The Wal-Mart-High-Fuel-Price Cycle

The Ironic Press Release Claim

From the if-it-wasn't-so-pathetic, it-would-be-funny dept. Wal-Mart blames high oil prices and thus high gasoline prices for negatively impacting sales this quarter.

"...The largest retailer in the world, Wal-Mart, reported last week that sales and profits for the three months ending July 31 were a little worse than expected because "our consumer continues to be impacted by higher gas prices."
The New York Times could barely contain its delight. The economy is slowing down because of soaring energy costs! ..."

The irony of Wal-Mart mentioning this in their financial report is almost too much to take, because Wal-Mart is a huge part of the reason China's economy is growing so.

Right?!!

Virtually every report we hear about the high prices of gasoline mentions increased Chinese demand, in fact a Chinese state run energy company even recently tried to buy Unocal.


If this is correct; it could be very funny to watch this cycle spool up, as Wal-Mart continues to price it's own customers out of their cars for the want of low prices everyday. It seems the money you are saving by buying your made-in-China-whatever at Wal-Mart, you are giving back at the pump by increasing the circumstance of the Chinese economy. So should people walk to Wal-Mart, will they send a Wal-Mart bus for you?

I challenge you to find more than a few items in any Wal-Mart that are not made in China. I don't know what percentage of Wal-Mart inventory is made in China Inc. but it has to be well over 50%. When I used to go there, the few things I have found there that are not made in China are made somewhere I never heard of.

China is not your friend

I understand the argument that we should engage the Chinese people with commerce as a way of undermining the influence and eventually the power of the communist despots who run the place. I am concerned though, that such an approach has reached the point of diminishing returns, and we continue such approach at our own peril. Apparently the people of China are too timid to do any such thing as put their tyrannical leaders in their place. As we are seeing in Iraq; having a group of people as large as a nation state with sufficient gumption to grasp the concepts and application of Liberty is a rare occurrence indeed. Our Founding Fathers were such a group.

It wasn't that long ago that Wal-Mart used to blow their own horn in commercials about how many of their products were made in America. Their trucks all featured American flags plastered all over the side. Those trucks and commercials have since been quietly retired. What percentage of China's GDP is Wal-Mart singly responsible for anyway?

The shiploads of money (not to mention scrap iron) that we are sending over there are being turned from plowshares into swords. While China has never been particularly aggressive before, that could change. Hotheads in the Chinese military establishment routinely make oblique threats to nuke Los Angeles in the press. Why else are they modernizing their military so? There is no threat to China. So with the money we spend at Wal-Mart, the Chinese are driving up our energy costs and dramatically modernizing their military. Not to mention their abhorent policies of forced abortions, prison labor, organ harvesting, etc.

Hmmmm.

To paraphrase Pogo: "I have seen the enemy, and they is us."

The math goes something like this: We go to Wal-Mart and give them money for say, lawn chairs made in China, Wal-Mart sends part of the money to China for more lawn chairs, the Chinese economy grows, Chinese demand for oil resources increases, the price of our gasoline goes up. And so the vicious "Wal-Mart-high-fuel-price-cycle" goes.


It's probably not fair to single out Wal-Mart here; it's just that they are the most glaring example, there are plenty of other American companies heavily invested in China, GM for example. But perhaps it is time to re-examine the wide open nature of engaging the Chinese economically. Perhaps placing more emphasis on gaining positive results on the ground in China in the areas of Human Rights and their foreign policy.

The Dark Side

Meanwhile, the Peak-Oil conspiracy theorists would have you believe the jig is up for America, I'm not buying it yet. At this so-called Life-After-The-Oil-Crash site, the author makes a very sophisticated argument, and I don't mean that in a flattering sense, I mean it in the Greek root sense of the word, as in sophistry. There are vast swaths of say, Siberia that have not even begun to be explored,the abiotic or abiogenic process theory wherein oil reserves replenish themselves naturally and generally speaking the cost of energy has gone down, not up over the last century.

There is a good counter argument here in the book The Bottomless Well ; I heard one of the authors, Peter Huber one night on C-Span, and he makes a very compelling argument, that we are not running out of oil.

We do have refinery capacity problems and a too picky and demanding EPA which requires boutique fuels for different markets. A demand that arguably our refinery infrastructure was not designed to handle as the refineries have to basically shut down to change over to the summer/winter blend, and to perform maintenance. And as a result, we see these horrendous spikes in the end costs of the refined products. Such requirements should be suspended by executive order, until such time as refinery capacity is imroved to the point to be able to accomodate this regime.

Speaking of C-span, I was watching late last night as an interesting debate was being conducted on the methodology of measuring the net energy profile of potential agri-derived alternatives (some argue petro-derivatives is more like it) such as soy derived bio-diesel; and corn and switchgrass derived ethanol as replacements for diesel and gasoline respectively. The argument wasn't settled, but this area of research holds promise.

Let Not Your Heart Be Troubled

My opinion; bio-diesel is the best candidate because the diesel powerplant is inherently more efficient than a comparable gasoline engine. Another good reason to pursue agri-derived alternatives is that they could someday mimic the energy density of petroleum products. That is petroleums greatest benefit: energy density. I read somewhere (maybe a Patrick Bedard editorial in Car&Driver) that it takes 800 pounds of lead/acid batteries to equal the energy content in one gallon of gasoline. Also diesel engines extract more energy through the combustion ignition process, as compared to gasoline engines. Diesel fuel is also safer in the event of a crash involving a fuel spill as it has a much lower flashpoint.

Two more important reasons to pursue better diesel engine availabilty and bio-diesel production are that we already have the infrastructure in place to support the movement and sales of diesel, and if America is anything, we are an agri-nomic powerhouse the likes of which have never been seen in the history of mankind.

If we are to wean ourselves off of imported oil; then minimizing the economic trauma of such a transition is imperative and logic would dictate that, already having an infrastructure in place to support bio-diesel would ease the transition by an exponential order of magnitude, unlike the pie in the sky nonsense about a so-called "Hydrogen Economy". I can go get you a bucket of bio-diesel today, you cannot do the same with a bucket of hydrogen; in fact, you couldn't even contain the hydrogen in a bucket for that matter. It would please Thomas Jefferson no end if we were able to leverage our agricultural prowess to avoid foreign entanglements.

Unfortunately, we don't have the latest diesel engine technology available in this country because the EPA and CARB keep imposing ever more stringent pollution standards on diesel emissions. The latest diesel powerplants readily available in the european and other world markets are very, very clean and getting cleaner all the time. But again, the eco-bureaucrats in this country are strangling innovation in this country. It is interesting to observe that were Henry Ford to attempt to produce such a thing as a Model T today he would be completely unable to for the burden of bureaucracy. EPA, NHTSA, CARB, OSHA, etc. would all feast on his carcass like so many buzzards. By the way, a Ford model T was good for a bout 25-30 mpg.

Excellent op-ed piece by Thomas Sowell on this subject where he makes some very good suggestions. Here is another counterpoint on this meme, and another good read here from Real Clear Politics. -SpinDaddy