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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: Keith Feral who wrote (147676)	10/12/2004 4:41:58 PM
From: Michael Watkins	Read Replies (1) \| Respond to of 281500

With energy costs DOUBLING, the full economic cost of transglobal exports are beginning to realize their real social cost. All of the sudden the competitive price advantage of a container of manufactured goods is cheaper to buy from a US company than it is to have the product shipped from China. It cost a lot less per ton to ship products all the way across the ocean than it does to ship a FedEx envelope (proportionately speaking) from one state to the next. Container shipping is very efficient. They could make it even more efficient, energy wise, simply by slowing the boats down (voyages are about have the length that they were back in the 70's oil crisis -- running faster consumes more fuel). Its the air transport industry which gets hit and quick .. there are no quick hits possible to reduce energy consumption in a plane except to park it. Its the domestic leg of transportation which costs the most, of which energy is a large factor but not the largest. It still requires labour to load and unload a truck, labour to drive it. Taxes, tarrifs, fees, licence costs and insurance are substantial. Equipment capital and operational costs ex energy are substantial. Finally the US is a big place. Rail is more efficient than trucking but in the era of cheap energy we've grown accustomed to centralization rather than bringing production closer to the ultimate consumer. There is a direct relationship between the increase in trade and the decline in transportation costs - of that there is no doubt. Energy is a significant factor in these costs, but not the largest. Still, radical increases in energy costs are going to limit trade - if that is your point, we agree. There is unfortunately an effect on Gross Domestic Product -- dramatically rising energy and transportation costs will hit the GDP which will hit individuals in one form or another. Any radical shift to domestic production from what is now produced overseas is almost certain to bring substantial increases in cost i.e. price inflation. The political risks here are going to make charting a course for the next few decades very tricky indeed. At any rate I'm all for more local production wherever it makes sense. I should not be buying apples from 1000 miles away when they are grown in my back yard so to speak.

To: Keith Feral who wrote (147676)	10/12/2004 6:03:32 PM
From: jttmab	Read Replies (1) \| Respond to of 281500

I think that the ridulously low price of oil has kept manufacturing countries like China way too competitive. The previous articles seem to dispute that notion. I don not accept the fact that China can ship a good to the US more cheaply than we should make it here. It's difficult to argue with someone that won't accept a fact. :o{ Think globally and act locally makes a lot of sense when it comes to commerce. Catchy phrase. All of the sudden the competitive price advantage of a container of manufactured goods is cheaper to buy from a US company than it is to have the product shipped from China. And the cost to export from the US will be higher. Cost of manufacturing will be higher. That will drive up employment rates. Higher energy prices will be bad for manufacturing countries and good for [commodity?] countries. Other than oil, wheat is a commodity and the US produces more wheat than it can use. We export it....using oil to ship it. jttmab