High Transportation Costs Shift Trade Locally
Soaring transport costs suggest trade should be both "dampened" and "diverted" as markets seek shorter, and therefore less-costly, supply lines.Higher energy costs generate cascading effects throughout the global economy.
"Instead of finding cheap labour halfway around the world, the key will be to find the cheapest labour force within reasonable shipping distance to your market," according to Rubin.
In that type of world, Mexico's proximity to the rest of North America, combined with its labor costs, will give it a second chance to compete with Pacific Rim production, according to Rubin, who predicts that when oil prices reach US$200 a barrel, it will cost three times as much to ship the same container from China than from Mexico. __Source_via_seekingalpha
An interesting side effect of higher shipping costs will be a shift to more local food production. Another interesting effect is the "ramping up" effect that higher shipping costs for oil have on oil prices, which further ramps up the costs of shipping the oil. Such a positive feedback effect can play havoc on the futures markets of oil and other commodities.
More: High transportation costs are causing large air carriers to scale back flight schedules, and to retire older fuel-hungry planes early. Cisco's new holographic video-conferencing technology appears custom made to step into the gap.