First it was steel. Anyone in the automobile business knows how the price of steel has skyrocketed in the past couple of years.
Now we're seeing the price of petroleum jump again, and it's showing up at the pump.
With most commodities, such as steel and petroleum, there's a finite amount available. On top of that, the oil-producing nations are trying to limit production.
And we have new competition for buying steel and gasoline. Between China and India, we're seeing a big increase in consumption.
China has quickly become a huge producer of automobiles; that requires a lot of steel. Imagine how much steel China's new skyscrapers are using. Once Chinese cars leave the assembly line, those gasoline tanks have to be filled. Suddenly China has become one of the world's big gasoline consumers.
Soon, China will become a major competitor in selling cars on the world stage, including in the United States. Then we will see Indian-built cars for sale in Europe and North America. In Mexico, Dodge already sells rebadged Hyundais built in India.
The entrenched manufacturers will have an even tougher time competing against those emerging nations. China and India probably will start with minimally acceptable quality. But in a short time, that quality will improve dramatically. Costs will be low, and so will the prices.
Think of the development of the industry in Japan and Korea. History will repeat itself.
Meanwhile, the world is going to be competing for a limited amount of petroleum products - not so much because of natural resources but because of refining capacity.
So not only are we going to be competing with our global neighbors in the marketplace; we'll compete for the commodities that drive our industries.
Even with gasoline costing more than $2 a gallon, we're not seeing a big shift in American consumers' buying habits. But a shift might start when the price hits $3.
And that will send the U.S. industry into a cocked hat once again as automakers have to shift production from big vehicles to smaller ones.
This industry is never lacking for challenges.
