IB Economics Extended Essay (2015)

IB Extended Essay Subject: IB Economics Investigation of ADNOC’s (Abu Dhabi National Oil Company) fuel subsidies by the Emirati Federal Government and their impacts on Abu Dhabi’s health and environment Student Name: Zain Al Sharaf Wahbeh Candidate Number: 000-895-0002 Supervisor Name: Mr. Joseph Kimes Word Count: 3,983 words School Name: American International School of Abu Dhabi Examination Session: May 2015 Abstract This extended essay examines the extent to which negative externalities of production and consumption are increased in Abu Dhabi City (AD), in response to the large subsidy that is granted by the Emirati federal government to the petroleum firm: ADNOC. Annually, this government spends 6 % of its GDP on fuel subsidies for fuel-providing firms like ADNOC and strongly mandates that it sells petroleum at subsidized prices Khawaja, Moign. “UAE Facing Fuel Subsidies Dilemma”. The objective of subsidizing ADNOC is to ensure that AD citizens, especially those with low incomes, could purchase fuel at a more affordable price. Thus, the research question examined is: To what extent does subsidizing the ADNOC petroleum firm increase negative externalities of consumption and production in Abu Dhabi? The scope of this investigation is to observe and apply the concept of market failure to the negative externalities of production and consumption that are caused by granting ADNOC subsidies in the billions of dollars. In terms of negative externalities, the impacts on the environment of the city and the respiratory health of the citizens were thoroughly researched .through documents, articles, and primary research. This research was then analyzed in order to determine the extent to which market failure in Abu Dhabi (AD) has worsened due to this subsidy. I have reached the conclusion that due to the high price elasticity of demand for fuel, despite the discovery that the subsidy does not increase negative externalities of production at all, the extent to which the fuel subsidies contribute to any further market failure is quite significant. Therefore, it can be argued that although the government was solely aiming to make ADNOC’s fuel more purchasable to Abu Dhabi (AD) consumers, it has caused more adverse impacts on the citizens’ health and environment than positive outcomes. Word Count: 298 words Contents Page: Page Description Page number Introduction 1 Methodology utilized for the collection of data 1 Review of Relevant Theory: Market Failure 2 The Present ADNOC Profile 5 Analysis A: Impacts on the Environment of Abu Dhabi and respiratory health of its citizens 6 Analysis B: Limitations of the economic theory and investigation of resources 11 Conclusion 17 Bibliography 18 Appendices 20  Introduction The following essay will be centered upon the concept of market failure, in the field of microeconomics. The research conducted has become an exciting opportunity to observe the extent to which particular economic decisions trigger transformations in the environment and the health of the residents in Abu Dhabi (AD). Specifically, this research pursues a case study that is focused on the effects of ADNOC fuel subsidies on AD’s environment and on its citizens’ health. Hence, this research will be evaluated in terms of negative externalities of production and consumption. This topic of interest was selected because negative impacts on environment and health are critical damages that will increase external costs that outweigh the benefits of the subsidy in the economy. This dilemma will occur in the long run, if no measures are taken to evaluate and find solutions to reduce those damages. This would eventually develop a severely unhealthy environment and workforce, incapable of carrying out sufficient economic activities. Hence, the economic theory of market failure was taken into great consideration. To revise, the fundamental research topic is the evaluation of the extent to which subsidizing the ADNOC petroleum firm increases negative externalities of consumption and production in Abu Dhabi. Methodology utilized for the collection of data Both primary and secondary research were conducted in order to carry out an analysis to determine the extent to which both negative externalities of production and consumption are increased in the city of Abu Dhabi. The primary research mainly consisted of an interview and a survey. Regarding the interview, I interviewed the CEO of The ADNATCO & NGSCO companies which are both owned by ADNOC Their role is to assist the ADNOC Group supply chain by transporting its production of oil, gas, refined products and petrochemicals to consumers. . Specifically, I inquired about the extent to which the government subsidies have increased the production and processing of ADNOC fuel. Additionally, I also inquired about any alterations in ADNOC’s current fuel prices in response to the subsidy and if ADNOC took any initiatives to reduce its environmental harm. As for the survey, it displayed a hundred multinational respondents’ various opinions on how reversing the subsidized price of fuel would impact their transportation decisions on several occasions This survey was created and conducted online on surveymonkey.com in which 100 respondents presented their opinions. Participants were reached out through social media. . Secondary sources were based upon documents and articles that provided any statistical information supportive to my research and analysis. These included official documents and reports published by the Environmental Agency (EA) in AD and were scrutinized to discuss the extent to which environmental toxicants have increased over the past few years due to copious fuel subsidies. Review of Relevant Theory: Market Failure as a result of Subsidies. It is essential to keep in mind, in the context of the research question, that the subsidy implemented by the UAE government was the catalyst of AD’s market failure. This is because the subsidy implementation has lowered the prices of the ADNOC’s fuel artificially, thereby increasing the consumer demand for this commodity significantly. By theory, subsidies are government spending aimed to directly increase the production of ADNOC fuel as well, leaving large room for significant damages to the AD environment and health. Market failure occurs when resources are not allocated in the optimal manner, meaning that the community surplus is not maximized. There are many reasons behind the existence of market failure such as the existence of externalities. To narrow this down, this review will only be centered upon the concepts of negative externalities of production and consumption. Generally, externalities occur when consuming or producing a good or service impacts the third party positively or adversely. Adverse impacts are considered a negative externality of production and consumption. In order to paint a clear picture of the full cost to society, the external costs to society must be added to the consumers’ or producers’ private costs. Assuming there are no externalities, the community surplus is maximized and the Marginal Social Cost (MSC) is equivalent to the Marginal Private Cost (MPC) and the Marginal Social Benefit (MSB). This trend can be modeled in diagram one. 0 Diagram 1 In diagram one, there is no existence of market failure as there are no external costs of production or consumption added to the private costs of a producer or consumer. Unfortunately, due to the increased supply and consumption of fuel in AD, negative externalities of consumption and production are prevalent. Negative Externalities of Production These take place when producing a good or service creates external costs that adversely impact the third parties in society. For example, subsidizing the ADNOC firm with billions of dollars will increase the CO2 emissions, degrading the environment and health of AD citizens. Thus, theoretically due to the subsidy, the production is expected to increase and the air pollution will worsen. There is evidently an external cost to the community that is larger than the costs of production for the fuel. On top of the polluting firms’ private costs will be these additional external costs. Hence, the MSC will be larger than the MPC. The MSC is known as the MPC ± any externalities. Since there are adverse costs to society, the MSC will be the sum of the MPC and the negative externalities of production. This can be modeled diagram two. Diagram 2 Because there is an extra cost to society due to the air pollution caused by fuel, the MPC ˂ MSC, as seen in diagram two. Specifically, these costs include respiratory complications among the inhalers of the pollution toxicants. Nevertheless, ADNOC is assumed to only be concerned with its private costs of production, producing at Q1 and at the price of P1. There is a scenario of market failure, since the firm is not producing at the socially efficient output Q* where MSC = MSB at point a. Thus, resources are evidently being misallocated as too much fuel is being supplied at a relatively low price for AD citizens. For this reason, there is a welfare loss to society for the units between Q* and Q1 where the MSC is larger than the MPC: the welfare loss being all the health and environmental costs in AD from the subsidized fuel production. Negative Externalities of Consumption: Various goods and services, when consumed, adversely impact third parties. A perfect exemplar would be the increased consumption of ADNOC’s subsidized fuel. Due its increased consumption, the MSB are less than the Marginal Private Benefits (MPB). MPB is associated with the benefits the individuals feel as a result of consuming a product. MSB signify a larger picture reflecting the benefits the whole society feels as a result of consumption of a particular product. Adverse impacts will lead to a negative utility that the entire society suffers which outweighs private benefits. This can be visualized in diagram three: Diagram 3 Individuals who consistently utilize cheap fuel might enjoy the utility of increased transportation, but such behavior will only create external costs to society. Specifically, respiratory complications due to increased toxicants and pollution will emerge, and the environment will degrade as well. Assuming this is a free market economy, the consumers of the fuel will maximize their utility, consuming at a level where MSC= MPB and will neglect the negative externality, as portrayed in diagram three. The overconsumption of fuel will occur as Q1 amounts of fuel will be consumed at a P1 price. In this scenario, there will be a welfare loss to society of the units between Q*, the socially efficient output, and Q1 where the MPB is larger than the MSB for these units, thus market failure occurs. Big Picture Given the economic theory and this applicable case study, it can be inferred that subsidizing fuel firms, with the assumptions of the subsidy theory, increases both negative externalities of consumption and production which will worsen the welfare loss to society. Nevertheless, there are several limitations in the assumptions made by the market failure and subsidy economic theories. This notion will be elaborated on in the analysis B section. Regardless of the limitations, it is essential to keep in mind the research question of whether or not the UAE government is genuinely benefitting its economy by subsidizing ADNOC. This will be answered with the support of the evidence presented in analysis A. The Present ADNOC Profile In order to ensure that citizens could fill their tanks cheaply, the UAE government has taken the initiative to use 6% of its 300 billion dollar GDP to grant subsidies for ADNOC. .Khawaja, Moign. "UAE Facing Fuel Subsidies Dilemma.As a matter of fact, the government subsidizes ADNOC $1.02 per liter sold (70%). Reuters. "Fuel Subsidies Are Double-edged Sword for UAE." Arabian Business. Since four years, an artificially low subsidized price of $ 0.47 per fuel barrel is sold to AD consumers. Bakr, Amena. "Cheap UAE Gasoline: Citizens and Industry Square up." Reuters. Thomson ReutersAccording to the World Bank, this value is less than half of the global average price of fuel. Nevertheless, in comparison to other Gulf countries, the UAE’s selling price is relatively high. Thus, the Federal National Council further endorses a higher subsidy in order to lower the fuel prices and match the price of the other Gulf Nations Reuters. "Fuel Subsidies Are Double-edged Sword for UAE." Arabian Business. . Due to the generous $11 billion dollar subsidy granted, it is assumed to help ADNOC produce approximately 3 million oil barrels per day Reuters. "Fuel Subsidies Are Double-edged Sword for UAE.". Furthermore, AD is a fundamental amplifier of the UAE’s production and processing capacity of oil, as it possesses over 95% of the entire nation’s existing oil reserves. "OIL AND GAS." UAE. <http://www.uaeinteract.com/business/oilandgas.asp>. Hence, with the assumption of the subsidy theory, granting a large subsidy to ADNOC would load its filling stations with endless amounts of more fuel. Speaking of the commodity sold itself, oil is produced in 2.6 million barrels per day while the daily consumption exceeds half a million barrels. "About ADNOC." About ADNOC. ADNOCHolding the subsidy accountable for increasing its production, in theory, it is evident that the demand and supply are very high and both the production and consumption of this product are producing external costs to the society of AD. Diagram 4 With the complete assumption of the subsidy economic theory, in diagram four , there is a shift in ADNOC’s supply curve (S1) downwards by the amount of subsidy ($1.02) as a result of subsidizing approximately 70% of the $1.56 price, thus lowering the fuel price per litre and increasing the production from Q1 to Q2 simultaneously. Analysis A: Impacts on the Environment of AD and the respiratory health of its citizens This portion of the extended essay will present a particular analysis of statistical and documented information regarding the impacts on air quality and health of the AD citizens. The following will be presented in relation to negative externalities of production and consumption Environment: Within the environment of AD, there are several classifications of air toxicants that are prevalent such as sulfur oxides, carbon monoxide and dioxide. Air Quality in Abu Dhabi." Environmental Agency Abu Dhabi. In terms of gathering accurate information to draw conclusions about the prevailing air toxicants that surround AD, the Environmental Agency (EA) utilizes Air Quality Indexes (AQI) to indicate the severity of the pollution and harm. On a general basis, the city of AD as a whole contains an AQI that triggers health warnings or emergency conditions. Table one presents the range of scales utilized to measure the degree of fatality: Air Quality in Abu Dhabi." Environmental Agency Abu Dhabi. Table 1 The AQI index for the entire AD city for the past few days (August 15- August 22 2014) added up to 427 µg/m3, which lies within the hazardous range: the highest portion of the scale! Air Quality in Abu Dhabi." Environmental Agency Abu Dhabi. In particular, the streets that were near industrial facilities of oil storages, production plants and airports had more hazardous AQI than those who weren’t as near. Figure one depicts the locations of production plants, storages, and stations where toxicants are at the highest "Commitment and Policies." ADNOC. ADNOC Distribution. Figure 1 In fact, both the Hamdan Street and the Khadeeja Primary School regions are located very close to the ADNOC Depot and the Production Plant in the North and these results came in on August 20 2014 in figure two: Figure 2 Another well-known region called Musaffah, located near the Takreer Depot, received an AQI of 160 µg/m3 for a few hours on August 20. Khalifa City A, sandwiched closely between two airports, also has a high AQI of 95 µg/m3. ( See map on Figure three) Air Quality in Abu Dhabi." Environmental Agency Abu Dhabi.. The AD National Airport carries out approximately 900 weekly flights as each plane utilizes copious amounts of fuel. Consequentially, the AQI in this region is evidently high. "Abu Dhabi Flights to Grow 8% in New Winter Schedule."ArabianIndustry.com. Figure 3 With the presence of 74 ADNOC filling stations, several depots and a petroleum refinery, it is conspicuous that the consequences of large amounts of fuel production and consumption are substantiated in terms of environmental toxicants in AD. Reuters. "Fuel Subsidies Are Double-edged Sword for UAE." Arabian Business. In terms of negative externalities of consumption, subsidizing the petroleum prices by 70% is encouraging consumers to purchase this product in half a million barrels per day. Thus, the existence of the air toxicants evidently arises from the prevalence of petroleum- fueled vehicles and combustion of fuels in the engines. The application to this theory is modeled in diagram five. $0.47 Diagram 5 Acknowledging the existence of negative externalities of consumption in terms of the environmental toxicants, the subsidized price of $0.47 is higher than the equilibrium price: P*. Additionally, due to the excessively large consumption of 571,000 fuel barrels per day ( Q1) , this value is also higher than the optimal quantity of fuel Q*. Because the consumption and price of fuel are higher than the optimal quantities and prices, there is evident welfare loss in which the MSB ˂ MPB. Additionally, with the assumption of the free market, the AD citizens will maximize their utility of cheap fuel, thus creating the external costs to society. One of the most prominent external costs in this scenario is the poor quality of air in the city. With the assumption of the subsidy theory, the government subsidy is assumed to play a very large role in further increasing the production and supply. Aside from the air quality issues and toxicants, ADNOC has admitted that there had been approximately 6 onshore oil spills since 2010 ADNOC. ADNOC DISTRIBUTION 2012 SUSTAINABILITY Report.. Oil spills are also known to adversely impact the environment. Hence, the costs to society for the production are higher than the costs to society for the consumption of fuel, since the production contains more severe environmental impacts than the consumption of fuel causes. Assuming this is a free market economy, the ADNOC firm would only consider its private costs of production, neglecting the environmental and health costs to society: Appendix 1 In appendix one, the quantity of fuel produced, 2.7 million barrels (Q1), is higher than the optimum quantity (Q*) that must be sold so that no market failure is present. Hence, the MSC will be larger than the MPC. Shaded in Appendix one is the welfare loss which represents the severe health and environmental costs from this subsidy, a catalyst of this externality. Health: Respiratory diseases, cancer, and heart diseases are considered three of the top four public health issues in AD. Loney, Tom. "Public Health Priority Area 4: Respiratory Disorders."Additionally, the population of AD is at extremely high risk of these diseases especially due to reliance on unsustainable transportation, exposure to traffic jams, urbanization, and construction projects. Air Quality in Abu Dhabi." Environmental Agency Abu Dhabi. In 2013, according to the Health Authority of AD (HAAD), there were 2403 total civilian deaths from circulatory diseases, respiratory illnesses, obesity, neoplasms, and injury and poisoning. These statistics are presented in chart one. "Leading Causes of Death." Health Statistics 2012 HAAD Chart 1 In chart one, it is evident that circulatory and respiratory diseases combined, both usually caused by excess amounts of daily toxicants and poor air quality, shaped the majority of deaths overall in that year. Narrowing this search down to cancer, lung cancer makes up the second highest widespread cancer in AD responsible for death, seen in chart two. "Medical Research." Medical Research. Chart 2 From the study in Chart two, it is evident that lung cancer is one of the most common among cancer patients in AD. The next step is to investigate the causes of lung cancer for these patients and to determine whether the exposure to pollutants and toxicants plays a large role in causing this disease. In particular, a late 2012 study performed by HAAD confirmed that air pollution was not the major cause of lung cancer deaths among AD citizens, portrayed in Chart three: HAAD. "Cancer." Health Statistics 2012. Abu Dhabi: HAAD Statistics Chart 3 In conclusion, in terms of lung complications and cancer deaths, exposure to air pollution is not the major cause for these diseases. Nevertheless, there is still a cost to society for these 29% of lung cancer patients who must have suffered medical expenses because of the environmental harm in the city. Analysis B: Limitations of the investigation of resources and the economic theories Limitations of the investigation: Regardless of the accurate research investigated in the previous section, several limitations must be addressed. One conspicuous limitation would be the fact that the addressed environmental issues in AD could be caused by more reasons than the refinement and excess consumption of ADNOC fuels solely Legend: Abu Dhabi Factories Figure 4 خرائط Google‏." خرائط Google‏. Factory Locations in Abu Dhabi Near the Musaffah and Khalifa City residential areas, in figure four, there are a variety of nearby industrial factories ranging from iron and steel factories to panel manufacturing. Those industrial locations, in addition to heavy-duty daily construction work throughout the entire city, all account for the poor air quality and high AQI values, too. This trend can mainly be seen in Musaffah and Hamdan streets alongside Khalifa A that are also surrounded by these nearby industrial sites. This serves as a setback because it is now difficult to measure the extent to which traffic jams, oil production, and refinement processes on their own cause an adverse impact on the air quality, excluding the industrial activity of the construction and other factories. Another major setback is that, regarding the study represented in chart two , it is highly possible that there is slight inaccuracy in the data since it is likely that several diagnosed citizens were undocumented if they didn’t attend or get treated in AD hospitals for any type of cancer or lung complications. Hence, the study would have provided different percentages if all diagnosed citizens were fully documented. Also, this study involved the sum of both male and female cancer patients. Nevertheless, according to HAAD, while the most prevalent cancer among female patients was breast cancer, the most common cancer among male patients was lung cancer. Furthermore, the ratio of female smokers to male smokers is 3 to 17 in AD. "Medical Research." Medical Research. Evidently, the fact that there are way more male smokers than female smokers substantiates that the prevalence of lung cancer among these male patients was significantly due to the habitual smoking and not the environmental pollutants. In conclusion, keeping in mind that smoking caused 71% of lung cancer incidents makes it difficult to see a large cause and effect correlation between the inhalation of environmental toxicants and the initiation of prevalent lung diseases, although EA specialists suggest otherwise. "71% of Lung Cancer Patients in UAE Are Smokers Limitations of the Economic Theory: Several market failure and subsidy economic theory limitations were noticed during the investigation and gathering of resources. Market Failure In terms of negative externalities of production, assuming the economy is a free market, the economic theory states that the polluting firms will only be concerned with their private costs of production, neglecting the costs pollution has on health and environment. Nevertheless, the UAE has a mixed economy and ADNOC does take initiative towards environmental causes. Through my interview with the CEO of ADNATCO & NGSCO, it was revealed: “ADNOC has been taking significant steps when it came to health, environment preservation and sustainable development”. Additionally, it was mentioned that“ ADNOC has been implementing certain measures in its operations for maximum utilization of Carbon Dioxide emissions in Enhanced Oil Recovery projects involve technologies that aim at reusing emitted carbon gases from operations by preventing them from going in the air minimizing any negative effect into the atmosphere.” These initiatives were further verified in official ADNOC documents. Through the charts four and five, it is conspicuous that environmentally, ADNOC has taken large measures in reducing the water withdrawal for operations and the direct energy consumptions since 2012 "Commitment and Policies." ADNOC. ADNOC Distribution, n.d.. Chart 4 Chart 5 "Sustainability Report '10." Only What They Need to Live, and to Preserve It for Succeeding Generations.”  With that said, it could now be extrapolated that despite the economic theory, ADNOC is not a firm just concerned with its private costs of production and does ensure action taken to lower the environmental damage caused from its heavy production. Additionally, in terms of consumption, AD Municipality has incorporated 150 more compressed natural gas-powered vehicles in aims of environmental conservation. The consumers of these vehicles are not to maximize their utility as there are GPS tracking systems to follow up with these vehicles’ movements "Abu Dhabi Municipality Add 150 Natural Gas-powered Vehicles to Fleet.". With environmentally friendly initiatives taken by vehicle consumers, it can be inferred that the negative externalities of consumption theory is too broad as some consumers are considerate of the environment and will not maximize the utility of environmentally harmful products. Subsidies: Diagram six illustrates the theoretical representation of ADNOC’s subsidy results which are supposedly increased fuel barrel processing from Q1 to Q2 and a decreased selling price of $0.47 Diagram 6 Nevertheless, in application, it was discovered through the interview with the CEO that there was “no such thing” as a scenario in which the government directly subsidized the production as well. Thus, the supply curve of ADNOC cannot be shifted to the right. Regardless of that, ADNOC produces about 3 million barrels of oil daily, while the demand for consumption is only 571,000 barrels of fuel. Central Intelligence Agency. Central Intelligence Agency, n.d. WebIn this case, there is excess supply in relation to the demand and subsidizing the production directly would be redundant. Thus, it can be concluded that the increase in negative externalities of oil production and fuel refining do not result from any subsidies. Now, to determine whether there is likely to have been an increase in negative externalities of consumption, a survey was conducted among participants of diverse ethnicities. The questions posed in the survey to 100 individuals regarded how reversing the subsidized fuel prices would impact their transportation decisions on several occasions. In this context, by altering prices I implied a scenario where the fuel prices were 70% higher, which would be the official price of fuel in the UAE if there was not a subsidy implemented. The following responses are presented in Appendices two, three, and four below. Appendix 2 Appendix 3 Appendix 4 Overall, these survey responses substantiate that if the subsidized fuel prices weren’t implemented, the consumption of fuel will be reduced quite significantly. With that said, the artificially low price is the main compeller that increases negative externalities of consumption in the UAE. This is mainly because of the inferences that the price of ADNOC fuel was more elastic than the economic theory assumes. This brings out a large limitation in this economic theory. This is because fuel in theory is treated as a commodity product and a necessity good while in practice, it is treated as a normal good that only some would use frequently depending on the price of fuel and their income. If it was recognized that fuel was truly a normal good earlier, against the theory assumption, it would have been much easier to claim that the consumption side of ADNOC fuel is what truly increased AD’s market failure in the economy as a result of fuel subsidies. Conclusion: Through the analyses in the previous sections, it can be evidently concluded that the subsidies granted to the ADNOC petroleum firm caused significant increases in negative externalities of consumption. In terms of production, it was discovered that no subsidy was granted directly to ADNOC’s production. Nevertheless, observing the environmental conditions of the neighborhoods and streets that were located near ADNOC depots and refinery plants, it can be evinced that the heavy production itself is what caused the environmental damage and not the subsidy. In terms of consumption, after discovering the high price elasticity of demand for the fuel, it can be concluded that the increase in demand of fuel due to the subsidized price had caused a drastic alteration in the already existing environmental harm due to the persisting high consumption of fuel. In other words, regardless of the government’s intention of making fuel more affordable to ease up the AD citizens financially, it indirectly led to exacerbating health and environmental complications among them. Because the disadvantages outweigh the advantages of the subsidy, it is recommended that the fuel subsidy granted to ADNOC should be reduced. Bibliography "71% of Lung Cancer Patients in UAE Are Smokers — Expert." Newsletter. Mahmood Saberi, Feb. 2012. Web. 08 July 2014. <http://gulfnews.com/news/gulf/uae/health/60-of-lung-cancer-patients-in-uae-are-smokers-expert-1.975887>. "خرائط Google‏." خرائط Google‏. Factory Locations in Abu Dhabi, n.d. Web. 15 July 2014. <https://www.google.ae/maps>. "About ADNOC." About ADNOC. ADNOC, n.d. Web. 08 July 2014. <http://www.adco.ae/en/adnocgroup/pages/aboutadnoc.aspx>. "Abu Dhabi Municipality Add 150 Natural Gas-powered Vehicles to Fleet."7DAYS Dubai. N.p., 11 May 2014. Web. 26 Aug. 2014. <https://7daysindubai.com/abu-dhabi-municipality-add-150-natural-gas-powered-vehicles-fleet/> ADNOC. ADNOC DISTRIBUTION 2012 SUSTAINABILITY Report. Abu Dhabi: ADNOC Distribution, 2013. Print. Air Quality in Abu Dhabi." Environmental Agency Abu Dhabi. EAD, n.d. Web. 14 July 2014. <hFwww.adairquality.ae%2Fen%2Fhome.aspx> Bakr, Amena. "Cheap UAE Gasoline: Citizens and Industry Square up." Reuters. Thomson Reuters, 30 May 2012. Web. 08 July 2014. <http://www.reuters.com/article/2012/05/30/us-emirates-petrol-idUSBRE84T0VW20120530>. "Commitment and Policies." ADNOC. ADNOC Distribution, n.d. Web. 14 July 2014. <http://www.adnoc.ae/content.aspx?newid=127&mid=127>. HAAD. "Cancer." Health Statistics 2012. Abu Dhabi: HAAD Statistics, 2013. 21-24. Print. Khawaja, Moign. "UAE Facing Fuel Subsidies Dilemma." www.arabiangazettecom. Moign Khawaja, 30 May 2013. Web. 08 July 2014. <http://www.arabiangazette.com/uae-fuel-subsidies-dilemma/>. "Leading Causes of Death." Health Statistics 2012 HAAD. Abu Dhabi: HAAD, 2013. 13-15. Print. Loney, Tom. "Public Health Priority Area 4: Respiratory Disorders." An Analysis of the Health Status of the United Arab Emirates: The ‘Big 4’ Public Health Issues. Abu Dhabi: n.p., 2013. 5-7. Print. "Medical Research." Medical Research. N.p., n.d. Web. 08 July 2014. <https://www.haad.ae/haad/tabid/756/Default.aspx>. "OIL AND GAS." UAE. N.p., n.d. Web. 08 July 2014. <http://www.uaeinteract.com/business/oilandgas.asp>. Reuters. "Fuel Subsidies Are Double-edged Sword for UAE." Arabian Business. Arabianbusiness.com, Oct. 2012. Web. 08 July 2014. <http://www.arabianbusiness.com/fuel-subsidies-are-double-edged-sword-for-uae-427653.html> "Sustainability Report '10." Only What They Need to Live, and to Preserve It for Succeeding Generations.” Sheikh Zayed Bin Sultan Al Nahyan (n.d.): n. pag. Sustainability Report 2010. ADNOC Distribution, 2010. Web. 15 July 2014. <https://www.adsg.ae>. Appendix Appendix 1 Details on prevalent environmental toxicants caused by negative externalities of ADNOC fuel production and impacts on health: In terms of carbon monoxide, Environmental Agency reports have shown that its main source is road traffic of petroleum- engine vehicles and vehicle exhaust. Carbon monoxide is a poisonous gas known for significantly deteriorating the transport of oxygen to the brain and heart, resulting in major respiratory and heart diseases. Regarding sulfur dioxide, the Environmental Agency (EA) investigations confirmed that this toxicant spreads due to oil power stations, industrialization in factories, and road traffic. Inhaling this toxicant is known to constrict the airways and initiate breathing difficulties and chronic lung illnesses in the long term. Lastly, Carbon dioxide is a fatal Green House Gas emitted from combustion and burning of fossil fuels in factories. The following information lists very particular environmental and health toxicants in Abu Dhabi caused by negative externalities of production and their impacts on the health of the Abu Dhabi citizens who are located near ADNOC depots and refinery plants. Appendix 2: Detailed description of the first question of my survey As seen in the results above , the vast majority of participants chose to refer to cheaper transportation methods like environmentally friendly transport that minimized gas intake, and public transport. Overall, out of all participants, only 28% claimed to not altering their transport methods and insisted on using their automobiles as much as possible. On the other hand, 72% insisted on minimizing fuel consumption in response to the increase in fuel prices . Through these statistics, it can be extrapolated that if the subsidy was never implemented by the Emirati Federal Government, meaning that the current fuel price would be 70% higher, the majority of consumers would be unlikely to purchase this good as often in this scenario. ****Note for appendices 2, 3, and 4- - United States of America - South Korea - Syria - Algeria - Turkey - United Arab Emirates - India - Iran - Brazil - Bangladesh - Jordan - Romania - Saudi Arabia - Malaysia - Canada - China - United Kingdom - Bahrain - Singapore - Lebanon - Germany - France - Egypt - Sudan All survey participants belonged to varied nationalities that included nationals of the following countries: The aim of surveying a varied range of participants is to receive a fairly distributed palette of assorted ethnicities with diversified incomes, thus distinct consumption habits. This helped attain a balanced overall response towards increases in the fuel prices. Appendix 3: Detailed description of the second question of my survey According to this study, while 80% of the survey participants decided to reduce their usage of automobiles on weekends due to potential price increases, only 20% decided to continue driving as much as possible. Based on this information, we can infer that the price of fuel in fact is more price elastic than inelastic, despite the theoretical assumption of fuel being inelastic. According to this study, while 80% of the survey participants decided to reduce their usage of automobiles on weekends due to potential price increases, only 20% decided to continue driving as much as possible. Based on this information, we can infer that the price of fuel in fact is more elastic than inelastic, despite the theoretical assumption of fuel being inelastic. Appendix 4: Detailed description of the third question of my survey Based on this survey, 77% of participants appeared to have taken price into consideration of fuel more than the quality of the holiday destination. Nevertheless, only 23% decided to spend time and money travelling 60 km to a resort that was only half a star higher than the 25 km destination. Overall, it can be further inferred that fuel is more price elastic than inelastic as consumers wouldn’t have been as careful with money if the subsidy was implemented Zain Al Sharaf Wahbeh, 000-895-0002 3