Globalization may be giving way to local production due to shipping costs. Photo: Think Panama

Americans can forget about avocado salads in January. The price of oil isn’t just hurting consumers at the pump — record oil prices are changing the way globalization works.

In the past three decades, the world economy has become so integrated that most products travel the world before coming home from the store. Illogical supply chains have emerged — and fossil fuels are wasted — because of price-driven production. From cars to processed foods, raw materials and labor from different countries, even different continents, are part of the production process of much of what we buy.

But cheap oil is now a thing of the past, and the cost of oil changes everything.

Higher prices are upsetting the global supply chains that until now considered cheap labor and raw materials more important than geography. Decades ago, Wal-Mart set the industry standard with this global supply chain model, but now industries that have made their fortunes through outsourcing are in trouble. Shipping a 40-foot container from Shanghai to the U.S. costs $8,000 now, compared to $3,000 earlier this decade. This increased shipping cost is the equivalent of a 9 percent tariff on all global trade, according to a recent report by Canadian investment bank, CIBC World Markets. The report states, “The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today” and “has effectively offset all the trade liberalization efforts of the last three decades.”

Globalization, economists are now saying, is changing rapidly. The “neighborhood effect,” or putting factories and suppliers as close as possible to the consumer, is the newest trend. People are now becoming increasingly interested in trying to grow, produce and shop as locally as possible, particularly food and goods which take little time to make or package or are heavy and expensive to transport. Electronics companies lured to Asia by lower wages and lax environmental standards are returning to Mexico, and furniture, footwear and toy industries are returning to the United States.

A shift to local growing will cause a change in what food is available and affordable. Consumers will now be economically encouraged to eat with the seasons, given the prohibitively high costs of exotic items, like avocado or peaches during the winter.

Perhaps most significantly, American steel production is rising after decades of decline, while China’s steel exports have fallen more than 20 percent this year. Motors, machinery, car parts and appliance industries will all be affected. As Chinese factory orders plunge and its export growth slows, the Chinese economy is already slowing. Economists expect growth to slip from double digits to 9 percent this year alone.

Globalization isn't dying — just changing. Products that are light and inexpensive to transport, products that are labor-intensive and products that don't require transportation, like telecommunication and Internet-based industries, will continue to be outsourced. But the change in global trade is shifting who profits and on what. These changes will impact both labor markets and trade balance, lessening the US trade deficit with China.

In an ironic demonstration of the power of globalization, China’s troubles will be felt worldwide. Their dampened economy is one reason gas prices have recently fallen in the United States.

With this change, though, environmental economists have something to celebrate. After all, with the U.S. Energy Independence Act of 2007 setting measly policy goals — reducing U.S. emissions by just 4 percent by 2020 (compared to the EU’s goal of 20 percent) — and the lack of any international climate treaty, the imperative move to green living will have to be driven by the consumer.

Regardless of your opinion of globalization, growing, shipping and shopping local is now the option that is most affordable - and sustainable- and option.