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Low Costs At The Pump Could Mean High Costs For Manufacturing

Anyone who drives probably feels a little bit of relief when they go to fill up at the pump and see the price. Americans are paying more than half of what they were just a few years ago, and that is adding up.

Last year, drivers saved about $100 billion, leaving them a little extra to spend and save. It sounds like it would be a great thing for the U.S. economy, but the benefits aren’t extending as far as one might expect.

When it comes to manufacturing and industry, will low energy costs end up hurting more than they’re helping.

Shell_gas_station Image Source: Wikimedia

Cost Of Low Energy Prices
Low energy costs have helped manufacturing in many ways. On the surface, it costs less money to reshore and run a factory, ship goods, and complete a range of other essential operations. However, low energy costs don’t amount to happy news for everyone, especially those in the energy sector.

Oil, gas, and other companies are investing and expanding less and downsizing more, which has a big impact on regions that depend greatly on oil and gas production and supply. Subsequently, the demand for durable goods has plunged.

Orders for a broad range of manufactured goods, from transportation equipment to non-defense aircraft have dropped. A stronger dollar has also put pressure on factories and may have increasingly subjected the U.S. to the affects of global economic slowdowns resulting from price drops in petroleum, copper, aluminum, and other materials.

Oil_well_pumpImage Source: Wikimedia

Reasons For Optimism
While this trend has some investors are worried, others see reasons to remain optimistic. Job growth has remained solid and the overall recovery of the U.S. economy has continued, albiet a bit sluggishly for some. Some analysts have also pointed out that higher energy prices would be a greater detriment to the economy than the lower costs are now.

The average household reportedly saved $700 as a result of cheaper gas, and consumers may feel more inclined to spend. Will that savings create enough of a ripple effect to give the U.S. economy more of a boost and not too affected by global slumps? We may have to wait and see.

Have low gas prices had a positive or negative impact on your business? Has the money you’ve saved at the pump had any affect on the way you spend?

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Currency Exchange Rates And Supply Shortages Driving Up Manufacturing Costs

Higher prices for materials naturally force manufacturers to increase costs for their customers. In the United States, a weakening dollar has left manufacturers with demands for higher prices from Chinese suppliers. Supply shortages for everything from raw materials, like steel and semiconductors, have made inflation an unavoidable reality. This impacts U.S. companies and global manufacturers alike.

Stronger Chinese Yuan Forcing Up Prices

In the last months of 2020, the Chinese yuan (CNY) weakened against the U.S. dollar (USD). Compared to January 2020, CNY declined by 7 percent compared to U.S. currency. In this situation, Chinese companies receive less compensation when paid in USD by U.S. companies. As a result, Chinese manufacturers are raising prices.

U.S. companies can expect to experience inflation when doing business with other international suppliers as well. Over the past year, the Australian dollar gained 17 percent over USD, and Euro dollars grew in value by 12 percent. Although many business contracts lock in exchange rates so that the parties may proceed in a somewhat predictable environment, the overall effect of the weakening USD will be continued inflation on consumer goods.


Prices Rise When Demand Outstrips Supply

Another inflationary force comes from demand exceeding supply. Supply shortages have driven price increases for European manufacturers on top of huge jumps in shipping costs. The German central bank predicts that inflation will reach levels not seen since the financial problems of 2008. Prices in Europe for 40-foot shipping containers coming from China have gone up to $8,000 according to data from Freightos.

With input costs reaching 10-year highs, the automotive and chemical industries in Europe have been suffering. Shortages of steel and semiconductors are prompting production cutbacks. Volkswagen may have to furlough thousands of employees.

What price increases and supply shortages have your company had to deal with this month? Comment with your experiences.

Credit: News Oresund

ABOUT Freightos

Freightos makes shipping international freight efficient, reliable and more competitive, giving you the buying power and support of a Fortune 500 importer. By combining logistics technology, expertise, and the world’s best freight providers.

Instantly compare air, ocean and trucking freight quotes from 75+ providers with the perfect balance of price and transit time from reliable forwarders and carriers.

Refreshingly easy logistics management with on-demand tracking, live updates, and proactive issue resolution from providers you can trust.  Effortless document management and communication with providers, backed by a team of experts.

ABOUT The German Central Bank

The Deutsche Bundesbank is the independent central bank of the Federal Republic of Germany. It has formed part of the Eurosystem since 1999, sharing responsibility with the other national central banks and the European Central Bank for the single currency, the euro.

Eurosystem monetary policy is the Bundesbank’s core business area. Its main task is to secure price stability in the euro area. This requires in-depth analyses, a long-term view and impartiality towards individual interests. The Bundesbank’s stability policy also relies on support from economic, fiscal and wage policy.

The Bundesbank is involved in many international institutions and committees that are dedicated to stabilising the financial system.

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Circular Economy Principles Equal Good Business For Manufacturers

Manufacturers have long emphasized efficient supply chain management. In a world confronted by resource scarcity, tightening environmental regulations, and consumer resentment about planned obsolescence, sustainable practices now define what efficiency looks like. Inspired by the principles of the circular economy, some manufacturing companies pursue the dual goals of controlling costs and generating public approval.

Sustainable And Regenerative Business Model

In a circular economy, reduction of material waste and pollution is always the primary goal. The circular model strips away the waste of the linear manufacturing model whenever possible. Instead of the old approach of consume a material, produce a product, sell a product, get more materials and start again, a sustainable system accepts back waste materials for use in future production.

Additionally, nontoxic biomaterials take precedence over hazardous materials that produce toxic waste. A circular economy values renewable biomaterials that can be continually regenerated over extractive or toxic material collection processes. Producers and consumers benefit from less pollution and consistent resource supplies.

Textile Dyeing Without Waste Water

Dyeing fabric has always been a water-intensive activity. The textile company DyeCoo has eliminated water pollution issues and expenses. Instead of soaking fabric in dye-laden waters, pressurized carbon dioxide infuses fabric with color. On top of saving water, the new dyeing process produces results twice as fast.

Solving The E-Waste Problem

Circular economy manufacturing tackles head-on the world’s enormous e-waste problem. Consumers have been rightly frustrated by computers and mobile devices purposefully designed to prevent repair. Dell Computers has designed its Latitude laptops with removable batteries and standard fasteners. The company has also removed toxic mercury and adhesives to achieve 97% recyclability of the laptop components.

A system that allows manufacturers to reclaim materials from old products has the potential to substantially lower costs. What materials do you wish could be reclaimed from the products that your company currently produces? How would this lower your costs?

ABOUT Dyecoo

DyeCoo‘s mission is to passionately lead the textile industry to a lean and clean future. DyeCoo’s CO₂ technology is the world’s first 100% water-free and process chemical-free textile processing solution. Providing geographical freedom from water sources and offering textile manufacturers a head start on legislation that restricts the use of hazardous process chemicals. Its low operating costs allow you to elevate your short-term results and long-term ambitions. Lean and clean.

DyeCoo, based in Weesp, the Netherlands has more than 15 years of experience in CO₂ technology. With extensive knowledge in design and engineering of CO₂ equipment, DyeCoo provides clean textile processing solutions on an industrial scale.


Dell Technologies is committed to transforming businesses, shaping the future of innovation and developing technologies to drive human progress.  Our story began with a belief and a passion: that everybody should have easy access to the best technology anywhere in the world. That was in 1984 in Michael Dell’s University of Texas dorm room. Today, Dell Technologies is instrumental in changing the digital landscape the world over.

We are among the world’s leading technology companies helping to transform people’s lives with extraordinary capabilities. From hybrid cloud solutions to high-performance computing to ambitious social impact and sustainability initiatives, what we do impacts everyone, everywhere.

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Are Flying Cars Closer Than Ever Thanks To This Deal?

Lotus and Volvo parent company, Zhejiang Geely Holding Group, has recently finalized the acquisition of Terrafugia. If you’re already familiar with the name of that transportation startup, you’ve likely heard of the Transition, a flying car prototype that features retractable wings. The deal may accelerate the development and launch of street-to-sky transport that’s available for personal use.

Image Source: Wikimedia 

Ready To Hit The Skies Before 2020

With support from Zhejiang Geely Holding Group, Terrafugia has some ambitious plans for making flying cars a nearing possibility for drivers, albeit, a very adventurous and wealthy minority of them. The Transition, which requires access to a runway for takeoff, is due for a market release as early as 2019. Drivers/pilots will be able to cruise at speeds of 100 mph and travel within a flight range of 400 miles. For a reserve price of $10,000 and a two year wait time, the Transition can now be reserved to own.

Image Source: Terrafugia

From The Driveway To The Sky

Flying car enthusiasts may have something more like the TF-X when they think of going from their driveway to the skies. Without the need for a runway, all electric power, and a range of 500 miles, Terrafugia’s TF-X is very much like a flying luxury car and is expected to be more appealing to the average consumer compared to the more plane-like Transition. Release of the TF-X is expected in 2023.

The Future Of Private Luxury Travel? 

By that time, flying cars may not be quite as ubiquitous as some hope, but they are expected to be more of a familiar sight in the skies. Uber is hoping to have its flying taxi program in operation as early as 2020. The competition for private vertical takeoff, street-to-sky vehicles is starting to heat up as well with companies like AeroMobil and Lilium now working on their own private crafts for affluent customers.


How will these developments shape the future of luxury and everyday transportation? Comment and tell us what you think of this story.

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