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High oil prices and consequences

This post: “High oil prices: Fortunately and unfortunately” by Chris Nelder is a useful crib sheet on what higher oil prices can and may well mean in the near future in the US.

As we all know, what happens in the US affects all of us, one way or another.

His summary makes compelling reading, in a number of ways.

Consider this:

Bus transport:

“Transit-hub based bus service enjoyed 6 percent growth in 2010, and 7.1 percent growth in 2011.”

“Traffic on “curbside operators,” which offer pickup at various locations aside from transit hubs, grew a whopping 32.1 percent in 2011”

“…one can book a trip from Boston to New York on BoltBus just two days in advance for between $17 and $25; on an airline, tickets for the same trip start at $360”

Airlines:

“Southwest Airlines, one of the few carriers who hedged their oil price risks properly in 2008 and avoided heavy losses, said yesterday that it will not earn a profit in the first quarter of this year.”

“Air France-KLM reported a $1 billion loss for 2011, saying that it had not been able to offset the rising cost of jet fuel.”

Distribution:

“Nowhere is the cost of trucking more evident to consumers than at the grocery store. Fresh produce and other perishables must be shipped promptly no matter what fuel prices are. Grocers, who also operate on razor-thin margins, must raise their rates in turn. So if you’re wondering why a head of lettuce has jumped from $1.59 to $2.00, that’s why.”

On the upside: “By training drivers to shift strategically and avoid hard acceleration or hard braking, they have shown that fleet operators of 100 vehicles can save $31,500 annually in fuel costs. Larger fleets, in the 1200-vehicle range, could save $1.2 million per year.”

And also: “One analyst who has predicted this for many years is former CIBC chief economist Jeff Rubin, author of the book Why Your World Is About To Get A Whole Lot Smaller: Oil and the End of Globalization. “Soaring transport costs suddenly change the entire economics of importing everything from cheap labour markets half way around the world,” he writes, “So much so that triple digit oil prices will soon breathe new life into our hollowed-out rust belts, and, in the process, bring long-lost manufacturing jobs back home.”

Read more, here.

Now, I haven’t verified the above facts. Some sources are linked, others are not. But assuming this is largely true, even the last part, it’s not all doom and gloom out there. Just different.

Here’s a video interview
with Jeff Rubin about his book:

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