When do fuel costs actually matter?

Kim Stanley Robinson gave a fun talk at Google a couple of years ago in which he brought up the possibility of large, slow, wind powered live-aboard bulk freighters, among other ideas.  I was reminded of it by this post from Alex Steffen.  Especially for commodities like coal, grains and ore — non-perishable goods that get carried in bulk carriers — what matters is the net flux of materials and the predictability of supply.  More (or larger) slow ships can deliver the same flux as fewer high speed ones.  International contracts for these goods can span decades.  If fuel prices became a significant portion of their overall cost, it would be worthwhile to make this kind of ships-for-fuel substitution.  However, it turns out that fuel is a vanishingly small proportion of the overall cost of most internationally traded goods.


Our neighbors in Pasadena moved back to Thailand, and packed their entire household into a single half-sized shipping container.  The cost to get it from their home in SoCal to their home outside Bangkok was $2000.  Their combined airfare was probably a larger fraction of the cost of moving across the Pacific.  You can get a full-sized shipping container moved from point A to point B, anywhere within the global shipping network, for several thousand dollars.  If your cargo is worth significantly more than that, then you don’t have to worry about Peak Oil destroying your business.  For a typical container carrying $500,000 worth of goods, the shipping costs (not all of which are related to fuel!) represent about 1% of the final costs of the goods.  If fuel prices were to go up by a factor of ten, the shipping costs would still only represent 10% of the overall cost.  This would have an effect on business, to be sure, but it would not cause global trade to collapse.

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