The Oil Drum

It was recently reported (about a week ago) that Wal-Mart's bottom line is being shaken by recent oil price increases. Wal-Mart's profit margins are already razor-thin, they rely on cheap oil (and cheap labor) by shipping their goods farther than anyone else, and they locate all their big box stores close to highways for their own restocking convenience (and because the land is usually cheaper in the boonies), demanding that their customers drive the extra distance. But heck, gas is soooo cheap that nobody cares to do the cost analysis. So you are right, odograph, to mention that higher gas prices will eventually discourage Wal-Mart customers to go the extra distance to save what used to be a couple of bucks on gummy bears and pickles. But I can't fathom your suggestion that energy prices rising quarterly by percentages in the double-digits still leaves Wal-Mart "sweet". Just watch Wal-Mart over the next six months. As they go, so goes America.

And yes, FedEx and UPS will be scrambling to survive as well. But shipping costs are what they are and will be paid. However, Wal-Mart is where Aunt Pearl goes to buy cheap mascara, and when it ain't cheap anymore, Pearl will look elsewhere... or horror of horror, go without. And that's when the American economy goes bust.