2013 ACJC H1 Econs P1

1 ©ACJC/2013PreliminaryExam/H1Economics8819/1 [Turn over ANGLO-CHINESE JUNIOR COLLEGE 2013 JC2 PRELIMINARY EXAMINATIONS ECONOMICS 8819/01 Higher 1 Paper 1 28 Aug 2013 3 hours Additional materials: Answer paper READ THESE INSTRUCTIONS FIRST Write your index number and name on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid / tape. Section A Answer both questions. Begin each Case Study Question on a fresh sheet of paper. Section B Answer one question. Begin Essay question on a fresh sheet of paper The number of marks is given in brackets [ ] at the end of each question or part question. At the end of the examination, arrange your answers in order. Fasten your answers for Section A and Section B separately using the cover sheets provided. This document consists of 8 printed pages. Please check that your question paper is complete.

2 ©ACJC2013PreliminaryExamH2EC8819/1 Answer all questions in this section. Question 1 Beyond the Oil Market Extract 1: Oil price may hit $150, warns International Energy Agency The world's leading energy thinktank, Paris-based International Energy Agency (IEA) has warned that oil prices could spiral above $150 (£93) a barrel from 2012 to 2015, if political unrest in Africa and the Middle East leads to inadequate investment over the coming years. The Middle East and North Africa produce more than one -third of the world's oil. Libya's turmoil shows that a revolution can quickly disrupt oil supply. Libya's oil output has halved, as foreign workers flee and the country fragments. The spread of unrest across the region threatens wider disruption. Despite a drop in the cost of crude on 9 November prompted by the deepening crisis in the eurozone, IEA said the high cost of crude posed a threat to the global economy and said there was a risk of prices exceeding the previous peak of $147 a barrel seen in 2008. The thinktank is expecting demand for energy to grow by a third between 2010 and 2035, with two thirds of the increase coming from the fast -growing emerging countries, and says enormous investment in exploration, drilling and refining will be needed for supply to keep pace. Fears that the outlook for global growth will be affected by Europe's sovereign debt problems prompted oil prices to fall by $2 a barrel as dealers anticipated weaker demand. Analysts said the fall would have been larger had it not been for the ratcheting up of international pressure against Iran over its nuclear programme. Source: The Guardian, 9 November 2011 Figure 1: 2012 Oil Prices (US$ / barrel) Source: US Energy Information Administration (EIA), 2012 Extract 2: Global economy learns to absorb oil price hike Despite the increase in oil prices over the past decade, the world has absorbed the price hikes with relatively little disruption due to fundamental changes in the workings of the global economy. IMF economists attribute this resilience to diversification. Countries have increasingly diversified their energy sources over recent decades. They import energy from more places than in the 1970s. They also use more varied forms of energy. This makes them less vulnerable to disruptions from any one supplier or source of energy. By 2030, it is

3 ©ACJC/2013PreliminaryExam/H1Economics8819/1 [Turn over expected that energy use will be even more diversified. Oil, coal, and gas are predicted to each have a 30 percent world market share, with hydro, nuclear and renewable accounting for the remaining 10 percent. However, oil sup plies remain a concern . Despite the reduced impact of high oil prices in recent years, large and abrupt price changes remain difficult to absorb, particularly if they come from supply disruptions. Source: International Monetary Fund (IMF) 25 May 2012 Figure 2: Fossil Fuel Consumption Subsidy Rates in 2011 Country Average Rate of subsidy (%) Total subsidy as share of GDP (%) Iraq 64.3% 19.3% Saudi Arabia 79.5% 10.6% India 18.6% 2.4% Indonesia 23.2% 2.5% Taiwan 3.9% 0.3% South Korea 0.3% 0% Source: International Energy Agency (IEA), 2011 Extract 3: Global carbon-dioxide emissions increase in 2011 to record high Global carbon dioxide (CO2) emissions from fossil-fuel combustion reached a record high in 2011, according to International Energy Agency (IEA). This represents an increase of 1.0 gigatonnes (Gt) in 2010. Coal accounted for 45 percent of total energy -related CO2 emissions in 2011, followed by oil (35 percent) and natural gas (20 percent). In 2011, a 6.1 percent increase in CO2 emissions in countries outside the Organisation for Economic Co -operation and Development (OECD) was only partly offset by a 0.6 p ercent reduction in emissions inside the OECD. China made the largest contribution to the global increase, with its emissions rising by 9.3 percent. India’s emissions rose by 8.7 percent, moving it ahead of Russia to become the fourth largest emitter behin d China, the United States, and the European Union. With energy -related carbon dioxide (CO2) representing the majority of global greenhouse gas (GHG) emissions, the fight against climate change has become a defining factor for energy policy - making – but the implications are daunting. Much additional investment will need to be directed towards lower- CO2 technologies, on supply and end -use sides alike. The benefits that society would reap from these measures would be of an equal if not larger magnitude tha n the cost to the energy sector. Source: International Energy Agency (IEA), 24 May 2012 Extract 4: Alternative Energy Market to Soar in Singapore Singapore's aim is to be a global hub where clean energy solutions are developed, tested, and exported overseas. Singapore's clean energy push centres on solar energy, given its strategic location in the tropical Sunbelt. Besides solar, resources are also being channeled towards wind

4 ©ACJC2013PreliminaryExamH2EC8819/1 energy, electric mobility, smart grids, biomass, fuel cells, energy efficiency, and carbon services. By 2015, the clean energy industry is expected to contribute S$1.7 billion to Singapore's gross domestic product and employ around 7,000 people. The Clean Ener gy Programme Office (CEPO) has since launched several complementary programmes such as The Solar Capability Scheme (SCS) and Clean Energy Research and Test bedding (CERT) Programme to develop the solar energy industry in Singapore. The S$20 million SCS seeks to encourage innovative design and integration of solar panels into green buildings. The objective is to build up the capabilities of its solar energy systems integrators through increased adoption by lead users in Singapore. The S$17 million CERT is ta rgeted at the public sector and complements the SCS. CERT aims to provide opportunities for companies to develop and test clean energy applications and solutions using government buildings and facilities in Singapore. Another CEPO programme is the S$50 mil lion Clean Energy Research Programme that supports R&D efforts in academia and industry. Manufacturing solar wafers, cells and modules has many parallels with semiconductor and electronics manufacturing processes. Singapore’s position as a major semiconductor hub, coupled with all -round capabilities from the precision engineering and chemicals industries, provides the nation with a head start in the solar industry. In addition, Singapore is an efficient base for companies given its excellent supply chain capabilities and linkages to the Asia region. Source: Singapore Economic Development Board (EDB), 28 May 2013 Questions [Total: 30] (a) Extract 1 a