Paul, thanks for the link to the WSJ article from a couple of years ago…I remember reading that at the time and felt optomistic. Then came the Great Recession.
The uncertainty in the Middle East is certainly sending waves out around the world. The list of African/Middle Eastern countries with unrest is again pushing us to explore alternatives for oil. Throw in the uncertainty of the Suez Canal and there is little wonder we have oil issues again.
Let’s take a look at what is occuring at this time:
Egypt’s administration resigns
Libya is unstable
Protests in Iran a year ago
Protests in Madison, Ws and now other states
QE2 in US is suddenly pushing commodity prices higher with food prices beginning to rise.
China’s low cost advantage is beginning to melt away (slowly). Other issues with China includes a demand for protein and a shortage of women…how are they going to keep the population happy?
The mess in Europe. How long can the Euro survive? How long can Germany prop up the Euro?
I am sure there are more issues, but these are the ones that pop to my mind this morning. There is considerable unrest, anger, and uncertainty out there and with the infrastructure of instant communications everyone knows everything that is occuring.
Can manufacturing return to US? Perhaps as a steady uptrend as all of these uncertainties exist worldwide. As I see it, for manufacturing to return a company either must be extremely large in order to face all of the regulations or very small (exemption from regulations are generally pegged at 50 employees or less).
I remain cautiously optomistic. In my sales job, I see hundreds of old factory buildings vacated and left for reclamation. I dont see those buildings being filled with workers again - too expensive to maintain and operate…but the real estate s
Just heard on a morning program that OPEC has announced it will up production to cover the loss that might occur from Libya.
EPA regulations. Perhaps a better set of regulations could be devised if appropriate people, organizations, government, businesses and any other proper people that should be at the table and hammer out that better system of what really makes economic sense, and still protect the population in a reasonable manner.
The cost of environmental compliance is insignificant next to the cost of labor, machinery, raw materials, and energy. Even for a very dirty process such as oil refining, environmental compliance is less than 1% of operating costs. The American Petroleum Institute (the industry’s own advocacy group) calculates that environmental compliance costs about $0.14 per barrel of refined products sold. Cancelling every possible environmental regulation tomorrow wouldn’t move significant jobs back to the U.S.
I deal with environmental regulations and the factions on all sides of the debate on a daily basis, as they affect railroad planning, construction, and operation. The problem is really not environmental law, it’s property rights. Environmental law is at its core all about who gets to do what with private and public property. No one wants anyone to tell them what to do with their private or public property, and no one is willing to allow anyone to do anything that might negatively affect the value of their private or public property, or their view, or their air, or anything.
Everyone’s definition of “reasonable” is different, and no one sees any reason to budge. I go to at least one of those “let’s all sit down together and hammer this out” meetings every week, and it’s a rare meeting when something is actually hammered out. Democracy is messy that way. China just takes whatever it needs from its property owners, the property owner has no rights to complain or argue, and while it’s true China gets things done, is that really the way we want to live?
Thanks for the interesting input and thought guys, but will higher fuel prices push buyers more toward American made goods…how about starting with American made oil.
Petroleum is somewhat fungible commodity, although there are a lot of different grades of petroleum. I doubt that petroleum from US wells would be appreciably cheaper than that from other locations. Drilling offshore, especially in deep water, is appreciably more expensive than land-based operations.
Very often “environmental compliance” gets business to the same place as “more efficient” use of fuel and other resources, and “less waste” generated and dumped does - saves money, too. That ranges from "using everything from the cow but the “Moo !” " and using all of the by-products from petroleum such as sulphur, to using the flyash recovered from burning coal and ‘combined cycle’ natural gas turbines. The trick is to figure out A) what to do and how to do it, and B) educate, explain, facilitate, cajole, incentivize, and/ or compel people and businesses to do it. Environmental regulations are only the means of last resort - “compel” in that list. They usually serve multiple purposes, too - clean air and water, sure, but also to “level the playing field” among competitors so no one obtains an advantage by doing the “cheap & dirty” thing. And though he’s long gone, John \Kneiling used to like to observe that business often used such regulations defensively to either ‘turf out’ competitors, and/ or prevent
Its also easy to forget that environmental regulations provide jobs too. For example, my girlfriend used to be a field tech for a firm that made the equipment that monitors air quality compliance. Its not all bureaucrat jobs. There’s a lot of work in those fields for all sorts of people.
So “Advantage, status quo ante” - who can survive and/ or do more with just what they now have, be it rails, roads, airports, or waterways, etc. - for both this and financial/ cost reasons.
Interesting insight and formulation - seems valid to me - wish I’d thought of it, or even seen it before.
Remember the guy who promised to “make the trains run on time !”, and what that was part of and eventually led to ?
I would guess that “American made” oil, pumped from a well in Wyoming costs more than oil pumped in Saudia Arabia. The reason being, when the price of oil drops too low, they cap a lot of American oil wells and keep pumping overseas. If the foreign oil cost less, they would be the ones capping their wells when the price went down.
I hate to say it guys, but this buy American rhetoric is just plain flag waving hot air. The US has been uncompetitive in a world market for a half a century. The list of failed US industry is long – steel, automotive, electronics, photography, shoes, clothing, textiles, et al. The argument says that the US rebuilt European and Japanese industry with our money. True, but what about our own industry? Did the worn out rail and steel industry get helped in any way? They were ignored by the Feds and the steel industry eventually failed. Foriegn steel unfairly competed with Euro steel and people complained about dumping, they said. Well, who funded the new, more efficient mills, them or us? You betcha, Uncle Sam did. Where were they when all the big mills in Pittsburgh died? Where were they when the rust belt began? The Feds were no where to be seen. Not a dime for any of them. It appears that the Feds don’t care about anything but a big military, anything for the people comes last. I still remember Lyndon Johnson asking, guns or butter? Butter lost.
The point being of all this is, when you go shopping for ANYTHING, do you even see any American goods to buy? Americans are true capitalists from top to bottom, they buy with their wallet. If there’s a foriegn car for $15,000 and an equivalent Made In America car for $20,000, which one get sold? It was once quoted somewhere that a container full of $30 blouses made in China that is delivered to NJ, the transportation cost per blouse is in the neighborhood of 30 CENTS. How can fuel costs even come close to changing that? Americans cannot compete because the Federal Govenrment is not behind them, railroad included, especially railroads.
“There’s not much low-priced oil - but there’s lots of high-priced oil out there !” - Villanova Law School Prof. Howard Lurie, Spring 1979, in Antitrust Law course. - PDN.
…Doesn’t really make much economic sense for us…the Americans…to continue to give billions in aid / support to countries all over the world since we’re not in a very good position to be doing so.
We are way O.T on this thread but having said that…
It’s interesting to me that currently only 9% of U.S oil imports come from the Middle East (we get more and more oil from Canada and Mexico) and yet a crisis there will drive fuel prices through the roof due to the fact that the energy market/industry is globalized…
While environmental regulations and compliance in and of themselves may not be large cost factors, the real cost as it relates to the environment may be in the litigation.
The biggest negative to globalization is the risk inherent in dealing with fare flung customers and suppliers in far away lands where the laws and values are different from our own. Usually the real cost of going global is thus only realized when things go wrong (as they so often do)…
Speaking from personal experience, I have resisted doing business on a global scale although I have customers who want me to manage their Asian and European transportation needs. As a small business I purposely stay close to home to minimize risk. Larger businesses with deeper pockets who are able to withstand larger losses may look at the risk return equation differently.
It’s not a zero sum game. Somebody doesn’t have to go “down” for somebody to go “up” - only in relative terms.
The last bastion of cheap labor will be Africa - and even there industrialization will eventually push up labor rates as the economy grows, just like in China. Once labor rates equalize, then the rising tide of economic activity raises all boats.
Most environmental litigation - though certainly not all - such as 'Super-Fund sites" relates to acts and events from way in the past, such as clean-up (“remediation”) costs and the 'toxic tort" suits. And often the people who have to deal with it now either weren’t there then, were legitimately unaware until a recent discovery or disclosure, or inherited the problem via an acquisition, etc. No modern business that wants to stay viable and retain its assets will risk creating that kind of problem for itself.
Agree completely with your points about the risks of globalization; and for larger businesses having taken the plunge and made the intellectual, cultural, legal, and financial investment to do that - how quick will they be to abandon and ‘write-off’ their overseas operations, on something as volatile as the current political instability and surge in oil prices ?
To raise all boats, you would need more water than what we have now. Since you can’t create matter - I fail to see where all this extra water is supposed to come from. Someone will make money, and someone will suffer.
As someone once said on a forum somewhere - “we are fast basing our economy on selling cheap foreign-made crap to each other” . I’m sure it can succeed, but I just think our standard of living is not going to exactly be the envy of the world.