The Fuel Cost Balance

Now is the time of a delicate balance.
Oil prices are receding but they are still high. If the costs of oil remain high then the cost of shipping is something to consider when manufacturing and assembling a product. If this alternate energy trend picks up speed then a fundamental shift will take hold and much of the growth that developing countries are experiencing will fade some. It won’t be a complete stall because the middle class is somewhat developed in places like India and China. But if oil prices remain high then it will be a blood bath come time to pay for heating oil in the Northeast this winter. Congress will act to prevent that. But in doing so the impetus to put the US back in the driver seat will be gone. For the long term that is bad. But no one is prepared to pay these costs. But to lower them for 2010 and beyond the shift has to occur.
The US must demonstrate a willingness to not consume oil. That is the leverage. Iran, Russia, and other countries are betting it can’t. But the US consumer is driving significantly less, spending is down, and GM and Ford are close to bankruptcy.
The oil producing countries are walking a slippery slow – maximize profit margins without making alternatives financially viable. For much of 2008 the alternate energy clock is running. I imagine that if the costs remain high for another 6 months then the alternative energy trend is here to stay. If they drop to pay for things like heating oil it will undermine the progress.
If I’m an energy entrepreneur, I’m watching closely to see what the media starts reporting regarding heating oil and the reaction of Congress.

Check out the article titled Shipping Costs Start to Crimp Globalization by Larry Rohter for more information about the impact costs of oil.

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