The Oil Drum | Is a Net Oil Export Hurricane Hitting the US Gulf Coast?

207 comments on Is a Net Oil Export Hurricane Hitting the US Gulf Coast?

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expat on June 2, 2008 - 10:47am

Interesting - who would have thought that transit times could also be such a major factor?

It seems like the oil fairy is not only limited by the fact that oil is finite, but that it actually takes time to transport.

And this just might explain the tanker rates - it isn't about increasing production, it is about increasing distance. After all, instead of one tanker making a round trip in a dozen days, it is now a tanker making a round trip in five dozen days. Which means that you now need 4 extra tankers to maintain the same flow of crude.

I think a lot of signals are starting to get crossed, meaning that a lot of people are taking comfort in the wrong things. Much like how a truly hot burn on the skin feels cool at first contact.

The reality of dissonance will not be easy to master - I still remain amazed at how the price of diesel has overtaken the price of gasoline, even in Germany, where it gets a 20 euro cent tax break compared to gasoline.

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westexas on June 2, 2008 - 10:52am

As usual, Matt Simmons pointed out the difference in transit time, long before I did.

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Gwydion on June 2, 2008 - 12:31pm

When I read that part above, the thought that struck me was hurricanes and not just from the title. That is, if V&M are not exporting as much to the U.S. and more is coming from the Persian Gulf, does this mean the effects from some sorts of of unplanned refinery shut-downs are going to have a bigger lag time before things are running smoothly again? I live in Atlanta and can remember after hurricane Katrina that a few people didn't come into work for a day or two because of short-term shortages in gasoline.

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memmel on June 2, 2008 - 1:56pm

As far as transit rates go slow steaming is becoming increasingly common where ships slow down to conserve bunker fuel. Its easier to find info for container shipping but we would assume that oil tankers are also using the practice. This would work to increase transit times.

Dated but its the problem we face.

http://links.jstor.org/sici?sici=0160-5682(198211)33%3A11%3C1035%3ATEOOPO%3E2.0.CO%3B2-Z

http://seekingalpha.com/article/77472-teekay-tankers-limited-q1-2008-ear...

http://www.istockanalyst.com/article/viewarticle+articleid_1980755~zonei...

In any case this would put some pressure on tanker rates and show a bit higher amount of oil in transit.
But the truth is less oil is actually moving since all voyages are probably taking longer.

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Geckolizard on June 2, 2008 - 2:16pm

Interesting - who would have thought that transit times could also be such a major factor?

Well, let's consider our happy friend the oil tanker.

If he can make 4 trips from Mexico or Venezuela in 20 days, he hauls 4x his holding capacity in those 20 days.

If he can only make 1 trip from the ME in thise 20 days, then he can only haul 1x his holding capacity.

Now... If the company that owns him wants to maintain the same rate (4x in 20 days) then the company needs to have 4x as many tankers. This drives up the overall cost of shipping by 4x as well.

I think that it would be an interesting article to post that asks 'What if we only got oil from one or two parts of the world that were far from us?' i.e. for the US, if we could only get oil from the ME and not Mexico or Venezuela; For Europe, if we could only get oil from the ME (again) and not the North Sea. What does the supply chain look like? How vulnerable is it to natural or man-made disruptions? How expensive is it?

Good stuff...

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SailDog on June 2, 2008 - 5:57pm

Diesel and kerosene are the "essential" fuels, providing third world cooking and military, truck, farming and aviation fuel. They are very close together in the distillate column and I guess interchangeable to some degree at a refining level; and a greater degree when used. Gasoline is rediscovering its status as a by-product, albeit one that doesn't suffer any lack of demand.

An interesting analysis could be made of the worlds diesel/kerosene capacity. I bet it would provide a fascinating twist to the ELM model and governments are likely to exert some form of control over these supplies before gasoline. For instance, the US military recently standardized all its equipment on JP8. Diesel can be used too in many/most road vehicles, but in theatre they only need JP8. Guess who will get the last drops of the stuff?

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