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The End Of The Just-In-Time Model

In the New Republic, Bradford Plumer has a must-read on “The End of Aviation.” 

Sounds portentous, but it’s a fascinating look at how high oil prices could literally destroy the aviation industry — an industry, Plumer notes, that was built on a business model of under-$100 a barrel oil. 

Of the many consequences Plumer explores, the one most relevant for us is the decline of air freight: 

“ … Companies like Federal Express bought up planes and transformed logistics and shipping in the United States, creating a system that sped up deliveries, gave the economy vast new flexibility, and fueled the rise of Internet distributors like Amazon and eBay. Air freight now plays a huge role globally, carrying, for instance, one-third of the value of all U.S. imports. And the system relies heavily on cheap fuel: Every night, FedEx keeps a number of empty planes up in the air, to better respond to requests at a moment’s notice.”

Not only air, of course, but sea-borne goods will suffer as oil gets increasingly expensive. This, in turn, would trickle down the entire supply chain. The “just-in-time” world was built in the era of inexpensive, plentiful fuel. If that world is over, as many believe, we could be faced with a major retrenchment in retail business models. 

Now, we’ve been through periods of such energy and growth-related pessimism before. Perhaps we’ll look back in 20 years and wonder what the fuss was about.

But maybe we won’t.