I think we need to slice it a bit more finely than that.BobS wrote: The U.S. represents approximately 21% of world Manufacturing, about 2.5 times more than China based on GDP.
The fallacy in globalization is that the decision to move or outsource jobs is based strictly on the cost of labor. While a large consideration -
otherwise why would China be outsourcing to Vietnam and Indonesia, while India outsources to Mexico and the U.S.? The one thing that makes
globalization possible is cheap energy. As oil goes back up to $90/barrel and more, costs of everything will rise.
Given that the cheap, easy to get, high btu oil has peaked and is in decline, the cost of procuring energy will rise as the energy expended to extract
a barrel of oil (EROI) will decline from it's current 10:1. (It was 30:1 in the '70s.) Countries that were net exporters of oil will soon become
importers - Mexico. See -
http://www.theoildrum.com/node/3810
Thus globalization will decline and follow more of a model that Emerson Electric is using - set up manufacturing where the market is and that means
some manufacturing comes back or we do without.
For heavy manufactured goods (where transportation costs represent a larger part of the overall cost of production) then I would say yes, a permanent increase in the cost of energy would bring certain forms of manufacturing closer to the end user.
However, for other manufactured goods, such as microchips and silly plastic toys I would say that transportation costs are such a small part of the overall cost of manufacturing the product that at almost any energy input cost it would still make more sense to manufacture it in the lowest labor cost location.
The overall nexus between economic activity and peak oil, however, has MANY moving parts, and I think it's hard to draw any meaningful conclusion about what the future will look like, other than to say it will probably be different from today.
I could just as easily make the argument that peak oil will be deflationary as I could that it will be inflationary. The idea that future shortages of oil relative to demand will necessarily result in price increases has, so far, not materialized. What has happened instead is that world conventional oil production peaked around 2005, and by 2008 the anticipated inflation began to show up. But then an interesting thing happened--the initial burst of inflation gave way to a much stronger deflationary trend that looks like it could be with us for quite a while.
In a pre-peak oil world, what would have been anticipated following an oil price spike would have been a decline in overall economic activity, followed by a collapse in the price of oil. This collapse in the price of oil is part of the basis for an economic recovery as input costs become much cheaper, allowing for profit margin expansion. In the first post-peak oil recession that began in 2007, however, what we saw was a very temporary collapse in the price of oil, only to be followed by a prompt return of high oil prices. These high oil prices will make any durable economic recovery difficult, and any resulting price increases as a result of cost-push inflation are likely to lead to more economic softness, as opposed to sustained price inflation.
Over at The Automatic Earth (a terrific blog, BTW) the energy piece of the puzzle is part of their overall case for long term deflation.
The really unfortunate aspect of where we find ourselves in the U.S. is that we have the macroeconomic triple threat of bad demographics, unfavorable fundamentals with respect to energy inputs, and the fallout from a financial crisis. Any one of these three items can create a nasty set of economic headwinds for a long time. What happens when all three of them happen at once? I don't know, I guess we will find out in coming years.
The one bright spot on the energy front is that a lot of production is going to be coming online in Iraq in the next few years. That may help with tight global energy markets and may provide some breathing room.