We are rapidly approaching the point were only certain commodities and specialty items and materials will be shipped long distances. As oil climbs to $200/barrel (I say six months), you will see the beginning of a resurgence in domestic manufacturing (and reverse engineering, of course). Nations with export manufacturing comprising a significant portion of their economy, like China, will begin to struggle. For the U.S., as long as we work towards greater energy self-sufficiency, the end of oil will be one economic cloud with a silver lining.

My company is betting a lot on being able to pull manufacturing away from the foreign subsidiaries of our parent company. I can tell you from a practical standpoint it’s not as easy as it sounds. Yes transportation prices are going up and the declining dollar makes exporting to the US more expensive but there are many factors mitigating any rapid shift to US based manufacturing.

1 – Cost of investment. The US manufacturing base is anemic. Enormous investment in equipment, plant capacity etc etc will be required to bring American manufacturing back to what it was in 50s and 60s. Rising material and transportation costs do not yet offset those investment costs.

2 – Suppliers still overseas. Even if we shift finished goods manufacturing to the US most raw materials and component parts will still need to be purchased from overseas negating most of the cost savings. Some of the component manufacturing can be shifted to US but that brings us back to point one. And key raw material (particularly metals like copper) will still have to be imported.

Don’t expect a sudden resurgence in domestic manufacturing. It will take years to build back even a fraction of what we lost of the last 30 years. And even if some of it does come back, don’t expect prices to drop anytime soon.

China. So either do without or pay through the nose. It's a happy hippy day of praise as America suffers. YAAAAAAY!!!!

China is using its monetary surplus to subsidize the price of oil. Even with an 18% increase in the past week or so, gasoline costs in China are about half of what they are in the United States. Furthermore, money is still available in China for financing new business ventures.

The US is a different story. Even with low interest rates, the US is "tapped out". There is no credit. A lot of tech-based startups have failed in the past few months because they cannot get funded. They cannot borrow money. The only thing that low interest rates have given us recently is inflation.

The question is whether China can hold out long enough, spending its wealth on subsidies for manufacturing, to finish us off as a consumer of resources like oil and iron ore, and create a sizable consumer group in China to replace the US.

China has a plan for being one of the "have's" in the New World Order. The US has no clue.

The true cost is massive debt for the Chinese economy.

Gasoline is highly subsidized in China

The true cost is massive debt for the Chinese economy.

I don't think so. The last time I checked, the U.S. was picking up the tab by buying so much stuff from China.

That they will not be subsidizing gas for much longer. That's going to make things interesting. One of the reasons China holds such a large 'soveriegn wealth fund' is because they trap much of those dollars in trade at the border to prevent they're economy from going into the hyper inflation trap that many emerging economies experience.

Dropping the gas subsidy and letting the price of gas rise will 1) raise prices and decrease the dollars people have available to buy which leads to 2) China being force to let more dollars into the economy to maintain current standard of living which leads to 3) inflation as money supplies go up.

They're going to have to walk a fine line to keep inflation at bay and I'm not certain how much longer they can do it and float the US at the same time.

but I'll bet they're keeping their options open. Do you really believe that the military-industrial-political hegemony is going to let energy prices stay this high for long? They're just thinning the fields.