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A blue tractor-trailer travels on a highway as dollar bills are seen to the right to illustrate diesel prices. — The cost of diesel fuel impacts truckers and the entire economy. (Photo: JIm Allen/FreightWaves)

Gasoline prices are increasing almost daily, pinching the wallets and pocketbooks of nearly all Americans with cars. However, as bad as that news is, diesel prices are surging even more across the country. Today’s truckstop retail diesel prices hit a new record of $5.32/gallon. Since February 1st, national truckstop diesel prices have increased by $1.57/gallon. For an owner-operator whose truck gets 6.5 miles per gallon, this equates to a cost increase of $0.24 per mile.

A graph showing the price of diesel per gallon.

Diesel’s importance to our economy

To many Americans (including politicians), diesel prices are so removed from their version of reality that they often dismiss the importance of diesel to the U.S. and global economies. However, diesel is the fuel that drives the economy and leaves major industries vulnerable to cost shocks.

Without diesel fuel, the U.S. economy would collapse in a matter of days. Our supply chains would completely shrivel, almost overnight.

Trucks use it to haul our goods across the country. Of all Class 8 trucks (the big ones), 97% use diesel. No, Elon Musk is not going to save us here. When Tesla announced the Semi in 2017, Musk projected that over 100,000 would be produced by 2022. Today there are less than 20, mostly prototypes.

Trains also depend on diesel to transport products across the country. Almost every train in the country depends on diesel for energy.

An orange BNSF train hauls coal — *A BNSF train hauls coal. (Photo: Flickr/Aaron Hockley)*

Even a large portion of our electricity is indirectly powered by diesel. Over one-fifth (22%) of our electricity in the United States comes from coal. Diesel-powered trains transport coal to power plants across the nation.

Diesel is also critical to our imports and exports, because 80% of the ships that transport products via the ocean are powered by diesel.

…click on the above link to read the rest of the article…

Container Shipping Supply Chain Faces The Deepest Crisis Ever As Massive Disruptions Emerge

May 2, 2022

Will the bullwhip do the Fed’s job on inflation?

April 12, 2022

Will the bullwhip do the Fed’s job on inflation?

Industrial rents unlikely to cool anytime soon — With inventories building and supply chain bottlenecks easing, is deflation next?

The only thing surprising about the freight market slowdown is the speed at which it’s unfolding. The supply chain “bullwhip effect” is both predictable and expected. The surge of inventories and declining freight costs/capacity imbalances will be deflationary.

The trucking market has slowed. Demand for trucks usually surges during the Spring, but this year, demand for truckload freight has broken out of this typical seasonal pattern.

Outbound Tender Volume Index (OTVI) is an index which measures the volume of truckload order requests in the contract truckload market. The OTVI chart shows year over year activity from 2018 to this year.

The bullwhip effect is something every supply chain 101 student learns about – the idea that upstream providers overproduce in reaction to a one-time demand shock.

What is the bullwhip effect?

According to the Chartered Institute of Procurement and Supply, the bullwhip effect “is defined as the demand distortion that travels upstream in the supply chain from the retailer through to the wholesaler and manufacturer due to the variance of orders which may be larger than that of sales.”

The best way to think of this in terms of COVID is that in the early part of the cycle, the Federal Reserve was pouring trillions of dollars into the economy to ensure that the market didn’t collapse. Consumers went out and spent all of that money on physical goods. At the same time, production in China and the U.S. was shut down or limited. The combination – stimulating consumption but limiting production – caused the American consumer to burn through almost all inventory.

Retailers ordered more goods based on the inflated demand at that time. Upstream to them, wholesalers and manufacturers did the same. Along that chain some even ordered bumper stock.

…click on the above link to read the rest of the article…

Experts Are Warning That Empty Shelves And Food Shortages Are Going To Continue For Many Weeks To Come

January 18, 2022

Experts Are Warning That Empty Shelves And Food Shortages Are Going To Continue For Many Weeks To Come

The term “return to normal” is being thrown around a lot these days, but will things ever truly return to the way that they were before the pandemic came along? I don’t think so. From an economic standpoint, an extraordinary amount of lasting damage has been done over the past two years. A seemingly endless list of major problems has thrown thousands upon thousands of critical supply chains into a complete and utter state of chaos, and this has resulted in some very painful shortages. For quite a while, the mainstream media kept insisting that the shortages would soon be gone, but now they are being forced to admit the truth. If you can believe it, NPR has even published a major story about the growing shortages in this country…

No, you’re not imagining it. Some grocery store shelves are bare again, conjuring bad memories of spring 2020 for many.

Social media is rife with images of empty supermarket aisles and signs explaining the lack of available food and other items. Stores such as Aldi have apologized to customers for the shortages.

Nobody in the mainstream media ever imagined that the shortages would last this long.

For certain items such as computer chips, the duration of the shortages is now approaching two full years.

Of course fear of Omicron has made things even worse, and one expert interviewed by NPR suggested that supermarkets in the U.S. are now facing a “perfect storm”…

“We’re really seeing the perfect storm,” Phil Lempert, editor of the website SupermarketGuru.com, told NPR.

Isn’t it strange how that term just seems to keep popping up all over the place?

…click on the above link to read the rest of the article…

The latest monster ships could be a disaster

December 2, 2021

The latest monster ships could be a disaster

Preface. The article below makes the case for the hazards of one of these enormous ships running aground or sinking, blocking a major shipping line, leaking oil, and possibly impossible to salvage.

In 2020, the largest container ship is the HMM Algeciras at 1,312 feet (400 m) long and 200 feet (61 m) wide, much larger than the Titanic, which was 882 feet long and 92 feet wide (Bell 2020).

To see where the all ships are go this marinetraffic.com link, where you can filter the map by type of ship, weight, and other parameters in the tool bar on the left side.

Gray, W. 20 November 2013. Don’t abandon ship! A new generation of monster ships will be even harder to rescue. NewScientist.

Should any of the new monster-sized ships run aground or sink, the resulting chaos could block a major shipping lane and create an environmental disaster that could bankrupt ship owners and the insurance industry alike. With vessels of this size conventional salvage will be all but impossible.

Despite a steady rise in air and road transport, our reliance on shipping remains overwhelming: ships move roughly 90% of all global trade, carrying billions of tons of manufactured goods and raw materials.

These monster ships are already plying the seas. There are 29 bulk carriers about 360 meters long (1181 feet). Designed to feed Brazilian iron ore to furnaces in China and Europe, each is capable of carrying up to 400,000 tons. More are on order.

The most rapid increase in size has come with container ships. In the 1990s the largest carried about 5000 shipping containers; the Maersk Mc-Kinney Møller can carry 18,000. Shipyards will soon begin work on the next generation, some 40 meters longer and capable of carrying 20,000 containers, and there are rumors of even larger vessels to come.

…click on the above link to read the rest of the article…

Shipping Container Price Surge Will Result in Increased Prices on Consumer Goods

November 25, 2021

Shipping Container Price Surge Will Result in Increased Prices on Consumer Goods

The United Nations Conference on Trade and Development (UNCTAD) announced that we should expect consumer prices to rise 1.5% on average over the next year due to the global shipping crisis. Inflation, fuel increases, and labor shortages are among the many factors that have caused shipping costs to spike. “UNCTAD’s analysis shows that the current surge in container freight rates, if sustained, could increase global import price levels by 11% and consumer price levels by 1.5% between now and 2023,” the UN reported last week.

This will impact consumers throughout the world. The US could see a rise of 1.2%, according to the UN, while China may see a 1.4% increase. Less developed countries could see costs skyrocket by 7.5%. According to CNBC, as of late October, over 600 shipping vessels were parked outside of ports worldwide as they are unable to offload. The UNCTAD expects prices on electronics to spike 11.4%, furniture and textiles by 10.2%, rubber and plastic by 9.4%, and basic electrical equipment by 7.5%. Even pharmaceutical products are expected to increase by 7.5%. There are no signs of this crisis improving anytime soon.

Yet another worry: Price of ship fuel is now highest since 2014

October 11, 2021

Yet another worry: Price of ship fuel is now highest since 2014

Bunker surcharges on the rise for shippers of containerized cargo

shipping fuel — Ship refueling (Photo: Shutterstock)

Commodity prices are surging around the globe, so it should come as no surprise: Marine fuel is getting a lot more expensive. That’s bad news for ship operators on the cost side, and, in the container business, yet another headache for cargo shippers.

Marine bunker prices are “soaring,” said Alphatanker on Thursday. “This has not just impacted 3.5% [high-sulfur fuel oil or HSFO] but also 0.5% VLSFO [very low sulfur fuel oil].

“There are expectations that crude, and therefore marine fuel, could move higher in the coming weeks as oil markets tighten further,” warned Alphatanker, adding, “This will undoubtedly clip gains in tanker earnings.”

All ship categories, not just tankers, are taking a cost hit. On Thursday, the S&P Global Platts T4 index estimated that a Capesize (a dry bulk ship with capacity of around 180,000 deadweight tons) burning VLSFO was spending $24,596 per day on fuel.

Ships equipped with exhaust-gas scrubbers are still able to burn cheaper HSFO under IMO 2020, a regulation that went into force for all commercial ships on Jan. 1, 2020. According to the Platts’ T4 Thursday assessment, scrubber-equipped Capes were paying $22,815 per day for fuel.

Why pricing is up and where it’s going

“The main driver for bunker pricing is the price of oil — that’s the key,” said Martyn Lasek, managing director of Ship & Bunker, a company that provides pricing data. “If you look at the relationship between Brent and VLSFO, it’s now pretty solid. There’s an established price trend.”

American Shipper asked Richard Joswick, head of global oil analytics at S&P Global Platts, where the price of crude — and thus ship fuel — is going.

…click on the above link to read the rest of the article…

“Global Supply Chain Crisis To Last Until 2023,” Says Middle East’s Largest Port Operator

October 4, 2021

“Global Supply Chain Crisis To Last Until 2023,” Says Middle East’s Largest Port Operator

Global central bankers have been out and about continuing to promote a narrative that inflation is “transitory.” We’ve seen it from the likes of Powell, Lagarde, Bailey, and Kuroda. Logically, these monetary wonks are right, inflation caused by supply chain bottlenecks will resolve itself, but these officials have yet to provide a timeline because they don’t know.

For more insight on when global supply chain bottlenecks will subside, Dubai’s DP World, one of the biggest international port operators, Chairman and CEO Sultan Ahmed Bin Sulayem spoke with Bloomberg TV at the Dubai Expo 2020 on Friday and said disruptions could last for another two years.

“The global supply chain was in crisis at the beginning of the pandemic,” Bin Sulayem said. “Maybe in 2023 we’ll see an easing.”

For some context on DP World’s operations, it manages the Port of Jebel Ali, also known as Mina Jebel Ali, a deep port located in Jebel Ali, Dubai, United Arab Emirates. The port is the world’s ninth busiest port.

The world’s largest shipping line, A.P. Moller-Maersk, recently warned bottlenecks might last longer than expected, and some shippers have pledged to cap spot rates. DHL and UPS have also warned supply chain disorder will not only persist into next year but could leave a permanent scar.

Before global supply chains splinter further and lead to more shortages worldwide, the question is: How can supply-chain bottlenecks be resolved?

Since the crisis was created by surging demand putting strain on container capacity, suppliers, and logistics companies as they struggled to deliver goods…

A Hunger Strike Against Big Oil

May 5, 2021

A Hunger Strike Against Big Oil

Ann Wright reports on Diane Wilson’s stand against channel dredging in mercury-laden Matagorda Bay, Texas.

Diane Wilson in mid April. (Diane Wilson)

Texas shrimper, fisherwoman, author and internationally known environmentalist Diane Wilson on Monday was on Day 27 of her hunger strike to gain national solidarity and publicity to pressure the U.S. Army Corps of Engineers to rescind its permit for big oil to dredge a channel in mercury-laden Matagorda Bay, Texas.

The dredged channel would allow massive oil tankers into the bay to take on crude oil that will be exported from the U.S.

“I am risking my life to stop the reckless destruction of my community. Oil and gas export terminals like the project I am fighting pollute our air, water, and climate — only to pad the pockets of fossil fuel CEOs,” said Diane Wilson. “The Biden administration needs to stop the dredging and stop oil and gas exports.”

The Army Corp of Engineers is not commenting.

Expansion of Ship Channel

Wilson is challenging the dredging operation funded by Houston-based oil and gas firm Max Midstream to expand the Matagorda Ship Channel in order to bring massive ships into the oil terminals to increase global oil exports out of Texas. The dredging will stir up mercury contamination in the area around the 3,500-acre Alcoa Superfund Lavaca Bay site, one of the largest polluted areas in the U.S., as well as covering up 700 acres of oyster reefs and increasing salinity in the bay, which would devastate local fisheries. The U.S. government has issued pollution reports over the past 30 years concerning the dangerous levels of mercury contamination from the Alcoa site.

…click on the above link to read the rest of the article…

Where’s Dirk Gently When You Need Him?

April 5, 2021

Where’s Dirk Gently When You Need Him?

Did you hear? A supersized cargo ship got wedged in the Suez Canal on March 23rd? If you didn’t, you must do pretty well at avoiding the news, social media, and late night TV. But the short of it is: the Ever Given somehow lost control (sandstorm strength winds have been blamed, as have human errors) and crashed into the bank of the canal and lodged itself in.

So what? Is this really news? Or just a sensational story to distract us from the pandemic, which, one might argue, is itself a distraction from the rapid unraveling of Earth’s systems and thus human civilization? Perhaps. But then again perhaps not.

Here’s why this incident is worth understanding:

First, a ship single-bowedly disrupted global trade for six days. It was finally freed on March 29th. However, there is now a backlog of over 300 ships while many ships rerouted around the Cape of Good Hope. The Suez Canal is part of a trade route that carries more than 10 percent of global trade, including 7 percent of the world’s oil. Each day 30 percent of the world’s shipping container freight moves through the canal. Thus it created backlogs in shipping (including some 200,000 live animals who could have overheated or run out of food). It raised the price of oil briefly. It created shortages in factories—not just of parts but of shipping containers. And of course, it felt like a freak occurrence. Last year, of the 18,840 ships that moved through the canal, there were no incidents.

But the main reason is because this is an excellent metaphor on how fragile our entire globalized system has become.

…click on the above link to read the rest of the article…

Erik Assadourian, suez canal, supply chains, trade, shortages, globalisation, gaianism, shipping

Blocked Suez Canal Adding to Container Shortages, Supply Chain Snarls, Component Shortages for Manufacturers

March 27, 2021

Blocked Suez Canal Adding to Container Shortages, Supply Chain Snarls, Component Shortages for Manufacturers

Exactly at the worst possible time. Ripple effects to be felt for months.

Today is Thursday, and the Suez Canal is still blocked by one of the largest container carriers in the world. The last thing the tangled up and strained supply chains needed amid a historic surge in demand for durable goods, and component shortages that have led to numerous shutdowns of assembly plants, was a traffic jam at both ends of one of the world’s most important shipping choke points. But that’s what manufacturers were served up when the Ever Given got stuck in a narrow part of the Suez Canal where about 30% of the world’s ocean container volume transits. Image by Airbus Space, this morning:

The Ever Given in all its beauty. Owned by Japan’s Shoei Kisen, operated by Taiwan-based Evergreen Group, and registered in Panama, it has a capacity of 20,000 TEU or Twenty-foot Equivalent Units.

On Tuesday at around 7:45 a.m. local time (Monday night in the US), the Ever Given got stuck in high winds, sailing northbound through the Suez Canal on its way from China to Rotterdam. And it is still stuck, despite all-out efforts to refloat the ship, blocking traffic in both directions. The estimates as when it could be moved out of the way range all over the place, from days to weeks, and might have to include partially unloading the ship.

About 19,300 vessels passed through the Suez Canal in the fiscal year 2020, or roughly 52 per day, according to the Suez Canal Authority. And they’re now piling up at both ends of the canal, and are stuck in the Great Bitter Lake in the middle.

…click on the above link to read the rest of the article…

Suez Canal Crisis Morphs Into Global Supply Chain Wrecking Ball

March 26, 2021

Suez Canal Crisis Morphs Into Global Supply Chain Wrecking Ball

The world got another wake-up call this week about the overreliance on complex global supply chains. As of Friday, the massive containership, “Ever Given,” remains stuck in the canal, unable to be refloated, paralyzing the world’s most important shipping lane.

Ever Given is one of the world’s largest containerships, with approximately 20,000 shipping containers of goods. The shipping lane is a vital linkage between Asian factories and customers in Europe and the US.

Reuters reports the Suez Canal Authority (SCA) is looking forward to cooperating with the US to refloat the stranded containership that has blocked the canal since Tuesday.

“The Suez Canal Authority (SCA) values the offer of the United States of America to contribute to these efforts, and looks forward to cooperating with the US in this regard,” it said in a statement.

Shoei Kisen, the Japanese owner of the ship blocking the Suez Canal, aims to dislodge the vessel from the canal bank by Saturday. But as Bloomberg reports, the process to refloat the ship could “take until at least next Wednesday.”

Peter Berdowski, CEO of Dutch company Boskalis who has been tasked with dislodging the vessel, warned Ever Given “could be stuck in the canal for weeks.”

So actual timelines on when the vessel will be unstuck are unclear. The blockage is wreaking havoc across global supply chains, and crude prices were higher on Friday morning on mounting fears the containership will be stuck for much longer than initially anticipated. Since the containership got stuck on Tuesday, crude prices have been chopping around 57-handle to 61-handle.

…click on the above link to read the rest of the article…

suez canal, shipping, supply chains, zerohedge,

Massive Inflation in Shipping Costs. And the Reasons

January 18, 2021

Massive Inflation in Shipping Costs. And the Reasons

Rates for trucking, ocean containers, airfreight, parcels, you name it, the costs for shipping consumer & industrial goods are surging.

The dollar-amount spent by shippers, such as manufacturers or retailers, on shipping their goods jumped by 13% in December from a year earlier, driving the Cass Freight Index of Expenditures to a new record (red line). The amount spent on freight is a function of shipment volume and freight rates:

The Cass Freight Index covers shipments by all modes of transportation, but is heavily concentrated on shipments by truck, with truckload accounting for over half of the expenditures, followed by less-than-truckload (LTL), rail, parcel services, etc. It does not cover commodities.

The freight rates embedded in the index jumped by 6.0% in December compared to a year earlier. “Based in part on spot trends, the acceleration in freight rates is likely to persist in the coming months,” Cass said in the report.

Shipment volume surged 6.7% year-over-year, given the Pandemic shift in consumer spending to goods that need to be shipped, from services that are not shipped. But shipment volume in December (red line in the chart below) remained below the levels of 2018 (black) and 2017 (brown) at this time of the year:

While Americans have cut back buying services, and spending on services remains sharply lower year-over year, they have been buying all kinds of goods, and many categories in record quantities, to where periodic supply shortages have cropped up here and there since March, ranging from hot-tubs to low-end laptops.

Retail sales (goods) in December rose by 4.8% from a year earlier to a record $620 billion (“not seasonally adjusted,” red line in the chart below). Everyone got sidetracked by the dip in “seasonally adjusted” retail sales. That dip was likely due to seasonal adjustments that had gone awry, particularly for ecommerce, due to the massive distortions in spending during the Pandemic:

…click on the above link to read the rest of the article…

Best Laid Schemes

July 27, 2020

Best Laid Schemes

A Really Neat Bridge

But, Mousie, thou art no thy-lane,
In proving foresight may be vain;
The best-laid schemes o’ mice an’ men
Gang aft agley,
An’ lea’e us nought but grief an’ pain,
For promis’d joy!
– Robert Burns, To a Mouse, on Turning Her Up in Her Nest With the Plough (in extract), 1785

Installation of the final cable support pipes on the Gerald Desmond bridge replacement. Here is a drone video of the project. [PT]

Photo by Scott Varley

The grand plans of our local officials in Long Beach have been foiled by the corona-virus bug. After seven years of construction, at a cost of $1.5 billion, they can’t even hold a proper ribbon-cutting.

The special occasion is the grand opening of the new, yet to be named, Gerald Desmond Bridge replacement. To prevent the spread of COVID-19, a virtual ceremony is planned for the Friday leading into the Labor Day weekend.

Virtual ceremonies, like professional baseball games with recorded fan noises, are Dumb with a capital D. But, perhaps, this is the fitting grand opening of an edifice that was planned and constructed for a world that may never arrive.

Certainly, the new bridge structure, which has the highest vertical clearance of any cable-stayed bridge in the US, is a remarkable engineering achievement. The cable-stayed design also has a signature aesthetic. We have watched it go up over the years; it really is extraordinary.

The two towers rise up to roughly 515 feet above mean sea level, and include 40 cables per tower. The bridge’s linear extent is approximately 8,800 feet. The cable-stayed span alone is 2,000 feet.

…click on the above link to read the rest of the article…

Maersk Crew Hospitalized In First Ever COVID-19 Cases On Board A Container Ship

March 31, 2020

Maersk Crew Hospitalized In First Ever COVID-19 Cases On Board A Container Ship

Despite one of the the world’s largest shipping lines, Maersk, recently suspending all crew changes aboard its container vessels for up to one month in order to shield crew and operations from the coronavirus and keep them “as normal as possible,” this weekend witnessed the first ever confirmed cases aboard a container ship.

In the past days reports have emerged that an entire crew from the Danish-flagged ship Gjertrud Maers have been tested, with some evacuated and hospitalized in Ningbo, China. A Maersk company spokesman later said in a press statement that “a number of our seafarers” on the ship were suspected for the virus.

“As per our established protocols, the seafarers were isolated on the vessel when symptoms appeared and we are providing medical treatment based on input from our medical advisers,” the Maersk statement said.

“The vessel was awaiting phasing into our network and currently idle at the quayside in Ningbo, China,” it added. “Extra precaution measures will be taken for crew replacement and sanitations will be implemented.”

Subsequent reports on Monday via state-run China News Service (CNS) indicate at least five of the crew members have tested positive for Covid-19, after a total of 22 foreign crew members were put in isolation aboard the ship while awaiting testing.

Initially seven crew members were reported as having “abnormal physical condition” over a week ago. Maersk did not immediately confirm the crew tested positive, however.

CEO of Maersk Ocean and Logistics, Vincent Clerc, late last week updated global customers and partners as to how the pandemic will impact shipping volume. He confirmed in a statement that necessary drastic actions taken by governments and companies to contain the spread of the virus will result in an economic slowdown. He added that recent interaction and conversations with customers “confirm our expectation of lower volume demand in the coming weeks.”

…click on the above link to read the rest of the article…

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