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Calling all scientists: oil’s properties appear to change when it is subjected to high prices. Instead of greasing the wheels of industry, it causes them to start seizing up.

Just ask FedEx, the self-styled “engine of the global economy”. Oil is burning a hole in its profits, accounting for half the increase in fourth-quarter operating costs. On its own, this is troubling but hardly a bolt from the blue. Although the headline fourth quarter loss came as a shock, once exceptional charges were stripped out earnings were in line with the consensus forecast. FedEx’s situation is a world away from that faced by those other kerosene- guzzlers, the airlines.

But when FedEx does not deliver, it is time to worry. The company, not known for irrational exuberance, slashed earnings guidance for the year ending May 2009, implying a drop of up to 19 per cent. Clearly, it is not expecting a V-shaped recovery in the economy. As the economy slows and FedEx raises fuel surcharges, so customers decide they can afford to wait for deliveries rather than pay extra for express services, resulting in a stagflationary squeeze on margins.

Longer term, FedEx hopes expensive crude will prompt consumers to switch to other fuels, causing crude prices to drop. As messages of reassurance go, this one is up there with Neville Chamberlain’s declaration of “peace for our time”. Demand destruction will come in the form of recession long before structural changes in behaviour have any impact. Moreover, to reduce oil prices, demand will have to fall in China and the Middle East, where oil consumption is still growing. Yet these are the very regions accounting for the bulk of America’s export growth – the one bright spot in the economic picture and the tailwind for FedEx’s fastest growing business, international deliveries.

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