How high would fuel have to be

[RichardE]

At this momment it is cheaper to make things in a third world country and ship it to the Americas/Europe. How high would fuel prices have to go in order for this trend to reverse itself. Eventually it would have to be cheaper to make products within the country than pay for the shippings costs associated with transpacific, transatlantic shipping.

As I thought of this, I became torn, as I am against globalization, but also wishing fuel prices would come down. I am beginning to think I would want fuel prices to raise, so that it would become too expensive to ship jobs overseas.

 

[magomago]

it would have to be MUCH more expected...some of those manufactoring jobs in china make 80-100 a month...thats about 1200 a year. If the avg manufactoring job here paid like 36000 the price of fuel would literally have to skyrocket by thousands of percent to make up for that wage gap., and if that happened we'd most likely have other bigger problems with fuel being that expensive

 

[JinLien]

Don't you think price of fuel would go up here in North America if it go up insanely high in Asia?

If fuel price get to the point that shipping product from cheap labour Asian countries is not viable, then we would doom because cost of fuel for farming & shipping would put a halt to America.

 

[Strk]

Originally posted by: magomago
it would have to be MUCH more expected...some of those manufactoring jobs in china make 80-100 a month...thats about 1200 a year. If the avg manufactoring job here paid like 36000 the price of fuel would literally have to skyrocket by thousands of percent to make up for that wage gap., and if that happened we'd most likely have other bigger problems with fuel being that expensive

The unskilled labor jobs over in China are not going to be 36k over here.

 

[ericlp]

OmmmmWhy do you think China is investing in Brazil and other parts of South America? One reason I think ... They wouldn't have to pay so much $$ in shipping charges.

But as it is, a lot of crap we buy is made in Mexico and Canada. I really don't think OIL would be a reason for bringing back jobs.

Besides have you seen the super transport ships... I mean the huge ships that china uses to bring goods to the USA? I'm not certain what kind of gas millage one of those things get... But if you devide it into a 20million containers it gets pretty cheap I would think.

 

[Stunt]

The decision to move operations overseas is far more complex than cost of oil.

By definition trade is the exchange of goods and services mutually benificial for both parties. It is trade that has allowed each nation to specialize in production of certain products at a lower price. So the argument to keep *everything* within one's borders is not only less than ideal, but repressive for increasing productivity and wealth.

It's not as simple as equating labour of nation 1 vs. labour of nation 2. Outsourcing tends to go to areas of political instability and low capital investment is desired, therefore more labour is required for the same output (less automation means less consumption of energy during manufacture). Also, these regions are long distances away and require extremely large inventories for warehousing and during shipment; causing much more costs and inflexibility to customer demand. That's not even considering costs to ship and distribute these goods as you are so focused on in this thread. Therefore it's not just a labour issue as magomago thinks; there are many other cost considerations when deciding to outsource.

It is for these reasons I fully support the outsourcing of manufacturing when economically justified, as it is the most efficient use of limited resources, we increase our productivity and wealth, and we allow the poorer nations of the world a chance to better their lives. Read Here

Companies who do not remain competitive will not survive and eventually die. If a company in the US decides to go against the most economically favourable route (ie. to outsource or not to outsource), within a margin of course; they will likely underperform, lose investment and become a burden on the economy through debt, lack of profits and poor opportunities for growth.

Don't be short sighted in saying that domestic products are always in our best interests, and don't assume outsourcing is a bad thing. It will be up to the company to outsource or not and I full support the most effective way to produce.

 

[dmcowen674]

Originally posted by: RichardE
At this momment it is cheaper to make things in a third world country and ship it to the Americas/Europe. How high would fuel prices have to go in order for this trend to reverse itself. Eventually it would have to be cheaper to make products within the country than pay for the shippings costs associated with transpacific, transatlantic shipping.

As I thought of this, I became torn, as I am against globalization, but also wishing fuel prices would come down. I am beginning to think I would want fuel prices to raise, so that it would become too expensive to ship jobs overseas.

That is why the Oil Barons are subsidizing the U.S. now.

A Congressman said on the News yesterday that Gas prices should be $10 a gallon based on the % increase but that would cause Foreign goods to be too expensive to ship and sell to the already stressed Middle Class debt laden consumer.

He even spoke about people racking up credit card debt to pay for gas costs.

 

[Hayabusa Rider]

Before that happens, many smaller businesses will have gone under, and larger ones will lay off. Inflation increases, driving up the cost of everything. You will wind up with high unemployment and inflation at the same time, the dreaded Stagflation.

Increased oil prices aren't going to help unemployment, it will make it worse.

 

[Stunt]

Originally posted by: Hayabusa Rider
Before that happens, many smaller businesses will have gone under, and larger ones will lay off. Inflation increases, driving up the cost of everything. You will wind up with high unemployment and inflation at the same time, the dreaded Stagflation.

Increased oil prices aren't going to help unemployment, it will make it worse.

Actually I believe higher energy costs will overall help the economy. Because of cheap energy in the past, companies could be very wasteful and still turn huge profits. With higher energy prices many businesses are upgrading equipment, looking at ways to conserve; see alcoa, etc. Plus with the demand for alternate fuels we are seeing a more companies develop new technologies like GE's wind turbine division which is doing extremely well, or other projects with solar cells/fuel cells.

But put all that aside. The price of oil is almost constant for all nations around the world (traded as a commodity not to be confused with after tax gas prices). Who is more likely to afford or bid the highest price for oil? The rich first world or the developing and poor third world nations? The answer is obvious.

It is this exact reason why you are seeing the US economy excel (5%+ gdp growth) even through these times of higher oil prices. As long as oil prices go up gradually with time, and they have (took them a few years to get to these levels) the economy will be able to absorb these costs. I mean the people profiting the most are people who live within the country and wealth is getting redistributed domestically.

If you think higher oil prices will do the things you say...you should have proof to show for it as oil has been rising over the last 3 years.

 

[Hayabusa Rider]

Originally posted by: Stunt

Originally posted by: Hayabusa Rider
Before that happens, many smaller businesses will have gone under, and larger ones will lay off. Inflation increases, driving up the cost of everything. You will wind up with high unemployment and inflation at the same time, the dreaded Stagflation.

Increased oil prices aren't going to help unemployment, it will make it worse.

Actually I believe higher energy costs will overall help the economy. Because of cheap energy in the past, companies could be very wasteful and still turn huge profits. With higher energy prices many businesses are upgrading equipment, looking at ways to conserve; see alcoa, etc. Plus with the demand for alternate fuels we are seeing a more companies develop new technologies like GE's wind turbine division which is doing extremely well, or other projects with solar cells/fuel cells.

But put all that aside. The price of oil is almost constant for all nations around the world (traded as a commodity not to be confused with after tax gas prices). Who is more likely to afford or bid the highest price for oil? The rich first world or the developing and poor third world nations? The answer is obvious.

It is this exact reason why you are seeing the US economy excel (5%+ gdp growth) even through these times of higher oil prices. As long as oil prices go up gradually with time, and they have (took them a few years to get to these levels) the economy will be able to absorb these costs. I mean the people profiting the most are people who live within the country and wealth is getting redistributed domestically.

If you think higher oil prices will do the things you say...you should have proof to show for it as oil has been rising over the last 3 years.

The prices have been fluctuating rather than continually going up. We saw these prices before.

I do have a few examples. The fellow who built my house in 2004 tole me 6 months ago that my home would be at least 1/3 higher in costs because of the increase in materials. That price is largely due to oil. House wrap, transportion of material etc.

I work with a guy who has been paving driveways in the summer. He's not doing much now, because the price of asphalt skyrocketed.

I know of several people who have been laid off because of the increase in fuel/raw materials. People had to go so the company could buy the basics.

You probably weren't around during the oil embargo, but that caused economic chaos, and the aftereffects were felt for years.

Remember that most people are employed not by Alcoa, but smaller companies with less resource.

While slow increases in energy costs may be absorbed by the economy, I doubt a sudden increase to 150 or 200 dollars a bbl (which is possible depending on what happens with Iraq) would be shrugged off so easily.