Wednesday, April 02, 2008

Peak Oil Hits the Road

According to NPR's All Things Considered (hat tip to the lovely girlfriend who told me to listen), truckers all over the nation parked their rigs yesterday to protest high diesel prices, which have already risen well above $4 a gallon.

Independent truckers are being particularly vocal, since they lack the bargaining power of larger firms to negotiate for lower diesel fuel contracts, and also seem reluctant to raise their rates. NPR quoted independent trucker John Paul Trainor as he sat on the beach in San Diego on Tuesday instead of delivering cargo in his rig. "It's like everybody wants something for nothing," Trainor said. "And they finally pushed us past the nothing point."

But it's not as though the bigger trucking companies aren't getting squeezed: some are taking the drastic measure of asking their drivers to obey speed limits, according to Treehugger. This quote is from an AP report of the phenomenon: "Truckers and industry officials say slowing a tractor-trailer rig from 75 mph to 65 mph increases fuel mileage by more than a mile a gallon, a significant bump for machines that get less than 10 miles per gallon hauling thousands of pounds of freight."

OK, so I harbor no deep regret that trucks are driving more slowly and that some truckers will sell their rigs and find something more productive to do than warehousing goods on our freeways. In fact, this is great news for air quality and highway safety.

However, after decades of Detroit's influence over transportation policies, the American economy is dangerously reliant on its trucks. Big rigs carry roughly 3/4 of America's goods (by weight) around the country (source). If truckers go out of business and constrain the supply of available shippers, or, if trucks driving at more reasonable speeds force retailers and manufacturers to invest more in their inventories, then the companies that hire the trucks will have to pay more to stay in business, and in turn, the prices we all pay for just about everything will rise.

Expect inflation, in other words. And since it's coming right in time for a recession as well, with the Federal Reserve Bank handing out bailouts and cheap loans like they were candy, it's beginning to look a lot like a shit storm of stagflation might be coming down, and it's highly unlikely that a $600 tax rebate is going to save us.

This is generally unfortunate news for everyone, not just truckers. But at least it's interesting for macroeconomists. More on stagflation, monetary policy, and the wage-price death spiral in a future post.

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