Click on the headline (link) for the full text.
Many more articles are available through the Energy Bulletin homepage
Oil’s cargo cushion
Marcus Gee, Globe and Mail
The soaring cost of fuel is whittling away at the cheap-labour advantage enjoyed by Asian exporters, giving Canadian firms a welcome edge in their fight to win back business from Asian competitors.
Two bank economists argue in a report released Tuesday that because of higher fuel costs, shipping a standard 40-foot container from Shanghai to the east coast of North America now costs $8,000 (U.S.), up from $3,000 in 2000 when oil was just $20 a barrel.
That higher cost is passed on to North American consumers, making goods from China and other Asian places more costly compared to the offerings of domestic North American producers.
… Jeffrey Rubin and Benjamin Tal of CIBC World Markets Inc. say higher oil prices are reversing the world-is-flat effect, in which lower trade barriers and new technologies like the Internet made it cheaper to move goods and services from developing Asia to the markets of the rich world.
“In a world of triple-digit oil prices, distance costs money,” they write. “And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.”
… Aggravating the problem is the fact that modern new container ships travel faster than old bulk carriers and so use up more fuel, doubling fuel consumption per unit of freight over the past 15 years.
(27 May 2008)
Soaring Fuel Prices Take a Withering Toll on Truckers
Louis Uchitelle, New York Times
… Today, though, all seven rigs are parked. The soaring price of diesel fuel – over $4.50 a gallon from $2.50 a year ago – has stripped the profit from hauling.
If diesel prices do not decline and make that side of the business viable, Mr. Hendley says, he will have to sell his trucks, or try to sell them. That is just what thousands of other truckers are doing as they shed used rigs in what appears to be the biggest shakeout since trucking was deregulated in 1980.
… The squeeze on truckers’ profits from rising fuel costs is compounded by the slowing economy, which is reducing freight traffic. Truckers say they find it hard to impose fuel surcharges, in part because their industry has suffered for years from over-capacity as deregulation drew thousands of small operators into trucking.
… Like the truckers, air freight operators are being hurt by higher fuel costs, although less so. But railroads, the third pillar in the nation’s freight infrastructure, have so far sidestepped losses, the Association of American Railroads reports. That is partly because of rising exports of coal and grain, which travel by rail to port cities, and partly because some trucking companies have turned to rail to move trailers long distances.
(27 May 2008)
Bad news for Detroit: Miles per gallon
Chris Isidore, CNN Money
It appears that the prospect of $4 gas finally has Americans getting serious about fuel economy.
Ford Motor (F, Fortune 500) CEO Alan Mulally said Thursday that his company has seen a “tipping point” in buyers’ preferences towards smaller, more fuel efficient vehicles.
And Mulally thinks this shift is here to stay as consumers come to grips with higher prices at the pump. That’s why Ford also announced it is cutting production on pickups and sports utility vehicles.
“Our best judgment is that a large part of the recent changes are structural as opposed to cyclical,” he said.
(26 May 2008)
Auto Industry Feels the Pain of Tight Credit
Eric Dash, New York Times
The auto industry is getting sideswiped by the housing crisis.
Auto lenders and banks, closing their wallets, have prevented hundreds of thousands of consumers from obtaining the financing for a car. Home equity loans, which had been used in at least one of every nine deals, when lenders were more generous, are no longer a source of easy money for many prospective buyers. And used-car prices have fallen nearly 6 percent as repossessed cars and gas-guzzling trucks and S.U.V.’s flood auction lots.
Those forces, on top of the softening economy, are putting enormous pressure on the American auto industry as it faces what may be its worst year in more than a decade. About 15 million vehicles are expected to be sold in 2008, down from 16.2 million last year, as sales reach the lowest levels since 1995, according to the marketing firm J. D. Power & Associates.
(27 May 2008)
Contributor Scott Chisholm Lamont writes:
Can’t afford the mortgage, can’t afford the car payment, can’t afford the gas.
