The Pub Discussion Board

Greetings

I like to read Global Guerrillas by John Robb and his May 29 posting is no exception:  Global Oscillations

“When a dissipative system exceeds its design envelope, you will often see oscillations (potentially as a prelude to bifurcation). We are seeing an oscillation right now as rising energy costs impact the behavior of the global economic system.”

Linking to a report from CIBC economists Jeff Rubin and Benjamin Tal: 

Will Soaring Transport Costs Reverse Globalization?

“Globalization is reversible. Higher energy prices are impacting transport costs at an unprecedented rate. So much so, that the cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today. In fact, in tariff-equivalent terms, the explosion in global transport costs has effectively offset all the trade liberalization efforts of the last three decades. Not only does this suggest a major slowdown in the growth of world trade, but also a fundamental realignment in trade
patterns.”

Snipped

“In a world of triple-digit oil prices, distance costs money.And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.”

The unintended consequences are always the most interesting to see and to write about:

WalMart takes advantage of “Just in Time” warehousing and globalization to dominate the American shopping experience and China becomes the manufacturing center for the world.  Goods are shipped everywhere by ship and truck.  The Chinese ride the wave to unprecedented riches.  The off shoring hollows out the American economy lowering the value of US Currency.  The Chinese ramp up consumption of fuel for production and for the motorcars their new wealth can buy.  The global demand coupled with those soft dollars drives the cost of a barrel of oil above $100.  The cost of oil begins to negatively affect shipping and JIT.  Thus globalization is affected, as products are cheaper made closer to home.  WalMart goes….

But I DON’T care since I don’t shop at Walmart but I do EAT!

For instance, cattle from across the West are shipped by truck to mega  centralized feedlots to be finished then shipped by truck to mega slaughter and packing operations to become hamburger shipped by truck to stories across the country.  The economy of scale, efficiency and even low wages ensure my hamburger is CHEAP and readily available.

So what happens when the cost of truck fuel affects every leg of this journey?  What happens to the fruit from Chile and the vegetables from…wherever when the ship and truck fuel prices go off the charts? 

Are you ready to go back to buying your fruits and vegetables from the local farmers market?  Your meat from the local butcher? 

How different will your cupboards and refrigerator look as the world gets rounder?

Enjoy the journey

WarLord