Saturday, August 02, 2008

Is De-Globalization Beginning?

On June 24 I wrote about "Some Interesting Developments on the Oil Front". Oil priced at more than $100 a barrel is having significant effects on world trade. The cost of shipping a container from China has increased from $3000 to $8000, which means it often makes a lot less sense to have products targeted for the American market manufactured in Asia.

This interesting article by the NY Times' Larry Rohter explores the issue further. In addition to the higher cost, ships are dropping their speeds by 20% to save fuel, adding a not-just-in-time component to the equation.

Cheap oil, the lubricant of quick, inexpensive transportation links across the world, may not return anytime soon, upsetting the logic of diffuse global supply chains that treat geography as a footnote in the pursuit of lower wages. Rising concern about global warming, the reaction against lost jobs in rich countries, worries about food safety and security, and the collapse of world trade talks in Geneva last week also signal that political and environmental concerns may make the calculus of globalization far more complex.

“If we think about the Wal-Mart model, it is incredibly fuel-intensive at every stage, and at every one of those stages we are now seeing an inflation of the costs for boats, trucks, cars,” said Naomi Klein, the author of “The Shock Doctrine: The Rise of Disaster Capitalism.”

We're living in interesting times.

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