Unit 10 - Resource Development and International Trade Flashcards
What is the main factor that determines the geographic abundance of ore deposits?
The most important factor determining the geographic abundance of ore deposits is the number of processes that contribute to the ore mineral’s concentration. An ore that was created by igneous processes alone, for example, will be less abundant than one that was created by a variety of igneous, sedimentary, and metamorphic processes.
The presence of mineral deposits in a country does not necessarily lead to a viable mineral industry. Why?
Non-supply factors that could hamper the development of a mineral industry include high labour costs, low productivity, environmental restrictions, absence of transport systems, high transportation costs, availability of inexpensive imports, and political instability.
If resources were evenly distributed and developed across the globe, what factors might still lead to economic and political instability?
Unequal population density and differences in the demand for resources would affect the otherwise stabilizing effect of a uniform global distribution of resources.
Why do countries often import the same commodity they export?
In large countries, it may be cheaper to import a resource from a neighbouring country or by ship than to transport it over land from a great distance within that same country. Canada is a good example. Coal, mined mainly in Alberta and British Columbia, is a major export in the Canadian economy. However, users in the Maritime provinces often find it less expensive to import coal from the USA than from Alberta or British Columbia.
Import and export of the same commodity may also occur when a corporation needs more of a resource than is contracted from a domestic producer. In this case, the corporation may need to bid on the spot market, which reflects changing world prices and sources for commodities.
How has the ownership of resources in Third World countries changed over the last thirty years?
During the first half of the twentieth century, many international corporations invested in and obtained ownership of the resources of developing countries. Since the 1960s, many developing countries have sought independence or control of their own resources. Newly independent countries have often resorted to nationalization and expropriation of mines and oil fields.
What has often been the result of nationalization and expropriation of resources?
When a country nationalizes or expropriates its resources from an international corporation, it sends a message, internationally, that investment in that country is risky, and foreign capital diminishes. Without foreign investment, there is often not enough money for exploration and development of new resources.
How and why do capitalist governments often provide aid to domestic resource operations that would otherwise be unprofitable?
Sometimes it is cheaper to subsidize an unprofitable operation than to support unemployed workers. Some governments provide cash subsidies, tax relief, or low interest loans to maintain a resource operation during periods of low demand. This maintains jobs while the country waits for an economic upturn.
Explain the rationale for the formation of cartels and syndicates.
Cartels and syndicates are groups of countries, companies, or individuals that have joined to control the production and pricing of a commodity. If a group of producers of a given commodity can control it, they can regulate its supply to maintain demand, thereby controlling price. If one company exercises such control, it is called a monopoly.
What political and economic situation led to the formation of OPEC in September of 1959?
When oil production in the Middle East increased, more oil was imported in the United States. To protect the more expensive domestic product, the US established import quotas. These quotas created an oil glut on the international market, reducing the price per barrel for oil. The unilateral decision by oil companies to reduce the price of oil lowered revenues to Arab countries. In response, Arab countries joined with Venezuela to form OPEC in 1959.
What were the causes of the “oil crisis” of the 1970s?
During the 1960s, the OPEC countries were divided on economic and political issues, and couldn’t agree on oil price increases. To increase revenues, they relied on increased production. In 1973, political tension between the Arabs and Israel led to Arab unification. This led not only to an increase in the price per barrel of oil, but an embargo of oil exports to countries such as the United States, which supported Israel. This embargo led to consumption quotas, restricted hours of operation for gas stations, and long line-ups in the United States.
How has the DeBeers syndicate influenced the market value of diamonds?
The DeBeers Syndicate owns or controls most of the world’s diamond mines. Diamonds themselves have little intrinsic value, but successful advertising and regulation of their availability on the world market keep the cost of diamonds high. This may change, however, as new diamond sources not controlled by DeBeers are being developed, and because gem-quality synthetic diamonds may be produced in sufficient quantities and size in the not-so-distant future.
How do authors A. F. Alhajji and David Huettner define a profit maximizing cartel?
According to these authors, a profit maximizing cartel is a structured association of producers who get together to formulate a mechanism for deriving higher returns from their products by controlling production and access to the product.
According to Alhajji and Huettner, why did Gabon and Ecuador leave OPEC?
Ecuador and Gabon left OPEC because they did not perceive any benefit from membership. Ecuador and Gabon have well-established diplomatic relations with the other members of OPEC and, significantly, the oil reserves in Ecuador and Gabon are controlled by foreign companies who operate independently.
According to Alhajji and Huettner, why did the worldwide production of oil decline in 1999?
World oil production declined in 1999 because low oil prices in the preceding period led to reduced investment and inadequate maintenance. This, in turn, led to reduced production capacity.
To what does strategic resource usually refer?
A strategic resource is normally a metal used in military defence and energy programs. Examples of strategic resources include chromium, niobium, nickel, platinum, and tantalum.
