Thursday Open Thread
Posted by Prof. Goose on March 23, 2006 - 3:50am
Topic: Miscellaneous
In seemingly important news that hasn't made its way up front yet, Qatar is going to establish Middle East's first international energy bourse, seemingly preempting Iran from making the move. More links and details on that below the fold, as well as a link to Tom Friedman's latest "A New Grip on (Energy) Reality"...but do consider this an open thread.
Update [2006-3-23 12:38:58 by Prof. Goose]:Also, former Saudi oil minister Zaki Yamani said today in this little bombshell that "Oil prices will remain high "for some time" until major consuming countries reduce their dependence on oil..."
Qatar to establish Middle East's first international energy bourse
Related articles:
http://www.financialsense.com/fsu/editorials/willie/2006/0302.html
http://en.rian.ru/world/20060320/44575239.html
hat tip: FTW
Also here is a link to Tom Friedman's latest "A New Grip on (Energy) 'Reality'". There seems to be a split emerging among conservatives on the issue of America's energy dependence...interesting. (This article is behind the timesselect pay wall.)
The latest newsletter of one of my clients said they were selling old ships and build new ones on heavy fuel literarely because the world was running out of light sweet and that fuel prices therefor will continue to rise.
There is by the way, as with oilworkers, a surging demand for engineers with the skills to run these more complex machines.
http://www.walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=349
This would be a miracle if they could pull this off. I would like nothing better than to see big truck get at least 10 mpg's on the road.. I drive over-the-road and know how much fuel truck take each year to run.
I also see they have a statement from the Rocky Mountain Institute and are looking out to 2020..
Why are we keeping a fleet of vehicles and the concomitant roadway system in the mix?
That seems pretty stupid.
Why not take the oil we do have, at this relatively cheap price, and revive the rail system? Revive the streetcar system?
The amount of fuel saved over the lifetime of a railroad would be exponentially greater than the fuel saved by more marginally more efficient trucks.
Urban Rail of all types, subway/rapid rail, light rail, commuter rail and streetcars all offer 100 to 1 energy savings as well as a better "fuel" than our cars.
My article (once again)
http://www.lightrailnow.org/features/f_lrt_2005-02.htm
Asphalt and bunker fuels are not that close to peak yet. Light sweet down, down, heavy production up.
Also, if one ranks transport by energy efficiency, the following ranking is close to correct (with caveats).
- Pipeline
- Water (ocean & barge)
- Rail
- Rubber tires
- Air
Trucking a container 1,000 km (or miles) takes more oil, and higher value oil, than shipping that container 10,000 km (or miles) by ship.Asian cargos bound for US East Coast would use less energy to go to NEw Orleans, then barge up Mississippi River system and rail to final destination than going to LA and turck/rail from there. Of course, factors other than energy use factor into shipping decisions.
Typically motor ships (as opposed to steam ships) use diesel when entering and leaving port, and switch over to heavy fuel oil once on passage.
Another good example of this one is trucking vs. rails. High gas prices have already caused this one to some degree in US. Just look how stock price of Norfolk Southern has moved during last two years.
Wal-Mart's whole business model is built on cheap energy. Distribution centers that are far from ports and stores, stores that are far from population centers. Cavernous big boxes that take tremendeous amounts of energy to heat and cool. Just-in-time delivery/"rolling warehouses."
Morover, their customer base is low-income. The people who feel high fuel prices first. Every dollar they put in their tanks is a dollar they can't spend at Wal-Mart. Already, some people are not going to Wal-Mart any more, because the cost of the gas to get there would eat up any money they might save shopping there.
I think people are buying in bulk at Sam's, and Costco, to stretch their dollars because everything is a lot cheaper than at the Giant or Weis stores, or at those little superettes you find in small towns. Maybe they're sacrificing the convenience of local shopping for price, but they would still drive to the local places anyway.
Also, you see Amish, Mennonites, and other country folk that are obviously making their weekly, or biweekly shopping trek. They might as well go to a cheap, big-box store.
You may pass a Wal-Mart on your way to work, but your situation is probably not typical. I live in a suburban area, and I would have to go to the next town to shop at Wal-Mart. My parents live in a once-rural area that is fast becoming sprawl. They shop at Wal-Mart regularly, and drive quite a ways to do it. There's one in their town, but it's in an "industrial area," outside of town, past the garbage dump, far from any housing developments. They don't really have to worry about fuel prices, though, so they keep driving their SUV to Wal-Mart.
Not so for others:
USA Today
I'm just sitting here trying to think of what sort of store is going to adapt well to rising energy prices. I think the home building chains will sell lots of caulking, insulation and wood stoves, but I can't think of anyone else that won't be hurt as much as Wal-Mart.
Unless you're selling something local, that you make with local raw materials and local labor, you'll have to deal with higher transport costs, right?
I can't; I'm not a business expert. But Fortune magazine had an article last year that explicitly tied high energy costs to Wal-Mart's doldrums. Because their distribution system is built on cheap energy, and their customers are lower-income than most. (Unfortunately, Fortune doesn't leave its articles on the Web for long, and it's gone now.)
Target has done very well. Their strategy? Aim for richer customers than Wal-Mart traditionally has. Wal-Mart is now trying to emulate that strategy.
Yes, but there are more efficient ways of dealing with it than Wal-Mart uses. Wal-Mart is exquisitely adapted for a world in which energy is cheap. That's one reason they were such a juggernaut for so long. But now the world is changing, and what was once Wal-Mart's strength is now a weakness.
If you're really interested in the differences between companies prepared to operate in a "carbon-constrained world" vs. ones that are not, check out this site:
http://www.ceres.org/
They are more concerned with global warming than peak oil, but good info nonetheless.
I do not know if you are familiar with the concept of a Giffen good. The idea behind the concept is that as incomes fall, people consume more of the cheapest goods--even as the cheapest goods increase rapidly in price.
For a possible example (The factual historical details are in dispute.) consider potatoes after the Great Potato Famine in Ireland. Potatoes went up a in price after the blight, but people changed their diet to eat more potatoes because that was still the cheapest food, and they cut down on luxuries such as bread or oats or fish or beer.
By analogy, my observation has been that some middle-class Target customers are shifting to Wal-Mart to take advantage of lower prices. Also, Target has had some bombs in their Cherokee line of clothing (which are now dumped at Goodwill and sold as if they are used items, which they are not), while Wal-Mart has an extremely astute marketing department that sells what people will buy--and nothing else. To some extent, I think Target has gotten fat, dumb and happy, while Wal-Mart is still lean and exceptionally mean and hungry.
Please accept my apologies for mispelling your name frequently. Is it from "Lea Nancy"? The problem is that I know well a couple of women named Leann (or Leanne), and I've been misreading your name consistently.
Anyway, thank you for the great quantity and excellent quality of your posts--something to look forward to each morning!
Soon we will all be foraging in the most low cost bix box stores of all, the garbage dump.
Weeeee. What fun it is to be American and stupid.
Nordstrom's might get away with selling to the rich, but Target sells to the middle class, and IMO the American middle class is an endangered species.
Wal-Mart is at $48 dollars today, near its five-year low. Target is near a five-year high.
I think the very things that gave them an advantage a few years ago are biting them now, and it will only get worse.
For example, just-in-time delivery. They keep only a three-day supply of their most popular items, depending on "rolling warehouses" (frequent, carefully-timed truck deliveries). That makes sense in a cheap-gas world. Why pay more for on-site warehousing when you can have daily deliveries instead?
Obviously, that math changes if fuel is expensive and real estate is cheap. Wal-Mart loses its advantage over its competitors.
They are, but whether they will succeed is a whole different story. It's not easy to change a large, complex organization like Wal-Mart. They may want to sell fine wine and sushi to rich yuppies, but so far, the yuppies are still going to CostCo.
Target (Tar-jay) will do well as long as my sister still has a credit card.
Of course not. But they do it best. They are more committed to the strategy than anyone else, and will have a harder time changing.
Oh, yeah. I think all the box boxes are doomed, actually.
Who knows? Maybe Sears will find a way to make its catalog business work again. :)
I think there will be a lot less stuff to sell, and a lot fewer dollars to pay for them, and as DS mentioned, WM keeps track of what is selling very well.
Because the QuickieMart will still have customers. Indeed, it will have more customers, while big boxes will have fewer. And the big boxes are dependent on high volume to make a profit.
From the distributors who can no longer sell to Wal-Mart, either because Wal-Mart doesn't need the stuff, or can't pay for it.
Hopefully, he won't need credit.
I agree, but Wal-Mart has a lot of resources sunk into infrastructure for the current system. Computers and software to keep track of inventory, huge stores and distribution centers. And look at what they are planning for the future. RFID tags on everything, so just-in-time can be just-in-time-ier. Entering the financial services market, so Wal-Mart can be your bank, too. Expanding to Brazil, Canada, Japan, etc.
Wal-Mart has to do this kind of thing. Stockholders want to see growth. The local Mom and Pop store doesn't have to grow or die. As long as they aren't losing money, they'll be okay.
In Wal-Mart: The High Cost of Low Price, Brave New Films profiled a WM that negotiated with some town for an initial two years without sales tax. When the period was up, they abandoned the stores for new ones just across the town line. What this tells me is that WM is more than ready to adapt their store locations to current conditions.
In general terms, I am skeptical of the belief that PO is going to "get" all those groups that we don't like (SUV drivers, Wal-Mart) leaving PO-aware people with PV panels, backyard gardens and wood stoves to inherit the Earth. Energy depletion will certainly bring change, but I suspect many of the pre-Peak winners will also be post-Peak winners.
Agreed. There's no guaranteed anything after TSHTF.
That tells me they are very short-sighted. Who is going to give them tax breaks again, if they keep doing that?
That is not what I am arguing, nor is what I believe. I am arguing that the companies that are best-suited for the current situation are often the worst-suited for a radically new one. (Regardless of whether I like them or not.) Sort of like organisms that are most specialized tend to be most vulnerable when the environment changes.
http://morningsentinel.mainetoday.com/news/local/2563816.shtml
I have to wonder if these big-box places might not find it worthwhile in the, well, Medium-Run.. to work with city-governments who are planning Mass Transit, in order to locate stops and stations at their outlets. We have busses that run to the Maine Mall, in South Portland, but I've wanted to see us get more serious with our Routes, and maybe start looking at the Electric Light Rail kinds of options as a next step, to make it really easy to get to shopping centers. Big disincentive to the City of Portland, of course, to send the spenders down to SOUTH Portland, but certainly a number of Benefits could be weighed into the mix, including perhaps the ease with which you could park at the mall, and then have easy access IN to Downtown as well, without the hassle of dealing with 'Them City Drivers', as people from within a couple of miles of Town are more than apt to say around here.
Other Portland stops are next to supermarkets, small town centers and new shopping malls (eastern terminus of Blue Line and near western terminus of Blue Line). Blue Line also goes through middle of pedestrian mall at "Saturday Market".
Portland and San Diego have lead the nation in Light Rail development. Congrats ! :-)
Beyond the line to Boston, I hear that there's a line between Freeport and Rockland, I think it was.. now if they can just bring it back down to Portland, then the east coast would be somewhat accessible again. (If Boston deigns to connect the Nor'easter to South Station)
Wal-Mart SuperStore is 6 blocks away (came in against great neighborhood opposition) and is likely to reopen in a few months.
Saturday Farmer's Market (~8/10 mile way) is also about to restart.
WalMart, whatever it's faults, is well managed and will strive to adapt. Shifting distribution centers to rail sidings and delivering as much as possible by rail is one possible adaptation.