Between 2004 and 2008 oil prices went up from $30 to $150 per barrel. Guess what it did to the price of all the merchandise that China exports and the price of the raw material that it imports. Transoceanic shipping cost tripled.
In 2000 when the oil was at $20 per barrel, the transportation cost across pacific was equivalent to an average 3 percent US tariff. At $100 per barrel, the transportation cost worked out to an equivalent of 8% US tariff. At $150 per barrel, the tariff equivalent was 13%.
On the other hand the bandwidth prices have been declining 20 to 25% annually!
Trend is clear, oil is going through the roof, bandwidth prices are falling through the basement. What does that do to the economies of China and India. While over a period of time oil prices are going to put brakes on China's booming manufacturing economy, the ubiquitousness of cheap bandwidth will continue to fuel and grease India's service economy. Place your bets cautiously!
The stats for this piece came from "Why Your World Is About To Get A Whole Lot Smaller" written by Jeff Rubin
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