The cost of crude oil only represents 68% of the price. Refining, marketing and taxes make up the rest. The cost of crude was stable for the majority of the last century, and only had wild swings during the first part of last decade (the Owes). Prices tripled from 2003 to 2008.
Why did crude go up so much? Some analysts suggest that because oil is a finite resource the laws of supply and demand are at work. Military conflicts in the Middle East (where most of the exploration is) could be a reason. Others imply nefarious conspiracies that oil prices increased so much under a President who had deep personal and business ties to the industry. Costs of exploration and extraction have increased. Likely there’s a combination of many factors that have resulted in the increase. Three years later it’s unlikely that prices will return to their historic average, and certainly there's no policy efforts from the U.S. Government addressing the issue.
The higher that fuel and transportation costs go – the economic benefits of outsourced manufacturing must be re-evaluated. There will be a tipping point where the lower wage and regulation costs outside of the U.S. are offset by increased transportation costs. Aggressive and nimble companies would be well served to look at towns and cities across America and reconsider the benefits of domestic manufacturing.
The global financial calamity of 2007-08 has been largely blamed by the “experts” on the bursting housing bubble. There’s no doubt that those issues contributed to the meltdown. But so did the trade deficit and a tripling of oil prices.
Increased tariffs, high oil and transportation costs would further incentive manufacturing to return to the U.S. That would mean jobs. People with jobs pay taxes and buy goods (that have to be made). People with jobs no longer require government programs, reducing government spending obligations. A 1% increase in the tariff would have an immediate, short term and long term benefit to the U.S. economy on multiple levels. Washington politicians will instead spend the fall having philosophical jousts - a crude irony when a solution is available.