As usual, Americans and the politicians who pander to them are focusing on the obvious, while the global economic consequences of rising energy costs sail right over their heads. The costs of shipping materials, parts and products around the world to exploit cheap labor are starting to count in the price.
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.
For example, some containerized overseas freight costs have more than doubled and take longer to reach port — sending one container from Shanghai to the U.S. now costs $8,000, compared to $3,000 earlier this decade, according to the New York Times article. Consumers may be able to discount unseen environmental impacts, but when logistics costs start pushing up the cost of goods sold, manufacturers will take notice.
Many economists argue that globalization will not shift into reverse even if oil prices continue their rising trend. But many see evidence that companies looking to keep prices low will have to move some production closer to consumers. Globe-spanning supply chains — Brazilian iron ore turned into Chinese steel used to make washing machines shipped to Long Beach, Calif., and then trucked to appliance stores in Chicago — make less sense today than they did a few years ago.
Just as gas prices have made Americans start to rethink where they work, shop and play, some industries may start rearranging supply chains. Beyond keeping down prices and emissions, this may have a positive impact on local employment, quality of goods, food freshness, etc.
Customer service and professional work that depends only on the transport of information will still flow to countries where education levels are high and labor costs are low, however. That's a problem no amount of domestic drilling can solve.
