Changing the way we do business

The price of gasoline is changing the way the world does business.
An electric car, the Tulsa, was going to have its body parts built in China and the assembly done in Ireland, with the final installation of the batteries to take place in the United States.
China was importing the raw materials to manufacture the steel and composite parts, then was shipping those parts to Ireland for assembly. The completed car then was being shipped to California.
The cost model worked for competitive reasons in 2007. But today, those shipping costs of moving the car once around the world in assembly no longer make sense.
More manufacturers who moved their plants from Mexico to the Far East are discovering that any savings they had in those moves have disappeared with the jump in oil prices.
Mexico and North America are regaining their competitive edge for some manufactured products. Transportation costs are bringing manufacturing plants closer to North America again.
Major retailers like Wal-Mart, Sears, and Target are discovering the costs of many clothes manufactured in Malaysia, India, and China are rising faster than the rate of inflation.
Transportation costs now are sometimes higher than the cost of the manufactured goods.
The costs of moving a container from Shanghai to the west cost had gone from $3,000 to $8,000 at $100 (U.S.) per barrel of oil. At $200 a barrel, it’s estimated the rate would jump to $15,000.
Those transportation costs are worrying governments in the Far East. But governments in Europe are welcoming those prices as manufacturing jobs are being created in Eastern Europe.
Most electronics find their way to North America aboard freight jumbo jets. Although we continue to see the costs of many computers and electronic gadget prices declining, the costs of moving those goods also are being affected by soaring fuel prices.
And some of that manufacturing is being relocated back to Mexico.
If you’ve spent any time in the supermarket recently, you’ll notice that many of the items are more expensive than a year ago. That, too, is a result of increasing transportation costs to bring in products from New Zealand, South America, China, and Israel.
Even moving potatoes across Canada is increasing their costs. In the United States, the price of flour has risen by 87 percent, eggs by 73 percent, cheese by 27 percent, and milk by 20 percent.
It certainly makes locally-grown food more attractive. Potatoes, onions, carrots, cabbage, broccoli, cauliflower, beans, and squash—because they won’t have to travel as far—will be both a bargain and fresher than anything imported into the region.
Mother Nature has provided an abundance of blueberries this year that are sweeter and tastier than supermarket varieties.
We even may begin choosing pears, apples, and peaches from either British Columbia or southern Ontario.