Journal, 23(1), 58-81.

Marcellus Shale (2009). Catskill Mountainkeeper. Retrieved 2013, August 6th from

Muntendam-Bos, A.G., et al., 2009. “Inventory Non-Conventional Gas.” TNO report TNO-034-UT-2009-00774/B, 03 September.

Merrit, Kelly (2009, October 30). Gas Producers Favor State Oversight of “Fracking.” The State Journal, 11.

Turner, Ford (2009, November 9). Interest Soars Across the State in Marcellus Shale Drilling. Centre Daily Times. Retrieved 2013, August 4th from

Van Balen, R.T. et al., 2000. “Modelling the hydrocarbon generation and migration in the West Netherlands Basin, the Netherlands.” Geologie en Mijnbouw / Netherlands Journal of Geosciences 79 (1): 29-44 (2000)

Zong, G., Wang, L., Deng, S.F., Chong, K.K., Wooley, J.S., and Dumesnil, J., 2012. “Search for Unconventional Gas in Asia Pacific Region: Chinese Cambrian Age Marine Qiongzhusi Shale Gas Play: Case History, Operation, and Execution.” Society of Petroleum Engineers, IADE/SPE 159227, International Association of Drilling Engineers, IAD/SPE Asia Pacific Conference & Exhibition, Tianjin, China, 9-11 July







My Perspective on the Global Financial Crisis, Political and Economic Approach


My Perspective on the Global Financial Crisis,

Political and Economic Approach    

1. Introduction

The most recent financial crisis has badly affected the global economy, including individuals, businesses, and governments. Each entity has suffered its impacts in one way or another (Burger, Coelho, Karpowicz, & Tyson 2009). Since it began, the financial crisis has posed a significant threat to world markets. Countries are trying to overcome the adverse effects of this crisis but have failed to recover their positions due to severe recession and worsening economic conditions (US Department of the Treasury 2012). As we have seen in our class this summer, authors, economists and financial analysts have discussed various reasons for the crisis; the huge downturn in the financial and housing mortgage sector seems to have been the biggest trigger of the crisis (Donath & Cismas 2009). The global financial crisis has hit almost all sectors of the economy, not only hampering industrial growth in countries but also creating serious challenges and issues for governments and regulatory bodies (Independent Evaluation Group 2012).

This paper provides a comprehensive review of the recent global financial crisis, which has shaken the world economy in a short period of time and reduced businesses and governments to helplessness in this recession period. The paper begins with a brief history of the financial crisis: what caused the financial crisis, where it originated, and what economists believe about it. Later sections discuss the different aspects of the global financial crisis, including its main impacts on the different sectors of the economy, the strategies that businesses and governments have been adopting to overcome its consequences and detrimental impacts, and the potential impacts of this financial crisis in both the near future and the long run.

2. History of the Financial Crisis

In 2001, the Federal Reserve in the US began cutting interest rates dramatically to encourage borrowing, which spiked consumption and investment spending. Lower interest rates worked their way into the American economy, and the real estate market began to grow. The number of real estate properties sold, and their prices increased dramatically from 2002 onwards. At the time, the rate on a 30-year fixed-rate mortgage was the lowest it had been in nearly 40 years. Subprime lending and similar mortgage originations in the US increased from less than 8% of all mortgages in 2003 to over 20% in 2006 (Exhibit 1).

The crisis was exacerbated with the bursting of the US housing bubble and high default rates on subprime and adjustable rate mortgages, beginning in approximately 2005–2006. For a number of years prior to that, declining lending standards, an increase in loan incentives, and easy initial terms for borrowers, followed by a long-term trend of rising housing prices had encouraged people to acquire risky mortgages in the belief that borrowers would be able to quickly refinance on more favorable terms.

In late 2006, the largest banks, insurance companies, and other financial institutions in the US noticed a substantial decline in their sales and profitability (Magdoff & Foster 2009). This downturn in financial performance initially was barely discernable, but it increased dramatically over time. The crisis began in the financial sector of the US before spreading to world markets in a considerably short period (Corker 2012). The global financial crisis, after brewing for a while, started to show in the middle of 2007, before accelerating in 2008. Around the world, stock markets showed large losses and financial institutions collapsed or they were bought over. Governments had to come up with emergency rescue packages to bail out their financial systems, which were failing at record speed.

2.1. Housing Finance, Mortgage, and the Subprime Mortgage Crisis

Housing prices peaked in December 2006, when the Federal Reserve was raising short-term interest rates, and then declined by 30% over the subsequent 26 months. (Shefrin, 2009). An estimated 8.8 million homeowners had zero or negative equity as of March 2008, that is, their homes were worth less than their mortgages. The situation produced a “walk away from home” effect, despite the credit rating impact. Increasing foreclosure rates and the unwillingness of many homeowners to sell their homes at reduced market prices significantly increased the supply of housing inventory.

Many economists say that the lack of regulation on financial derivatives led to the financial crisis. In the US, the crisis was mainly triggered by the collapse of financial derivatives known as mortgaged assets, which include prime (borrowers with good credit history) and subprime (borrowers with weak credit history). The Global Financial Crisis was mainly due to the overinvestment of the general public in housing finance and mortgage contracts. Before this financial crisis hit the US market, the housing mortgage and finance market was dominated by a few large commercial banks (Donath & Cismas 2009). They were in stiff competition with local and international banks and financial institutions that offered these facilities at comparatively lower interest rates than did banking institutions (United Nations Organization 2009). In order to contend with these competitors, the local banks in the US reduced their interest rates and made their terms for housing and mortgage facilities more flexible (Burger, Coelho, Karpowicz, & Tyson 2009).

The real estate and financial crisis, caused by a significant increase in mortgage delinquencies and foreclosures, had repercussions for banks and financial markets globally, and weakened the global financial system. In the past years, an estimated 80% of US mortgages held by subprime borrowers were adjustable-rate mortgages. After house prices reached peaked in the middle of 2006, the steep decline that followed made refinancing exceedingly difficult. Adjustable-rate mortgages began to reset at higher rates, resulting in increasing mortgage defaults. Financial firms holding securities backed with subprime mortgages were left with securities with no value. Ultimately, credit around the world was tightening as the capital in many banks and US-government-sponsored enterprises was losing its value.

The crisis can be attributed to a number of factors: the failure of homeowners to meet their mortgage payments, adjustable-rate mortgages resetting along with the extensive lending, overbuilding during the boom period, international trade imbalances, inappropriate government regulation, and speculation. In 2008, the mortgage industry played a crucial role in the recession when an estimated 1.5 million homeowners defaulted on payments and when they were driven to foreclosure by 2009.

After the subprime mortgage crisis spiraled out of control, nearly five million jobs were lost, together with massive loss of wealth and depressed consumer confidence. Several big companies at the heart of the US financial system, such Lehman Brothers and AIG, faltered. In the past years, the rate of home foreclosures had risen dramatically due to defaults on residential mortgages, resulting in the overall meltdown of the US economy and subsequently other countries.

2.2. Bankruptcy of the Largest Banks and Insurance Institutions

As the crisis developed, credit markets froze, banks closed their lending doors to each other, and banking companies and financial institutions had to sell their short-term and long-term securities to pay for the loans, resulting in a significant decline in the volume of their deposits and long-term assets (Magdoff & Foster 2009). When they found no other means of funding those loans, they had to request the government for bailouts (Corker 2012). By September 2008, Lehman Brothers declared bankruptcy without a rescue or bailout, creating fear that the government would allow the financial sector to collapse.

American International Group (AIG), an insurer, and Fannie Mae and Freddie Mac, two mortgage-finance agencies where at the core of the crisis. Fannie Mae and Freddie Mac had owned, guaranteed, and helped securitize about half of American mortgages. These institutions were judged as essential to a healthy housing market; however, their numbers prompted government intervention, which came, as a massive bailout.

2.3. Bailout of the Financial System

The Fed decided a few days later to save AIG with an $85 billion emergency loan in exchange for an 80% stake in the insurance company, in an attempt to stop the domino effect that was sweeping through the global financial markets (Exhibit 2). Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs), were nationalized by the US federal government, transferring $5 trillion of mortgage debt from private to public hands.

The Treasury Department implemented a key step in October 2008, with a $700 billion financial bailout program called TARP (Troubled Asset Relief Program). This plan also included a ban on short-selling of financial stocks. Consequently, financial institutions like Citigroup, Bank of America, JP Morgan, Wells Fargo, Goldman Sachs and Morgan Stanley, among others, lined up to receive a portion of TARP (see Exhibit 3).

According to “The Economist,” by 2009, the state owned about $170 billion of shares in banks. With the $160 billion of equity invested in the toxic trio, this number rose towards $300 billion. Including other kinds of help, such as loans, the total pumped into the three firms eventually reached $800 billion (Exhibit 4), or 6% of GDP.

In the book “Too Big to Fail,” the author describes how The US government responded by engaging in several proposals to tackle the issue: “The government would buy the toxic assets to get them off the bank’s books, which in turn would raise the value of the assets by establishing a price and make the bank healthier, which in turn would help the economy and, as Paulson repeatedly said, help main street.” Eager to bring life back into the economy, the Bush administration pushed for a stimulus package and created lending programs for banks, and interest rates were dropped to nearly zero. The Federal Reserve also expanded the types of assets it would buy from financial institutions in an effort to ease credit and restore confidence. As the economy showed few signs of recovery, the burden fell on the newly elected president Barack Obama, who faced, in to his first month of presidency, the task to push for a $787 billion bailout package. Across the Atlantic, the British government launched a 500 billion pound bailout to inject capital into the financial system, nationalizing most of the financial institutions in trouble. Many European governments followed as well, to prevent recession, improve liquidity, and boost investor confidence.

3. Present Conditions of the Financial Crisis

The world economy began experiencing the impacts of the crisis when investors from the United Arab Emirates and other rich economies had to face the same debt issues that the financial sector of the US had seen in its housing mortgage and finance facilities. At present, the world economy is in a great recession, where the economic performance of financial institutions has significantly decreased, industrial growth has slowed down, and international trade has been discouraged with the poor economic conditions of a large number of countries in the world (US Senate Committee on Banking, Housing, and Urban Affairs 2012).

Two weeks ago, interest rates on 10-year US Treasury bonds fell to 1.4%, becoming the lowest on record under present or expected inflation, which ranges from 2–3%. Thirty-year Treasury bond rates have fallen to 2.5%. Investors are piling into Treasury bonds and are driving rates downwards, as they are not buying risky stocks or using their cash to expand or create businesses. American investors are protecting themselves against the unknown. Treasury Secretary Tim Geithner reported last week that bank capital had increased 70% to $420 billion from 2009. Home prices are starting to go up while household debt service (monthly payments of interest and principal) as a share of disposable income has dropped to the levels of the early 1990s. Nonetheless, to date, these favorable conditions have been neutralized by the general risk aversion and fearful psychology of people. After all, the Greek and European economic crisis is part of the American’s daily newsfeed.

3.1. European Crisis

The economy of the European Union is made up of 17 nations that use the euro and 10 other nations. The EU is a larger economic bloc than the US or China. The current European economic crisis has been three years in the making, and its outcome is still uncertain. In the case of Greece, there was high fiscal deficit and an attempt to manipulate the numbers prior to the global crisis, to hide debt, which was a result of deficit spending, economic mismanagement, government misreporting, and tax evasion. Even then, it took a long time before this was uncovered. The Greek tragedy has shown to the financial world that no one can any longer mock the critics of high fiscal deficits. Nowadays, countries like Greece, Spain, and Ireland face ongoing recessions crushed by debt, while Germany, the Netherlands, and the International Monetary Fund are pushing for austerity measures.

3.2. Government Policies

The governments of different countries are taking steps to recover the economic positions of the financial and services sector. For this purpose, they are recapitalizing the financial sector so that it becomes stable and recovers its past performance. Moreover, this financial crisis has made a large number of governments run their economies in fiscal deficits. These governments are unable to achieve the Balance of Trade, or to control their expenditures to match their revenues (US Department of the Treasury 2012). Similarly worse conditions are being faced by business organizations in international markets.

As result of this financial crisis, the purchasing power parity of customers has been badly affected, which has resulted in a decrease in the number of customers for each particular product manufactured by international business organizations (Donath & Cismas 2009). This has shrunk the growth and profitability of these organizations and has forced them to keep their business operations limited to their local markets, instead of expanding into new international markets (Burger, Coelho, Karpowicz, & Tyson 2009).

4. Expected Outcomes of the Financial Crisis

The global financial crisis began in the housing sector in a single economy, spreading to all sectors and industries by hitting the entire world economy. A large number of economists and financial analysts that we have studied in Professor J. Grant’s class have presented their views on the expected outcomes and impacts of this global financial crisis in the future. Many of these authors and the US Senate Committee on Banking, Housing, and Urban Affairs believe that this economic crisis will last much longer than previous global crises, which have hit the world economy three times during the previous century. They argue that the recent financial crisis has not finished yet and that it will continue to affect the financial sector and the other sectors in the services industry in the short run (Barth 2009).

4.1. Impacts in the Short Run

The economic downturn will first affect the manufacturing sector, due to which industrial growth will slow down. As a result, economies will experience a significant decrease in Gross Domestic Product and National Income (United Nations Organization 2009). This decrease in GDP and NI will automatically hit the services sector due to poor financial performance and miserable industry conditions (Corker 2012). The repaying abilities of industrial concerns will also decrease, which will restrict them from availing of high-interest, long-term loans from the financial sector (Donath & Cismas 2009).

These negative impacts of the financial crisis will also affect the consumption patterns of individuals, businesses, and governmental agencies. As the US Department of the Treasury 2012 reports, consumers will find it harder to maintain a balance between their incomes and expenditures due to deep recession and high inflationary pressures. They will either shorten their needs or look for substitute products to save money. Similarly, business organizations will feel be hesitant to expand operations in international markets, especially in countries affected by the global financial crisis. Governmental bodies will also cut down their expenditure in view of the increasing fiscal deficits and deep recession in world economies (US Senate Committee on Banking, Housing, and Urban Affairs 2012).

4.2. Impacts in the Long Run

Individuals, businesses, and governments will face the same situation in the long run, when the recession will worsen for both the services and manufacturing sectors. Some researchers and economists believe that the global economic crisis will make it harder and more challenging for governments to revitalize their financial sectors. This is because the world has not yet seen any significant steps taken by the governments of the affected economies to recover the past performance of their financial sectors. For instance, the government of the US has failed to bring its economy out of serious foreign debt, which is rapidly increasing (United Nations Organization 2009).

4.3. Global Economic Outlook through the IMF’s Eyes

According to the International Monetary Fund’s latest forecast, the global economy will experience steady growth over the next two years. Europe’s current financial crisis and a possible budget crisis in the US. could slow world growth even further. The IMF warned that economic conditions could worsen if the US does not deal with a pending budget crisis soon. By the end of 2012, several large tax cuts are set to expire, and massive spending cuts are scheduled to kick in at the same time. If Congress does not take action, the US. could experience another recession and the global economy could slow sharply. This all depends on the upcoming November elections and the measures that the US. president may apply. The IMF’s chief economist, Olivier Blanchard, said, “failure to deal with these issues could cut up to 4 percentage points off US. growth in 2013.”

Regarding Europe, the IMF predicted that even if the 17-nation euro zone follows through with its commitments, the region’s economy would shrink by 0.3% this year and grow by only 0.7% in 2013. German and French economies are expected to grow in 2012 and 2013 at a slow pace, while the economies of Italy and Spain will contract. The IMF expects a slow growth in developing countries due to a decrease in exports to European countries and the US. (IMF report, 2012)

4.4. The Next Decade Deficit

After the panic and dark days of the financial crisis, it is expected that new generations may have an inclination to save and a reluctance to incur debt or borrow money. Today, “too big to fail” private financial institutions are fewer and larger, after having qualified for unlimited taxpayer bailouts. Nonetheless, our nation is facing an enormous deficit that may generate a collapse. According to Arnold Bock from Safe Haven Preservation of Capital, “Rising interest rates are all that is necessary to trigger the Round Two collapse of the ongoing financial crisis.” The US is facing expanding government deficits as well as debt and unfunded liabilities. People and businesses paying fewer taxes due to diminished income are the reason for almost half of the debt in the US.

The US deficit grew under the George Bush administration as a result of the recession. Bush approved the 2009 budget and the bank bailout (TARP). However, the recession itself is the main cause of the deficit. Bush and Reagan increased the debt in good times, while Clinton tried to pay down the debt (Exhibit 5). During the last three years of the Obama administration, national debt has increased more than it did during the eight years of the Bush administration ($4.899 vs. $4.939 trillion, as of March 2012). National debt on August 6, 2012 will reach the staggering amount of $15,993,366,918,897.39 and will keep growing. The estimated US population is 313,266,356, so, each citizen’s share of this debt is approximately $50,862.04 (Debt clock, 2012).

As of today, the national debt exceeds 100% of national GDP. The latest federal budget sent to Congress by Mr. Obama shows that the debt would continue to grow, hitting $16.3 trillion in 2012, $17.5 trillion in 2013, and $25.9 trillion in 2022. If Mr. Obama wins the November elections, and these budget projections prove accurate, national debt will exceed $20 trillion in 2016, the final year of his second term. That would mean that the debt increased by 87%, or $9.34 trillion, during his two terms (Knoller, 2012). According to sources run by political campaigns, from 1789 to 2008, with 43 presidents, the total debt left was approximately $6.3 trillion dollars, and the debt added by President Obama in less than one term is approximately $6.5 trillion dollars.

Considering these alarming numbers, our nation has to become more fiscally responsible: people need to start taking risks, starting businesses and ventures, and we need to fuel the economy, leaving behind the fear acquired through the Global Financial Crisis. This is because the bills have to be paid, and a default is not an option if we want to maintain the good name of the US in global fiscal circles, in order to prevent another global financial crisis. Many economists believe that the debt ceiling needs to be raised, while others think that raising the debt ceiling may be a mistake that will only encourage the same poor decisions that brought us to the initial crisis. Considering that our monetary system was initially built on the gold standard and was then changed to one built on faith, if you lose this faith, then nothing matters.

5. Risk Analysis in the Global Financial Crisis

In order to revive the world economy from the severe financial crisis, businesses and government have adopted different strategies in the recent past. The first of this is the risk analysis of the different factors that caused the financial crisis and badly hampered the industrial growth and economic performance of different entities (Kaufman, 2009). The risks involved in this process include further vulnerability of the financial sector, competition among businesses, and political instability in different economies of the world.

As far as political instability is concerned, the revival programs for stable economies will not be affected because all governments have been taking initiatives to revive their financial sectors and industrial growth (US Senate Committee on Banking, Housing, and Urban Affairs 2012). The second risk factor is competition among businesses, which can affect the revival programs in a negative or positive way. The price war between different businesses can lead to greater competitiveness, but it can also lead to more relaxed terms and conditions, as the world experienced before the recent global financial crisis (French, Baily, Campbell, & Cochrane 2010).

6. Impacts on the Different Sectors of the Economy

The financial sector was not the only industry affected by the global financial crisis: all industries have been affected in one way or another. This section provides an overview of the impacts on different sectors in light of some important economic measures. The overall impact of the financial crisis can be discussed by highlighting its impacts on the inflation rate, balance of trade, monetary policy measures, and economic reform programs taken by governments from time to time (Chorafas 2009). These factors are now discussed below in detail:

6.1. Impacts on Inflationary Pressures

The financial crisis badly affected the value of currency by putting high inflationary pressures on almost every currency of the world. The US Dollar returned to its previous position when the financial crisis hit its economy. Similarly, the value of currencies in the Asian and European markets also depreciated due to low production levels, high trade deficits, and discouraged international trade (Donath & Cismas 2009). Terrorist activities had also increased during the previous three to four years, which discouraged tourism and travel around the globe (UNCTAD 2009). The inflationary pressures also increased for general consumers: it became harder for them to save money for their future needs due to the increasing prices of consumer products. Businesses also experienced high costs of production after the global financial crisis affected their countries (Barth 2009).

6.2. Impacts on the Balance of Trade

The global financial crisis discouraged international trade by making it more expensive for businesses and individuals to import required goods and services from international markets. Exporters were unable to sell their manufactured goods to potential target markets due to decreased demand by importers. These exporters were not supported by their governments, and their trade balances suffered (US Senate Committee on Banking, Housing, and Urban Affairs 2012). These issues resulted in a decreased level of production by manufacturers, which meant they had to run their plants under capacity (International Monetary Fund 2012). This increased their cost of productions and the level of unemployment in their countries. The governments had to take external funding to meet their trade deficits, which increased their interest expenditures (French, Baily, Campbell, & Cochrane 2010).

6.3. Monetary Policy and Economic Reform Programs

Although the steps taken by the governments of different countries for the revival of their economies are largely criticized by business analysts and researchers, the changes in monetary policies and the launch of economic reform programs are two appreciable steps that seem to have effectively beat back the global financial crisis (Chorafas, 2009).

6.3.1. Monetary Policy

Monetary policy measures are being implemented in order to control the flow of money in the economy. Governments are controlling the level of inflation in their countries through tight monetary policies. They have set the discount rates for banking companies higher in order to discourage borrowing (Patterson 2010). Similarly, the inter-bank rate has also been set high in order to discourage lending and borrowing transactions between local banks. Economic reforms by the governments of different countries include encouragement of foreign direct investment in their countries, running industries on full capacity, and supporting micro financing in rural areas (Nanto, 2009).

6.3.2. Foreign Direct Investment

Attracting potential investors to come and do business in new international markets encourages foreign direct investment. Governments are attracting these investors by offering relaxed terms and conditions for setting up and operating their businesses. For example, the introduction of tax free zones, easy financing facilities, and regulatory conditions are few steps to attract these investors.

6.3.3. Revitalizing the Industrial Sector

Offering easy financing facilities to increase capacity and level of production is revitalizing industries. These steps also help in increasing foreign direct investment. Donath and Cismas (2009) believe that industrial growth is the strongest weapon in beating the global financial crisis. An economy can only grow if its industries are running at their full capacity and contributing a big part to the GDP. The revitalization process of the industrial sector will also help the economies by decreasing the level of unemployment and improving the social status of the consumers (French, Baily, Campbell, & Cochrane 2010).

7. Conclusion

The global economic crisis began in the housing sector and spread to all sectors of the world economy (Magdoff & Foster 2009). Overinvestment by the general public in housing mortgages was the main reason for this crisis, which led to severe economic conditions in the entire international business and economic environment (International Monetary Fund 2012). Economists believe that the financial crisis was mainly due to the price war between banking companies, which forced them to charge very low prices for their services. The financial crisis soon entered the world markets and caused a deep recession, which is still affecting major parts of the world (French, Baily, Campbell, & Cochrane 2010).

The expected outcomes of the global economic crisis are presented by the researchers and analysts in two opposite perspectives; one camp believes that the crisis will worsen in the future while the other argues that the maximum period for which this crisis will affect the world economy is one decade (US Department of the Treasury 2012). In either case, world markets will have to struggle to recover their previous positions. The governments of different countries have taken numerous steps to revitalize their economies (US Senate Committee on Banking, Housing, and Urban Affairs 2012). The tightening of monetary policies, encouragement of foreign direct investments, and supporting of industrial sectors are the most significant steps in this respect (Chorafas 2009).

From the above discussion, it can be concluded that every single entity in the world has been affected by the recent global financial crisis (Independent Evaluation Group 2012). The inflationary pressures, unemployment, balance of trade, fiscal deficits, and poor financial performance of major industries are some notable negative impacts of this crisis (Burger, Coelho, Karpowicz, & Tyson 2009).

8. Exhibits

Exhibit 1

 Exhibit 2


Exhibit 3


Automakers include General Motors, Chrysler, and GMAC, General Motors’ financing arm. The automakers requested additional funding in February 2009.

Exhibit 4



Exhibit 5


9. References

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Burger, P., Coelho, M.D., Karpowicz, I., & Tyson, J. 2009, The Effects of the Financial Crisis on Public-private Partnerships. Washington, DC: International Monetary Fund working paper

Chorafas, D.N. 2009, Financial Boom and Gloom: The Credit and Banking Crisis of 2007-2009 and Beyond. US: Palgrave Macmillan Studies in Banking and Financial Institutions

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Magdoff, F., & Foster, J.B. 2009, The Great Financial Crisis: Causes and Consequences. N.Y: Monthly Review Press

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Patterson, S. 2010, the Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, 1st Edition. N.Y: Crown Publishing Group

Hersh Shefrin, How Psychological Pitfalls Generated the Global Financial Crisis.Research Foundation Publications, Insights into the Global Financial Crisis (December 2009): 224-256.

Sorkin Andrew, Too big to fail, The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, Viking Adult; First edition (October 20, 2009)

UNCTAD, 2009, Assessing the Impact of the Current Financial and Economic Crisis on Global FDI Flows. United Nations Publications. P 3-20. Available from <> [Accessed August 4th, 2012]

United Nations Organization, 2009, The Global Financial Crisis – the Response of the Regional Commissions. United Nations Publications. Available from <> [Accessed August 4th, 2012]

US Department of the Treasury, 2012, The Response to the Financial Crisis – In Charts. Available from <> [Accessed August 4th, 2012]

US Senate Committee on Banking, Housing, and Urban Affairs, 2012, The European Debt and Financial Crisis: Origins, Options, and Implications of the US and Global Economy. Available from <> [Accessed August 4th, 2012]

World Bank, 2012. Financial Crisis. Available from <> [Accessed August 4th, 2012]




What I Learned from my Ethic’s Class


Because of our rationality we can understand the difference between right and wrong we can understand moral laws, which it is, our duty to accept as binding. Kant said that morality is universal and objective, rather than local, historical, and subjective which mean that every rational agent has an obligation to do what is right. Consequently, it is a person’s duty to do what is morally right as an objective matter. Kant believed that ethical issues are black and white, or right or wrong. There is no grey in between. “Act only on that maxim whereby you can will that it should become a universal law”. In other words, moral activity is something that applies to everyone and we should act accordly, giving from a moral point of view what we expect in return.

Carol Blenda

Governance and Development: Iraq after the US invasion


Wednesday, May 5, 2010

By Carol Blenda Reyes Avila

The loss of life continues to rise in the US-led invasion of Iraq as both proponents and detractors of the war begin to question the almost certain human rights violations that are occurring. Overseeing the establishment of a sound and appropriate government once appeared to be the ultimate goal although many, particularly those on the left-side of the political spectrum, are beginning to criticize America’s continued involvement in the Middle East.

The United States has had troops stationed in both  Afghanistan since 2001 and Iraq since 2003, fighting an enemy that has no face. It’s a war that crosses cultural barriers where, often times, there simply may not be a solution to a particular problem, some of which are historically rooted so deeply into cultural value systems that one would have to have grown up there, literally, to fully grasp their complexity.

Once the President of the United States determines that the mission of the American troops has been completed and it is time to go home, what happens next?  Exactly what criteria will determine our pulling-out of these situations that, quite possibly, we shouldn’t have gotten involved in to begin with. The war on terror is a never-ending battle and there will always be needed work to improve what we have voluntarily started. We complain of poverty in the United States yet we really have no idea what poverty is. We continue to focus on terroristic events that occurred on our own soil, yet we really have no idea what it’s like to live in terror, on a daily basis, none what-so-ever.

The cost of human life is too precious and there is work that needs to be done in every neighborhood across the globe. One can only imagine what it’s like for the Iraqis, having their government and way of life literally turned upside-down after being freed from the reign of Saddam Hussein and his sons who systematically violated the human rights of Iraqis and those of other countries as well. They did so with utter disregard for human rights, operating a vast enterprise encompassing at its worst mass graves, the use of torture chambers, chemical baths, routine rapes, brutal and arbitrary murder including legitimizing killings and medical amputations as punishment among other crimes (Foreign Affairs, 2003)

As of March 16, 2010, at least 4,385 US military personnel have been killed in Iraq since the invasion began exactly 7 years ago. (AP 2010). This loss of soldiers and civilian lives will only continue to mount unless an immediate withdraw of troops is implemented. President Barak Obama claims he will send most if not all troops home by August 2010. (Lothian and Malveaux 2009). However, with the approximate 120,000 troops overseas immediate withdraw will be impossible. But, as part of the agreement that former president George W. Bush signed with the Iraqi government, all troops must be out of Iraqi territories by December 31, 2011. (Cockburn 2008). Critics claim withdrawing now will only leave Iraq and its citizens in further disarray. They believe that until a proper government and infrastructure is established the United States, since they helped lead the invasion, should be responsible for overseeing that the appropriate people are put in place in order to run the country effectively. They should monitor the establishment of new laws and legislation that are best for the Iraqi citizens without forgetting the sovereign right of the Iraqi people.

However, history has shown that in many instances anytime a governmental regime is overthrown by an external power chaos will inevitably ensue. This is especially true in an area of the world where various sects and clans will claim their authority, announcing that it is their right to oversee all governmental affairs. Others, especially in Iraq, claim religious affiliations, saying the country should be ruled as a Muslim state. Obviously, even when apparently it is not evident to those who are in power, there are all of these different interest groups, each wanting a piece of the pie. Most of the populace, even knowing their particular culture, is confused with respect to what will happen next. They wonder what the Americans, who they see in the streets on a daily basis as American Troops and some civilians working in war – related jobs are going to do in the overall scheme of things. Even though Saddam Hussein’s regime has come to an end, clearly, there is still work to be done. The reconstruction of Iraq is a process that will not happen overnight. In fact, there will still be problems and conflicts long after the US presence has disappeared. (Park 2008).

Furthermore, detractors of the war have begun to examine America’s recent occupation in Iraq and there are human rights issues that are certainly of great concern. Naturally, many accusations have to do with actual combat in the city centers, like the plundering of occupied health care centers and schools. (Al-Darraji 2005). As with any war zone, people can begin to act irrationally, naturally reacting to their surroundings, and they often times lose sight of proper moral and ethical behavior. Many times, however, soldiers will begin treating anyone and everyone like the enemy. As a result, it should be no surprise that many complaints have surfaced. American troops as well as soldiers from other countries backing the Iraqi occupation are now being watched more vigilantly in regard to their treatment of Iraqi citizens. Human Rights Watch, an international non-profit watchdog group, has been monitoring the attacks on refugees ever since the invasion began in 2003. (Human Rights Watch 2003). These groups want to ensure the civilians and prisoners alike in this kind of conflict are not being needlessly abused or tortured as often happens during warfare.

In addition, various religious sects in Iraq, each claiming to now have authority and Amnesty International as well as other associations want to make sure the Iraqi people and those in power are not violating any international humanitarian laws. (Amnesty International 2010). They also want to ensure all detainees are being held with reason and are receiving the proper due process as established by The International Covenant for Civil and Political Rights. (ICCPR, 2010).

In conclusion, any observer can see that the war in Iraq has led to more than just the loss of life as there are obvious human rights violations that are occurring on a daily basis reported by the media and International groups. The work that needs to be done to rebuild Iraq’s government and infrastructure will be required long after the United States military has withdrawn its occupation. Some argue that it is a futile war that America has been facing because the enemy has had no face yet others claim that this is just another form of imperialism. What is the war on terror they ask? How does one fight terror? Until an exact game plan is put into place regarding America’s overall plans in Iraq, both now and in the future, detractors around the world will continue to protest the US-led invasion of Iraq. And with the billions of dollars being spent overseas, who wouldn’t?
Al-Darraji, Muhamad. “First Periodical Report of Monitoring Net of Human Rights in Iraq.” Paper presented to the Secretary General of United Nations Kofi Annan, New York, NY, August 23, 2005.

Amnesty International. “Iraq Human Rights: Human Rights Concerns.” Retrieved March 26, 2010, from
Associated Press. “US Military Deaths in Iraq War at 4,385.” New York Times. March 16, 2010, Politics Section, Middle East Edition.

Cockburn, Patrick. “31 December 2011: Day the Last US Soldier leaves Iraq.” The Independent. November 28, 2008, Middle East Section

Human Rights Violations under Saddam Hussein: Victims speak out, hearing before the subcommittee on the Middle East and Central Asia of the committee of International Relations House of Representatives, One hundred Eight Congress, First Session, November 20, 2003  Serial No. 108–64.

Human Rights Watch. Flight from Iraq: Refugees and other non-nationals in Iraq. Retrieved March 26, 2010, from

International Covenant for Civil and Political Rights. “International Standards of Due Process.” Retrieved March 26, 2010, from
Lothian, Dan and Suzanne Malveaux. “Obama: US to withdraw most Iraq troops by August 2010” CNN. February 27, 2009, Politics Section.
Park, James. “Iraq After Occupation.” Minneapolis, Minnesota. July 23, 2008.


Reviews by: Jeffrey Alan Sunner

© 2010, Carol Blenda Reyes Avila. All rights reserved.

President Evo Morales on Bolivia’s Human Rights and Development Issues


Wednesday, May 5, 2010
By Carol Blenda Reyes Avila

Evo Morales Ayma is a man who wears many titles – coca grower, labor leader, and president of Bolivia.  Presiding over a country wherein 64 percent of citizens live in poverty conditions, this President possesses insights into their situation that his predecessors have lacked.  Born in the Andes Highlands in the colonial mining city of Oruro in 1959 to a small-time peasant farmer Dionisio and his wife Maria, Evo was one of seven children.  Like other farm families their village, the impoverished Morales clan endured the hardships of agricultural life in a challenging region susceptible to dramatic changes in weather, which include frost, hail, and drought which are frequent in the “Bolivian Altiplano”.  Like their harvesters, the Morales’ potato crops were in a constant struggle for survival.

The President has vivid memories of chewing on banana and orange peels that were dropped by bus passengers traveling through his village.  Life was so difficult for the family that four of the seven Morales children died before the age of two.  Despite enduring great hardship and loss, the President remains both matter-of-fact and even upbeat about his difficult childhood, observing, “That’s how life is in peasant families… What luck that three of us survived!” What President Morales took from his childhood were the moral principles his parents instilled in him and his surviving siblings as well as a deep concern for human rights and a commitment to his country’s economic development .

Having confronted adversity at an early age, the President never harbored any illusions that life in politics would be easy.  His career in the National Congress was cut short by his expulsion in 2002, which he contends served “to deepen his commitment to the people”.  By 2005, his political comeback was complete as the Movimiento al Socialismo (MAS) party’s presidential candidate.  The charismatic leader marketed his indigenous background to cement unity within the disenfranchised masses of natives and “cholos” that had little voice in the Bolivia political system as those with European background governed Bolivia since the early days of the Republic.

Morales is infuriated by the notion that indigenous Bolivians are still regarded as “sub-national groups” when they should be the architects of their own political and social development.  He would be the first to admit that his strong indigenous grass-roots support led to his assuming the presidency after a landslide victory on January 22, 2006, the first indigenous individual to ever assume Bolivia’s highest political office.

The President remains as hardworking now as he was when he was a little boy on his father’s farm, working from Monday to Sunday and sleeping a mere four hours a nigh.  He wasted little time in initiating changes that would contribute to Bolivia’s economic prosperity and encourage development.  Within the first year, he reduced his own salary by 60 percent and those of other government officials at a savings of 61 million bolivianos in savings, which the President announced would be used for educational and health programs.  He raised the average minimum wage 13.63 percent and also increased physician and educator salaries.  The President addressed educational and medical care deficiencies by hiring more than 2,000 teachers and doctors and through the implementation of literacy programs that benefited 300,000 citizens.

The President said he expected his ambitious campaign would have a positive impact upon the country’s widespread illiteracy within a few months.  He also revealed he was investing $217 million U.S. dollars in primary school education. Evo Morales also said his socialist reform plan would provide state medical insurance for young people and senior citizens that had been previously denied coverage. Furthermore, Cuban volunteer physicians were imported to Bolivia to provide free medical care, and with the assistance of Cuba and neighbor Venezuela, the President reveals, “We have established eleven ophthalmology centers and sixteen surgical centers, which have served more than 200,000 people” .  By far, the President’s most aggressive action during his first term he believed strongly had both human rights and developmental implications.  His “Agrarian Revolution” targeted the historic practice of concentrating land into latifundios or large commercial estates while leaving the peasant farmers with little or no land.

Evo Morales prohibited the hoarding of land by landowners and supported the peasants in their efforts to grow food not only for their families and for their villages but also so they can turn a profits .  His programs and reforms succeeded for the now ” Plurinational State of Bolivia”  and its native people but also created great animosity to many which saw power and property decreased through the “Evo Year in Power”

Not surprisingly, on December 6, 2009, President Evo Morales was voted into a second term, receiving an astounding 63 percent of the popular vote.  He wasted no time in cementing the foundation he constructed in his first term by allocating funds to further assist the poverty-stricken rural citizens.  The President has established three cash-transfer programs that expedites funds to groups that are in the greatest need – public schools, elderly pensions, and pregnant women.  There are also incentives being provided for poor farm families so they will not have to seek employment elsewhere.  President Morales has also spearheaded public works programs that distributed more than 1,000 tractors to farmers in need, paved 840 roads, built 545 medical clinics and healthcare facilities, and financed water connections for 821,000 that have existed without water resources for far too long.

Despite criticism that President Morales has become as power hungry as his reported mentor Venezuelan President Hugo Chavez, he considers himself very much a man of the Bolivian people.  He explains, “In addition to being part of the Aymara nation and having lived in both the highlands of Oruro and the Cochabamba tropical area where the Quechua culture is predominant, maybe the most important thing is that I am a leader who came out of the social struggles of the country, from a situation of poverty, of knowing and experiencing the reality of most of my countrymen…  I really think that the most important thing is my life experience”.

The special connection this popular President has with his constituents is evident in the attitudes expressed by peasant housekeeper Adela Rojas, who declares she will remain a loyal supporter of ‘Evo’ “until the end”.  When asked why, she explained,  “Because Evo is us and we are Evo” .  Evo Morales is a leader with a clear vision of what the future of Bolivia should be.  Perhaps this is because he has never forgotten where he came from.
Garrigues, L.  (2007).  Bolivia looks back on Morales’ first year.  Indian Country Today, 26, A7.

O’Shaughnessy, H.  (2006).  Evo Morales: How long will Bolivia’s cocalero President last?  New Statesman & Society, 135(4776), 36.

Panizza, F., & Miorelli, R.  (2009).  Populism and democracy in Latin America.  Ethics & International Affairs, 23(1), 39-46.

Shultz, J.  (2010).  ‘Evonomics’ gets a second term in Bolivia.  NACLA Report on the Americas, 43(1), 4-5.

Trujillo, A.  (2007).  Evo Morales: Commitment to change.  Americas, 59(4), 14+.


© 2010, Carol Blenda Reyes Avila. All rights reserved’s-human-rights-and-development-issues/

Responsabilidad Social de las Empresas y sus Relaciones con la Gestión de las Personas en las Organizaciones.


Responsabilidad Social de las Empresas y sus Relaciones con la Gestión de las Personas en las Organizaciones.

Wednesday, April  7, 2010

By: Carol Blenda Reyes Avila

Se entiende que la adopción de criterios de Responsabilidad Social Corporativa (RSC) en la gestión empresarial entraña la formalización de políticas y sistemas de gestión en los ámbitos económico, social y medioambiental; así también, la transparencia informativa respecto de los resultados alcanzados en tales ámbitos y  finalmente, el escrutinio externo de los mismos. “la definición de RSC no siempre es clara” debido a las diferentes visiones de los grupos de interés y las ideologías de la dirección. Ante todo, la RSC es consistente con hacer máximos los beneficios e interés de los accionistas.

El modelo de gestión de RSC propone que la articulación de las expectativas de los distintos grupos de interés concurrentes en la actividad empresarial redunda en una mejor anticipación de los riesgos y, finalmente, en la creación estable de valor para el accionista. La adopción de la filosofía RSC por las empresas comienza con la adopción de políticas formales y sistemas de gestión en los ámbitos económico, social y medioambiental, la transparencia informativa respecto de los resultados alcanzados en tales ámbitos y finalmente el escrutinio externo de los resultados.

En la actualidad, el debate sobre la RSC se ha trasladado al ámbito político y público principalmente embocado a la función que han de desempeñar los poderes públicos para la promoción de la filosofía RSC.  Buena parte de los gobiernos de las economías avanzadas han adoptado políticas formales de difusión de la cultura corporativa de la RSC, entendiendo que las mismas puede favorecer y optimizar las ventajas competitivas de las empresas en determinados mercados, encauzar sus actividades en países emergentes o en vías de desarrollo y dar acceso a algunos segmentos del mercado de capitales ásperos.

Las agendas internacionales y la adopción de políticas formales RSC por parte de grandes grupos empresariales internacionales. En muchos casos competidores de empresas en la mayoría de los países industrializados han llegado a éstas por medio de la toma de decisiones por imitación. Esta voluntad mostrada por un creciente número de compañías permite ser optimista acerca de un conocimiento más adecuado y mayor difusión del enfoque RSC  a nivel empresarial

Hoy en día las empresas son cada vez más conscientes de la necesidad de incorporar las preocupaciones sociales, laborales, medioambientales y de derechos humanos, como parte de su estrategia de negocio y desarrollo. Progresivamente, un mayor número de empresas son conscientes de que pueden contribuir al desarrollo sostenible orientando sus operaciones a favorecer el crecimiento económico y aumentar su competitividad, al mismo tiempo, estas empresas garantizan la protección del medio ambiente y fomentan la responsabilidad social, incluidos los intereses de los consumidores.

Todo lo anterior, unido a las recientes tendencias de transparencia e información, en la actualidad  han dado lugar a que muchas corporaciones  hayan comenzado a elaborar y publicar informes de los actos  responsables ejecutados en los ámbitos laboral, social y medioambiental  llevados a cabo durante la gestión lo cual puede ser usado como ejemplo de Responsabilidad Social Corporativa.

I wrote this article for my Human Resources class at UVM  and professor Arimates suggested to get it published, so I did it!


Child Slavery Problem in Haiti


Monday, April 5, 2010

By: Carol Blenda Reyes Avila

Today, all eyes are on Haiti–the island that was devastated by a natural disaster–but in closely looking at the problems there, one has to wonder how human right issues have been overlooked. At least, while it is not a secret that Haiti has had problems, the extent of the misery there has been underrated. Padgett  writes about the Restaveks or the human slaves in Haiti. Child slavery is a given there and the Haitian government in 2001 claimed that about 300 thousand young people were in fact child slaves. It is not that Haiti condones the situation. Yet, the problem goes undetected by the Haitian government. It festers there the same way the drug trade goes on secretly in the United States. Everyone knows its there but it is hard to stop entirely.

Danielle Romer, the head of a private social service agency claims that the problem of child slavery in Haiti is more widespread than anyone wants to admit. First, it is important to define the problem and take a look at Haiti. Why are the child slaves called Restaveks? The term in Creole means “to stay with us” and it is a nice sentiment for the abhorrent practice of owning a person same as any object bought at an open market.

Slavery has existed in Haiti since the nation became independent from France in 1804. The Haitian Revolution technically took place between 1794 and 1804 but the bloody French Revolution is also related.  The revolution in France in 1789  propelled Europe to go into an all out war, touching off “slave uprisings” in Caribbean islands . In 1794, France did do away with slavery in the colonies.

In 1802, Napoleon tried to restore slavery in the West Indies but when on January 1, 1804, Dessalines called himself the leader of a new nation, Haiti would emerge as a separate entity. Indeed, like the United States broke from Britain, Haiti would break from France. The first revolution occurred due to the desire for freedom. It was a typical colonial struggle between the people who lived in Haiti and the mother country of France. Fast forward to February of 2004 and there would be another struggle brewing.  Haiti’s rebellion had spread by February of 2004 and the Bush administration had taken a proactive role in  brokering a political settlement.

Haiti is politically unstable and now this country has to deal with extreme impoverishment due to an earthquake, even as child slavery is still a part of its culture. One can see that while Haiti did separate from France, and had been on its own for some time, the nation has never been politically stable. It never completely did away with slavery either.

A recent televised rock concert was held to raise money for Haiti and there have been many collections, but this does not always help the Restaveks. Yet, there are organizations that have been trying to alleviate the problem of slavery specifically. For example, the mission of the Restavek Foundation is as follows: ” Our mission is simple. We want to put an end to child slavery in Haiti. Unfortunately, the solution is not so straightforward. As a part of a complex web addressing the Restavek system in Haiti-our role is to give hope, and even freedom, to those who need it most. The Restavek Foundation provides Restavek children opportunities for education, advocates for enslaved children, and raises awareness on a global scale to end modern-day slavery in Haiti”

Indeed, as the mission statement suggests, the problem is not simple. In part, educating people will help, but poverty is at the root of many of the problems there. Poverty and a lack of resources, or even jobs, create the issues as do a lack of education. The fact that the problem is largely hidden is keeping other nations from taken action. Again, the most significant problem is the poverty. It is why parents do not do anything to stop the slave trade. In fact, they encourage their children to take these roles. Why? Lee explains: “In Haiti, solutions are hard to come by. Children die of starvation and many parents have little choice but to hope that the Restavek system provides them a way out of certain death.” Incredibly as it sounds, the plight of the child in Haiti is worse than that of the slave in Haiti.

Haiti is widely considered to be the poorest nation in the Western Hemisphere. Even if it did not experience an earthquake, or there were no Restaveks, the nation would still be in chaos. With so many people living in poverty, life is dismal. The fact that there has been a recent natural disaster and evidence of  child slavery  along with abuse, only makes matters worse. To some extent, bringing attention to Haiti does help in terms of aid. Right now, a great deal of money is being raised for the country.

Haiti certainly needs an overhaul. Poverty must be resolved and the infrastructure built up. Yet, aside from the creation of a better organized, more lucrative nation, the slave trade cannot be tolerated. Poverty is no excuse for abuse. Yet, again, the infrastructure and the government needs to be reformed as well. The police in Haiti are notoriously corrupt. Parents must not give up by giving their children away to a life of slavery. Awareness is important, as is education, but resoling the issue of poverty seems to be most important to the cause.

Jean R. Cadet Restavek Foundation. 2010. Retrieved from e&id=1026

Lee, N.C. (2009, August 6). ANOTHER VIEW: SPOTLIGHT RETURNS TO  ‘RESTAVEKS’ OF HAITI. Retrieved from
Marquis, C. & Polgreen, L. (2004, February 21). U.S. to help    Haiti and urges out Americans. International Herald     Tribune.
Padgett, T. (2001, May 4). Of Haitian Bondage. Time Magazine.   Retrieved from racematters/ofhaitianbondage.htm
Smith, K.F.  (2010, January 16). Haiti: A Historical Perspective.
Newsweek Web Exclusive. Retrieved from
The Haitian Revolution. 1794 – 1804. 2010. Retrieved from

India’s Child Prostitution from a Woman’s Perspective


By: Carol Blenda Reyes Avila

Globalization has turned children’s bodies into a commodity through sex trafficking for someone else to make money. The propensity toward prostitution is on the increase in such global locations as India because while several programs exist to prevent the presence of sex trafficking, it may as well be the Prohibition Era all again with the level of inefficacy that surrounds any effort law enforcement makes to overcome the industry. With women and children from across the world “being taken captive and sold as sex slaves by International crime rings” laws that already exist are either not strong enough or effectively enforced to stop such slave traders. Sangera points out how “the reality of prostitution and sex trade today is extremely complex and contains a multiplicity of forces, dimensions and players,” thereby making any policy potentially inadequate to deal with such enormity.

In 2000, assertive legislature came to pass when four programs were implemented to put an end to global trafficking of women and children. Coupled with the help of the U.S. Agency for International Development the U.S. State Department spent almost 1.6 million dollars so that non-governmental organizations (NGOs) had the funds to build preventive efforts, “providing assistance to victims, and improving coordination between law enforcement officials and local NGOs”.

While intervention efforts have had some positive impact upon India’s child prostitution, the condition is similar to controlling drugs in the United States: as much money is put toward cessation, that much more effort is put forth by those perpetuating the problem in the first place. Throughout history, money has played a crucial role in virtually all cultures; it forces persons to agree with a way of life, and money frequently alters their perceptions for the worse. The drive and desire to possess money has survived through the centuries, only to become highly devastating in modern culture. There appears to be no end to what people will do in order to obtain money, often sacrificing their families, health, morality, as well as depriving others of their human rights.

While the understanding of globalization would seem to reflect a beneficial movement for all countries, current events clearly illustrate how such movement for some is at the detriment of social, political and economic expense of innumerable other societies. As such, this dichotomy of progress has rendered globalization a much-contested concept, particularly when it comes to the hotly debated issue of India’s child prostitution.

Examining this atrocity from a woman’s perspective, we can find a number of issues involved, which include a multitude of humane violations from rights to education and economics to gender equality. The journey to empower otherwise oppressed women, is a long-standing conflict between democratic freedom and patriarchal conformity whose roots are firmly planted within cultural and religious underpinning. A woman’s role within societal constructs has experienced transformation in developed countries whereby gender equality has come to reflect equity of human rights, as well. This Western ideology, however, has not infiltrated those global communities where religious principles are the guiding force behind to what extent fundamental rights are bestowed. Examining those nations that use religion as an excuse to batter, berate and undermine their women shows how they are not concerned with the level of human rights violation they are committing but rather feel the compelling need to maintain control over the female gender out of fear, power and personal inadequacy.

The Universal Declaration of Human Rights has been ineffective toward enacting any substantial level of compliance that indicates any improvement of gender treatment in international communities like India. This proclamation issued by the General Assembly of the United Nations, certainly provides the groundwork for starting a viable course of action toward restructuring the thought processes — and thereby the actions — of patriarchy. However, what looks operational on paper has proven anything but in real life, as too many cultural behaviors are protected behind a religious shield that precludes any imposed threat. Even from as weighty as an authority as the United Nations, to pressure adherence to the Declaration, the nature of which carries with it a wide range of application: aligning national leaders on civil rights issues; legal equality; cultural and social rights; academic rights; establishing a global community free of insensitivity and prejudice, hunger and ignorance; and “a world of justice and reconciliation”.

Similar to lemmings collectively jumping off a cliff for no apparent purpose, people display similar traits when they allow themselves to be led blindly without benefit of putting forth their own critical thinking process to determine if what they are being asked to follow is right or wrong. India’s continued mistreatment, degradation and humiliation toward women and children indicate a direct correlation with this blind ideology in that men are following the patriarchal lessons of their fathers and grandfathers who themselves were indoctrinated with faulty philosophies about gender. It is not within their ethical composition to understand how and why their behavior is both unacceptable and inhumane from a platform of human enlightenment. However, their cultural programming does not provide for the capacity to detect any err in their ways.

Life consists of several aspects that comprise one’s existence; instrumental to this is the notion of natural rights. What are these rights, who are viable recipients and why is there a conflict at all, those are issues philosophers have long pondered without finding any definitive answers to such unfavorable human behavior. Coercion and power are two highly tangential elements that exist throughout this subtext of Indian gender inequity and its ring of child prostitution, they exists due to nothing more than the fundamental nature of strategic subordination and predisposed nature. While some countries like America have evolved to the point of recognizing the detriment of such unsavory actions, others like those in less civilized societies like India perpetuate the oppression of women under the guise of religious mandate.


Edwards, C. & Harder, J. (2000). Sex slave trade enters the U.S. Insight on the News. 16, 14.

Fox, T. C. (1998). Measure of human rights is in actions, not words. National Catholic Reporter, 34, 32(1).

National Council of Churches (2008). Resolution on human trafficking. Retrieved from

Poulin, R. (2003). Globalization and the sex trade: Trafficking and the commoditization of women and children. Canadian Woman Studies, 22, 38+.

Sangera, J. (2007). In the belly of the beast: Sex trade, prostitution and globalization. Retrieved from

U.S. Department of State (2000). Combating trafficking in women and children in South Asia. Retrieved from

Vincent, S. (2005). When freedom requires force. The American Enterprise, 16, 54(2).

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