Globalization being undone by high oil costs

[Die Neue Zeit]

Globalization being undone by high oil costs: CIBC (http://www.cbc.ca/money/story/2008/05/27/cibc.html)

Last Updated: Tuesday, May 27, 2008 | 5:22 PM ET
The Canadian Press

The high price of energy is undercutting the advantages of globalization by raising transportation costs so much that they are forcing businesses to look closer to home, says a CIBC World Markets report.

"Globalization is reversible," the bank's chief economist, Jeff Rubin, wrote in the study released Tuesday.

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

Rubin and co-author Benjamin Tal say the cost of moving goods — particularly heavy materials such as steel — not the burden of tariffs, is the largest barrier to global trade today.

They calculate that every $1 US-a-barrel rise in world oil prices has translated into a one per cent increase in transportation costs.

In fact, the report says, the jump in transport costs caused by the record price of oil has effectively offset all the trade liberalization efforts of the past three decades.

In 2000, when oil was $20 US a barrel, the cost of transportation was the equivalent of a three per cent U.S. tariff rate, the report states.

Now, transportation costs are equivalent to a nine per cent tariff, and at $150 US a barrel for oil they would amount to an 11 per cent tariff — about the average of tariff rates in the 1970s.

Given the costs of moving raw materials and finished goods, distance to market is becoming an increasingly important factor in business decisions, the report says.

According to the report, China's steel shipments to the United States are down by 20 per cent from a year ago, the worst performance in a decade, while U.S. domestic steel production has risen 10 per cent.

There is evidence that other Chinese exports such as furniture, apparel, footwear, metal goods and industrial materials are also beginning to slow.

"How much of Chinese manufacturing production will be coming home remains to be seen," the report adds, "but there is certainly no reason why we should not expect to see at least comparable if not greater trade diversion than we saw during the OPEC oil shocks of the 1970s."

A big beneficiary could be Mexico, with its low labour costs and proximity to the U.S. market.

[BIG BROTHER]

A big beneficiary could be Mexico, with its low labour costs and proximity to the U.S. market.

That's what I was thinking too. If the trend keeps going more factories and "maquiladoras" are going to open in Mexico. Of course this will only increase the irony that the expensive stuff that comes from the united states is now going to be made in our country.

on the plus side, if we ever became socialist we would have a stronger industry. but i don't see that happening anytime soo, so i guess that the only benefit is that employment would go a bit down.

[Pawn Power]

This article assumes that transportation and the movement of physical things is the root of globalization. This is not wholly the case. Advancements in information technology has played a tremendous role in the development of globalization, which is not dwindling with oil.

Rising costs of oil cannot deconstruct the fifty years of modern globalization developments. Perhaps we will be able to travel as cheaply as before or products might not be shipped as far... but we will still be viewing the world in a global manner and communicating with people around the globe at a great rate (like we are doing now) all things which define globalization.

If oil becomes scarce enough it could certainly cause an alteration in the developments of globalization and how we view it... but I don't see it reversing the phenomena.

[BIG BROTHER]

true they are exagerating a little, but now like the article says maybe fims enstead of looking for cheap labor far away, will try to search for closer places. enstead of undoing it it guess you could say more like slowing it and modifying it.

[GPDP]

Indeed, I doubt globalization per se can be reversed. Its direction, however, can be deeply affected.

Whether this development benefits us or threaten us further is beyond me, however.

[chegitz guevara]

Globalization has been reversed before.

[sonicbluetm]

I don't know what it is or isn't doing to globalization on the whole, but I probably wouldn't worry about it. They know exactly what they're doing.

According to globalresearch.ca, "...a conservative calculation is that at least 60% of today’s $128 per barrel price of crude oil comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York NYMEX futures exchanges and uncontrolled inter-bank or Over-The-Counter trading to avoid scrutiny. US margin rules of the government’s Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex, by having to pay only 6% of the value of the contract. At today's price of $128 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120. This extreme “leverage” of 16 to 1 helps drive prices to wildly unrealistic levels and offset bank losses in sub-prime and other disasters at the expense of the overall population."

[ckaihatsu]

I don't know what it is or isn't doing to globalization on the whole, but I probably wouldn't worry about it. They know exactly what they're doing.

According to globalresearch.ca, "...a conservative calculation is that at least 60% of today’s $128 per barrel price of crude oil comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York NYMEX futures exchanges and uncontrolled inter-bank or Over-The-Counter trading to avoid scrutiny. US margin rules of the government’s Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex, by having to pay only 6% of the value of the contract. At today's price of $128 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120. This extreme “leverage” of 16 to 1 helps drive prices to wildly unrealistic levels and offset bank losses in sub-prime and other disasters at the expense of the overall population."


Wow, and if you play your cards right and talk up a lot of Green stuff, maybe you'll get to meet Bono *in person*!!!!!! Wheeeeeee................

Jeeezus, with this shit above and a billboard I recently saw for $0 priced trades, can't we just shift all of this onto this discussion board already and be done with it??? It's either that or else we'll have more rags-to-mediocrity stories than our already overly-mundane-ly-saturated consumer culture can keep up with...!

Seriously, again, what does the capitalist "leadership" have in mind for the future of this quasi-globalized world, anyway? That every minimum-wage service worker can now become the junk-bond king of their own backyard? So how is that any different from having a math hobby while living in a well-funded public services sector?



true they are exagerating a little, but now like the article says maybe fims enstead of looking for cheap labor far away, will try to search for closer places. enstead of undoing it it guess you could say more like slowing it and modifying it.


I don't have any stats, but maybe we'll be seeing more continent-ization, or regionalization, if these transportation costs continue to rise?

With the decline of global US petro-dollar hegemony will we be seeing more continent-ization? Note the rise of the EU's Eurozone, the emergence of Iranian self-sufficiency (and trading), and the China juggernaut....

But, just to correct myself and stay on-course, here's the real deal:



Thus, what is the significance of the Unasur project for the workers of South America? In the face of the current ever-deepening world economic crisis and in the face of the growing threat posed by spiraling inflation and the food crisis, what is the program of Unasur for the working class? For the workers, it offers nothing but empty promises and speeches filled with made-up phrases. They talk about “union of peoples,” “social inclusion,” “economic growth,” etc., but the real objectives are increased profits for internationally connected banks and corporations at the expense of the broad mass of the region’s people.

The proposal for regional integration represented by the creation of Unasur does not spell any alternative or any hope for the workers of South America. This project is, in the final analysis, a sign of the deep crisis of the ruling elites of the continent as well as the crisis of revolutionary leadership in the working class itself. Neither Unasur nor Chavez nor Morales nor Lula represent an alternative for bettering the conditions of life of the Latin American working class.

The goal of genuine regional unification, the breaking down of the nation-state borders and the harmonious development of economic and social life across the continent cannot be realized under the domination of the bourgeoisie. It can only be achieved through the conquest of power by the working class and the establishment of the Socialist United States of Latin America.

http://wsws.org/articles/2008/may2008/usan-m28.shtml