Top US Refineries: Energy Information Administration

Feeder stocks require refining as well. Medium weight stocks like Vacuum Gas Oil are moving like crazy- my own ship is backloading (filling up and discharging at the same ports) VGO and residual stocks at a record pace...

Now, here’s another wrench in the economic gears: time to delivery of shipborne finished and feedstock products is declining as oil transport companies convert from owning self-propelled tankships (avg 15.5kt in up to force 7 seas, and 8-10kt in up to force 9) to smaller Articulated Tug-Barge units (avg spd 8 kt in up to force 5 seas, 2 kt or less above that) because of unfriendly economic policies in the US government.

My own ship, which is barely medium sized, can carry enough gasoline to power every personal car in the US for a day. The cost to US consumers for transshipment for that gasoline averages 1 to 1.5 cents/gal at the pump. It would take 6 average seagoing Tug/Barge units to move the same product, but, even under idyllic conditions, the product can only be moved at 60% of the speed over the water, and only in absolutely perfect weather conditions, which is pretty much never on the East Coast.
Unfortunately, we have President Bush, Sr to thank for that, proving yet again that even good people make mistakes. If you look deeper, you can see the effect that this could have on local supplies, brokerage houses and spot markets, and the effect this has had on stability of pricing at the pump.

Per gallon amount allocated to crude transportation, refining, pipeline distribution, road distribution, retail marketing (no profit) on my gallon of regular unleaded yesterday: $ 0.83

You are a key player in the most interesting part of the price equation: turning the crude into something useful and getting it to market. And all of this activity was done for about 27% of the final price of a gallon of gas. Yet these costs are service costs and not commodity costs and they don't have the same elasticity to respond up and especially down to market forces.

So you look for more efficient ways to get the work done.

This is really curious.

What is setting up the dynamic between the self-propelled tank ships and the articulated tug-barge units? Since the economic principle of efficiency of scale hasn't been repealed (as far as I know), what is the economic rationale driving devolution from a more capable and efficient ship to less capable multiple units?

Is it terminal onload/offload cost efficiency? It can't possibly be transit efficiency, can it?

What is the operating technique that allows use of less efficient vessels but makes possible a decline in the "time to delivery of shipborne finished and feedstock products?"

What is the U.S. Government economic policy causing this effect?

Maine should have one of the largest refineries. In 1972, plans were made and money was spent in preparation for a refinery and supertanker port at Eastport.

Ten years of lawsuits, EPA interventions, environmental scares, Bald Eagle counts, a studid Canadian re-invention of the Treaty of Ghent, and by 1983 the builders decided that it just wasn’t worth the billion dollars the project now represented.

New England would be so much better off for this project. We’ll call it a self-inflicted wound.

All excellent questions, sir. I doubt that we’ll agree 100% on everything here, but I’ll do my best to denote where my own bias leads me.

1) Economies of scale in shipping are limited by physics, to start... a 1,000 ft ship has a service life of 10 years on average wracking and hogging (bending and stretching)stresses from everyday seas are incredible). A 700-foot ship can be designed for 20 years, and some can make 25, in theory. Larger ships can’t get into shallow US ports, plus, many docks aren’t set up for large ships.

2) Ships are incredibly expensive. The Jones Act requires that all commercial vessels working between US ports be american built and crewed. This is done to protect US shipyards and to maintain a supply of US civilian mariners. This is admittedly an inefficiency. The replacement cost of my ship is 130 million US- if it were Korean built, it’d be 30 million US (2 articulated tug/barge units could be built in the US to carry the same amount of cargo for $50 million each). The original idea of the Jones Act was to keep shipyards trained, efficient and experienced in advanced shipbuilding during peace and wartime. The practical rationale today is to keep foreign interests from controlling our ports. Since 90% of all commodities in the US travel by ship, this is sensitive subject.

3) Staffing- My ship requires 21 people to be safely operated (4 deck officers, 4 engineers, 9 unlicensed sailors and oilers, a steward, 2 cook’s helpers, etc.) Everyone on board has undergone an extensive background check, and is a citizen- we are allowed 3 green-card holders at a time, so long as they can pass the check. The jobs pay a living wage right down to the guys in the galley, who make about 38k/year w/ benefits for two 120-day hitches each year. Between help, insurance, and expenses it costs about $32,000 a day to run my ship before fuel expenses (65 tons/day at $150/ton).
A large tug/barge unit that has a crew of 8-9 guys, but can move say 1/2 of the oil that we can, can do that at about 30-35% of the cost per day, but the cost savings must be offset by slower transit times and reduced ability to operate in inclement weather. Unfortunately, all I have are soft numbers here, which are spouted industry-wide, but I can’t confirm ‘em, but you can see (I hope) that each has its’ cost...

Hope this helps- I had to cut it short, as we’re sailing in a few hours.

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