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Silver lining in energy costs?
- By Vicki Bell
- May 28, 2008
These days, wherever I go & whomever I talk to & the conversation usually turns to high gas prices. When I shake my head at the ever-increasing cost of produce at the market, my first thought after "Should I buy these blueberries at this price?" is It"s those high fuel costs!
It's not just the food we eat and the products we buy that are affected by high fuel/transportation costs. A young man near and dear to my heart had to round up his change and visit a nearby Coinstar® machine to turn change into dollars for the gas to visit his mother for a Memorial Day picnic (sans blueberries). Even then, he was watching the fuel gauge closely.
With the price of crude oil escalating and the price at the pump following suit, could there possibly be a silver lining to high energy costs? Maybe.
In an article posted today on Canada.com, Eric Beauschesne wrote, "North American factory jobs that have been lost to low-wage offshore producers could eventually be coming home, or at least closer to home, as soaring energy prices push-up global transportation costs to a level that more than wipes out the savings of cheap labor in countries like China, a report by a Canadian bank investment house [CIBC World Markets] says."
According to Chief Economist Jeff Rubin, a co-author of the report, the cost of shipping a container from East Asia to the North American east coast has already tripled since 2000 and will double again as oil prices head toward $200 per barrel.
The report noted that "it currently costs $8,000 to ship a standard 40-ft. container from Shanghai to the North American east coast, including in-land transportation. That's up from just $3,000 in 2000, when oil was $20 per barrel. At $200 per barrel & the cost to ship the same container is likely to reach $15,000.
"These soaring energy costs are threatening to offset decades of trade liberalization and force some overseas manufacturing to return closer to home."
The report also said that energy costs have replaced tariffs as the largest barrier to global trade, and that the impacts are already being seen in manufacturing, where there is a high ratio of freight costs to the final sale price, such as in steel production.
According to the report, "Soaring transport costs, first on importing coal and iron to China and then exporting finished steel overseas, have more than eroded the wage advantage and suddenly rendered Chinese-made steel uncompetitive in the U.S. market. Underscoring this is the fact that China's steel exports to the U.S. are falling by more than 20 percent year over year, while U.S. domestic steel production has risen by almost 10 percent."
"That's great news if you are the United Steelworkers of America," said Rubin. "Long lost jobs will soon be coming home.
"But (italics added by this editor), if you're a steel buyer, your costs are going up regardless of whether you're sourcing from China or Pittsburgh."
Perhaps another silver lining for humanity at large is the possible reduction in gasoline emissions in the U.S. Although official numbers are not in for the Memorial Day weekend, CNNMoney.com reported that evidence is pointing to fewer Americans driving because of high gas prices.
The U.S. Department of Transportation reported May 26 that Americans drove 11 billion miles less in March 2008 than a year earlier, marking the first time that estimated March travel on public roads fell since 1979. The 4.3 percent decline is the sharpest year-on-year droop for any month in the history of the agency's reporting, which dates back to 1942.
If jobs besides those in steel mills return to the U.S., and if our air quality improves, $4.00 per gallon might not seem quite as steep. Nor will the higher cost of blueberries.
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The Fabricator is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The Fabricator has served the industry since 1970.
start your free subscriptionAbout the Author
Vicki Bell
2135 Point Blvd
Elgin, IL 60123
815-227-8209
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