This section of Salutus Solutions deals with the interaction between resource depletion and transport.
During the latter half of the 20th century, cheap, reliable and energy rich fossil fuels (specifically Crude Oil) allowed developed OECD countries to export their energy intensive manufacturing overseas, via the globalisation of manufacturing production, to feed consumers at home with the latest goods, at affordable prices. Without this growth in a relatively cheap global transport network, US dependency of Oil as a percentage of GDP would have been unlikely to have fallen within an existing technological framework. The wage advantage of manufacturing overseas with cheap transport/shipping costs was an economic 101.
It is the belief of Salutus Solutions that the world is moving towards a new economic paradigm where higher energy costs will have radical effects on the way we live today, and will touch many key services, ranging from the re-localisation and possible de-globalisation of manufacturing production, shipping, global aviation, local transportation ‘hubs’, farming/agriculture, to the possible re-urbanisation of our city centres.
We are less optimistic than many forecasting groups on the ‘peak demand’ theory for oil usage in developed OECD countries over the coming decade. Although we expect significant growth in real energy efficiency and alternative energy sources, we also expect a higher than forecast growth rate in net energy requirements chiefly due to an enhancing trend in the re-localisation and de-globalisation of manufacturing (to be closer to the end consumer), and resource substitution (for example growth in Water Desalination plants, domestic mining for local/national raw materials) all likely to shift the energy demand curve significantly upwards. We also believe that high levels of US/European sovereign debt will result in a re-focusing of economic policy towards pro-growth/monetary expansion initiatives (growth/inflate out of debt) as well as short term tax raises and spending cuts. In that light we are neutral on the long term effects of sovereign debt on global crude oil demand, but in the short term, there is likely to be commodity price weakness on the downside. Also short term commodity price weakness could result from any slow down in China, or negative transitional effects as China attempts to move from export driven growth to domestic consumer growth.
Any forecasts are provided AS IS, and Salutus-Solutions disclaims any and all warranties, whether express or implied, including (without limitation) any implied warranties of merchantability or fitness for a particular purpose.
Last Updated: 21st July 2010
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