Friday, January 22, 2016

Shipping slowdown- my 2 cents (Part 1)

 Please bear with me. I don't write as much about this stuff as I used to, and minds, like machines, do gather rust. My ability to articulate thoughts has gone way downhill since I started just being a tankerman and not doing side work as a scientist. I'm more used to speaking bunker barge pidgen English, these days. Trying to explain this stuff is like trying to speak the King's English after 20 years of speaking only in Ebonics.  


The world of shipping and ocean trading is getting some publicity this week, mostly because it really, really sucks to own a ship right now.

Here's a great thumbnail sketch, with, more importantly, many supportive links that connect some dots for you. I'm going to refer to matters covered therein, so I feel that it's worth reading and following up on those links. The reporting is solid.


The tankers are piling up outside Galveston.

Yes. It's been warm, oil is cheap and plentiful, and Galveston bar is the gateway to the largest source of refining capacity in the US. There's a backlog in other places too, if you look at real-time ship tracking sites lik

 There's a lag between when oil gets ordered and when it arrives, and contracts for oil delivery don't always run concurrent with terminal and refinery capacity. If there's no demand for home heating oil, there's no place to PUT the home heating oil already made, and the feedstock storage fills up, and ships already underway carrying feedstocks become very, very expensive floating storage.

        This also is an issue because we don't have anywhere near enough storage for oil in the US. Like Wal-Mart, oil production is pretty close to just-in-time delivery thanks to profitability and permitting issues courtesy of a perfect storm of overregulation and an increasing reluctance of major players to invest in multiple parts of the supply chain. If you've noticed, the blue-chip oil majors have shrunk their footprint in the infrastructure significantly. More and more, companies owned by investment trusts handle more and more of the supply chain, and the former blue-chip major players sell off their more diverse portions of the market share. Sunoco used to own everything from the oil field to the gas station, and could manage Every. Single. Second. From the well to the gas station, all over the world, they had the wells, the pipelines, the refineries, the ships, the trucks and the gas stations. Exxon did too. Mobil, Shell, BP... none of them do that anymore. Some still have some terminals, some still have refineries, I believe that none have ships, and most divested themselves of assets to reduce their footprint and exposure in the supply chain. The new owners of these assets are banks and investment trusts and other partnerships, which means that they ride the wave economically, and expansion in infrastructure is often not part of their business model. Why spend money when you're going to have to sell everything the moment that some investors get nervous? Plus, Jesus Christ, have you ever had to buy land near any sort of body of water? It's a nightmare just dealing with small-town legalities. Now add a billion times more regulation, a professional cadre of overseers and permitters and bottleneck their efficiency by only allowing government employees to do these jobs. It takes more effort and oversight to expand the parking lot of an oil terminal than it did to build a new World Trade Center in New York. Who the fuck wants that kind of headache just to build some oil tanks so that the price of gas doesn't quadruple every time there's a storm?


    Mind the hyperbole, but you get the idea, I hope. There's obviously money to be made, but pimpin' ain't easy, anymore. The return on investment in oil is nowhere near as good as most dildos in the public might think.
 After writing the world's most boring treatise, I once traveled around  to several universities in the US and EU to cure insomnia by lecturing on the impact of regulation on international trade in gene lines and broodstock for commercially grown foodstocks.
       This wasn't what I actually was supposed to focus on, but my focus evolved from labor force issues to policy. This was in 1998, so we're talking ancient history, when it comes to genetics, but the regulation hasn't changed as much as you might think. Biosecurity protocols have evolved, but are constantly behind the times, creating a massive drag even today in these commodities markets... BECAUSE... government works at the speed of government. Half of the time I was meeting with government employees who lamented this very fact. I'm still in touch with some great guys in Scotland doing the same job they did 18 years ago with the same complaints.I made it about 3 years, talking about this shit, and by then it was a matter of either shooting myself in the head or turning my back on it.

      Unfortunately, the oil trade has many of the same issues and their analogues specific to the oil trade.

 Now, I wandered far afield of where I started, but you hopefully see where I'm going here. There are many issues that affect the oil trade, and the lack of robust stability (and long-term ownership of assets in the supply chain) makes it a fairly decent barometer of the governing economics behind everything I can see. When you combine this with conditions in dry bulk shipping (absolutely beyond the worst you can imagine) and containerized shipping (bad, probably getting worse and a classic chickens-coming-home-to-roost story), you get a more in-depth, nuanced view, but one that is pretty frigging consistent across the board.

 Part 2 will discuss the amplifying and delaying effects of current management practices in dry bulk and containerized shipping economics, and why the increasingly horrific outlook is both their own damn fault and must be viewed through a lens rather than being taken as a snapshot of global economic conditions. And also probably some dick and fart jokes. You know... for the people.
   And finally, I've got to remind everyone that while I'm using solid facts to form my opinions, they are MY opinions, and I'm neither an economist nor a scientist anymore, just a dude with some time and some


Stackz O Magz said...

If you ever make it down to Galveston for a hitch, give me a shout. I'm 45 mins north and would be more than happy to buy you a beer or 7.

Anonymous said...

Part of the problem is the years of enviromental challenges that are filed by charities getting gov't grants and then the companies spend millions defending before they ever break ground.


Anonymous said...

They want gas, but not near them.
They want to poop, but not have it near them. Wave hello to my honeyboat if you go upriver past 138st.