Will Shipping Fuel Price Hikes Scuttle Globalization?

Last weekend, I had to feel salt water. In my case, that means a short drive down to the Hampton Roads, Va. area where I get the extra benefit of seeing the big container ships roll in with their cargoes of cars, white goods, T shirts and place mats. I am a sucker for big things that go "toot" such as ships and trains.

But as I drove past the harbor on my way to the beach, I got to thinking about how energy price hikes are changing the overall equation. Sure enough, the next morning, there was a front page story about how fuel costs are crippling the entire concept of economic globalization.

So, I put in a call to T. Parker Host, a Norfolk-based shipping agent and a firm I have dealt with off and on for years. They told me that bunker fuel, the lifeblood of container ships, roughly tracks to gasoline, price-wise, and in some cases can jump up even more.

The workhorse of the World Economic Globalization Fleet is the typical 800 or 1,000-foot container ship usually launched in South Korea or Japan. One ship can carry about 2,000 tons of bunker fuel and burns from 20 to 30 tons every day at sea.

According to Financial Express, bunker can run about $700 a ton, up by $200 a ton from this spring. Let's do the math. A Norfolk-bound ship from Asia that may take 14 days for a one-way trip has a fuel bill of $294,000 instead of $210,000 a few months ago.

Already, shippers are cutting back. One example: half a world away, some 14 ships running the busy route between Bangladesh and Singapore have suspended their trips because of high fuel costs, Financial Express reports.

The Times provides the bigger picture by noting that extra fuel costs, such as Bunker C, suddenly make those Thai-made battery packs for electric cars or those Chinese-made T-shirts at Wal-Mart too expensive.

"Cheap oil, the lubricant of quick, inexpensive transportation links across the world, may not return anytime soon, upsetting the logic of diffuse global supply chains that treat geography as a footnote in the pursuit of lower wages," the Times reports.

True, fuel prices have taken a momentary hiatus. But like you, I was weaned on a global economic world and had the Thomas Friedman mantra that "Global is Good" pounded into me. We could be looking at a change so huge we can't fathom it yet.

(Image by Vicki and Chuck Rogers, via Flickr, CC 2.0)