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Oil consumption of containerships

Oil consumption of containerships

Preface.  Since 90% of international goods move by ships, I was curious about how much fuel they burned.  It’s a lot: The very large container ship CMA CGM Benjamin Franklin above, which can carry 18,000 20-foot containers, carries approximately 4.5 million gallons of fuel oil, which takes up 16,000 cubic meters (FW 2020).  As much fuel as 300,000 15-gallon tank cars.

But these ships can carry 200,000 tons of goods, so they end up being more energy efficient than 300,000 cars (Stopford 2010, UNCTAD 2012).

Pound for pound and mile for mile, today’s ships are the most energy-efficient way to move freight. Table 1 shows the energy efficiency of different modes of transport by kilojoules of energy used to carry one ton of cargo a kilometer (KJ/tkm). As you can see, water and rail are literally tons and tons—orders of magnitude—more energy efficient than trucks and air transportation.

Table 1 Energy efficiency of transportation in kilojoules/ton/kilometer (Smil 2013), Ashby 2015)

(A) ……………Transportation mode
50……………. Oil tankers and bulk cargo ships
100–150….. Smaller cargo ships
250–600….. Trains
360………….. Barge
2000–4000 Trucks
30,000…….. Air freight
55,000…….. Helicopter

(A) Kilojoules of energy used to carry one ton of cargo one kilometer Transportation mode

***

Further details

Fuel consumption by a container ship is mostly a function of ship size and cruising speed, which follows an exponential function above 14 knots. So an 8,000 TEU container ship consumes 225 tons of bunker fuel per day at 24 knots, but at 21 knots  consumption drops to 150 tons per day, a 33% decline. While shipping lines would prefer consuming the least amount of fuel by adopting lower speeds, this advantage must be mitigated with longer shipping times as well as assigning more ships on a pendulum service to maintain the same port call frequency. The main ship speed classes are (Notteboom 2009):

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Is 2020 the End of a Energy Trend or the Beginning of a New Trend for Climate Change Advocates?

Is 2020 the End of a Energy Trend or the Beginning of a New Trend for Climate Change Advocates?

QUESTION: Marty; I see that Socrates’ forecast for oil in 2020 was a major turning point. All the reversals worked great. But my question is, do you think with this 2020 turning point that this climate change agenda of Bill Gates will fail if oil bottoms here in 2020?

GA

ANSWER: The array picked up 2020 nicely and it was also a Directional Change. But note that we also have a Directional Change in 2021 and the next turning point in 2023. So far all indications are that they will fail in eliminating fossil fuels. Socrates sold even the high just before the Crash. It appears as stated at the WEC,  this is the culmination of the trend, and this cycle into the peak of this 8.6-year wave should be a commodity boom but one based upon shortages and currency because we are headed into a Monetary Crisis Cycle for 2021-2022.

So just looking at crude by itself shows that this should be the culmination of a trend rather than the start of a trend as Gates and others would like to profess. That said, the excess in supply is real because they have shut down the global economy with lockdowns which have reduced driving and air travel while also shipping has been disrupted. So 2020 should be at the very least the lowest yearly close.

However, the consequences of a crash in commodity prices typically result in destruction also of the productive capacity. This will happen at the low in Gold or any commodity.

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Oil Price War Puts Entire Kingdom Of Saudi Arabia At Risk

Oil Price War Puts Entire Kingdom Of Saudi Arabia At Risk

At no time since Ibn Saud first consolidated his Arabian conquests into the Kingdom of Saudi Arabia in 1932 has the ruling Saud dynasty faced such an existential threat to its continued rule over the country.

It is true that Saudi Arabia has been able to gain some temporary advantage in key Asian export markets, as its shipments to China more than doubled in April to 2.2 million barrels a day (bpd) and those to India, at 1.1 million bpd, were also the highest in at least three years. This, though, as much as any other factor that might endure, was a product of Saudi slashing its official selling prices (OSPs) for April crude sales to some of the lowest levels in decades, undercutting its rivals, and exactly the same happened again for May crude sales.

Even this very slight victory, though, has already been jeopardised by an indication that the scale of the trouble into which the House of Saud has placed Saudi Arabia is truly monumental. Just last week saw massive economic pressure force the Saudis into increasing the June delivery price for its Arab light crude oil to Asia by US$1.40 per barrel from May, albeit at a discount of US$5.90 to the Oman/Dubai benchmark average. Market expectations were that Saudi would continue to keep OSPs low to hold onto market gains.

Saudi Arabia did this because its finances are in an even worse state now than they were at the end of the Kingdom’s previous attempt to destroy the U.S. shale industry that ran disastrously from 2014 to 2016. Back then, Saudi had a much greater chance of success in destroying the U.S. shale industry than it did this year, for a wide variety of reasons, but even then the effort nearly destroyed the Saudi economy forever.

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Has Demand For Oil Already Peaked?

Has Demand For Oil Already Peaked?

Oil prices continue to rise on the prospect of a rebound in fuel demand as economies begin to reopen.  But there is a large difference between oil demand rising from recent lows and actually growing relative to pre-COVID-19 trends. In other words, demand destruction on the order of nearly 30 million barrels per day (mb/d) may have been brief, but we are a long way from a 100-mb/d oil market. 

In fact, some are wondering whether the world will ever get back to 100 mb/d of oil demand. Even oil executives have their doubts. Royal Dutch Shell’s CEO Ben van Beurden recently suggested that a rebound is unlikely, even looking out beyond 2020. “We do not expect a recovery of oil prices or demand for our products in the medium term,” he said.

“We basically have a crisis of uncertainty. Uncertainty about demand, about prices,” van Beurden said in a video address when presenting first quarter results at the end of April. “Maybe even uncertainty about the viability of some of our assets given all of the logistical issues we have.”

BP’s CEO Bernard Looney largely admitted the same thing. The COVID-19 pandemic could entrench certain societal changes – more teleworking, less commuting, less flying – that could permanently erode a portion of consumption. “It’s not going to make oil more in demand. It’s gotten more likely [oil will] be less in demand,” Looney said in an interview with the FT

“I don’t think we know how this is going to play out. I certainly don’t know,” Looney said. “Could it be peak oil? Possibly. Possibly. I would not write that off.”

Not everyone agrees. ExxonMobil’s chief executive Darren Woods recently said that the long-term trends “have not changed.” 

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

How the first phase of peak oil brought Virgin Australia into minus after 2008

How the first phase of peak oil brought Virgin Australia into minus after 2008

Fig 1: The conventional crude oil plateau started in 2005

At the end of the high oil price period in June 2014, Virgin Australia had liabilities of $ 4.7 bn. Despite lower oil prices it never got rid of that debt. Instead it increased by another $ 2.1 bn.

Fig 2: Virgin liabilities vs Brent oil price

This post is an update of:

Despite growth in passenger numbers Virgin Australia can’t make money since 2009

12/2/2014 (with data up to 2013)

All airlines are hit by the impact of the Corona virus but Virgin had problems before travel restrictions were introduced. High debt – accumulated over more than 10 years – is among the main reasons why voluntary administration was unavoidable.

Virgin Australia owes almost $7 billion to more than 12,000 creditors

https://www.abc.net.au/news/2020-04-30/virgin-australia-owes-7-billion-creditors-meeting-administration/12198130

We compare Virgin’s profits and losses with oil prices:

Fig 3: Profit/loss vs Brent oil price FY 2003-FY 2019

It is clear that Virgin went into the red after the oil price shock in 2008.

How have Virgin’s losses come about? The next graph shows how operating expenditure consumed the revenue. The 3 main cost components are fuel, airport charges and staff expenses. All have increased over the years, more than the number of available and revenue seat kms.

Fig 4: Virgin Revenue, Operating expenditure and profit/losses

Note that the irregularities in 2005/06 were caused by changes in the reporting periods.

Fig 5: Stacking on negative areas hides the losses

At the bottom we start with profits and losses (1) then stack hedges (2), income tax (3) and fuel (4).

The large loss in 2018 includes a tax expense of $m 452 resulting from a derecognition of deferred tax assets ($m 511) which had accumulated since 2009 (see note B5, Annual Report 2018, p62).

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US To Remove Patriot Missile Protection From Saudi Arabia Amid Oilpocalypse

US To Remove Patriot Missile Protection From Saudi Arabia Amid Oilpocalypse

Petrodollar panic?

As tensions between OPEC (cough – the Saudis – cough) and Washington rise over the supply (and price) of oil globally amid a pandemic-driven demand collapse, it would appears President Trump may have just gone ‘nuclear’.

“…there will be blood.”

The Wall Street Journal reports that The U.S. is removing Patriot anti-missile systems from Saudi Arabia and is considering reductions to other military capabilities – marking the end, for now, of a large-scale military buildup to counter Iran, according to U.S. officials.

As a reminder, OilPrice.com’s Simon Watkins warned last week that President Donald Trump was considering all options available to him to make the Saudis pay for the oil price war as the crash that followed has done significant damage to the U.S. oil industry.

With last month having seen the indignity of the principal U.S. oil benchmark, West Texas Intermediate (WTI), having fallen into negative pricing territory, U.S. President Donald Trump is considering all options available to him to make the Saudis pay for the oil price war that it started, according to senior figures close to the Presidential Administration spoken to by OilPrice.com last week. It is not just the likelihood that exactly the same price action will occur to each front-month WTI futures contract just before expiry until major new oil production cuts come from OPEC+ that incenses the U.S. nor the economic damage that is being done to its shale oil sector but also it is the fact that Saudi is widely seen in Washington as having betrayed the long-standing relationship between the two countries. Right now, many senior members on Trump’s closest advisory circle want the Saudis to pay for its actions, in every way, OilPrice.com understands.

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

Oil Suddenly Crashes After Jobs Report

Oil Suddenly Crashes After Jobs Report

It would appear no one told the machines that ADP would report a devastatingly ugly jobs print this morning…

Oil started sliding earlier but the ‘better than expected’ ADP print actually seemed to spark a panic puke for some reason ahead of this morning’s EIA inventory/production report.

Oil flows spell deep depression

Oil flows spell deep depression

Energy is not just one commodity among many in the economy; it is the commodity. Without energy, nothing gets done. And, oil is not just one form of energy in the energy commodity complex; it is the energy source upon which our modern way of life depends. In fact, it is the main energy source running through the arteries of the global economy.

Far from being a boon to the world, ultra-low oil prices signal that the global economy is flat on its back—even worse, flat on its back with two broken legs.

Petroleum geologist and consultant Art Berman recently detailed the problem in this piece. Berman is the man who accurately predicted—starting way back in 2008—the persistent losses that shale oil and gas would produce for the companies that extracted them. The shale industry continuously vilified Berman for his analysis over the next decade, even as the industry was in the process of blowing 80 percent of investors’ capital as of last year. With the arrival of the coronavirus, the coup de grâs has just been delivered to a shale oil and gas industry that was already on its knees.

Perhaps the most important thing to understand about the current oil “glut” is that it is not merely the result of producing too much oil for an economy humming on all cylinders. It is primarily the product of a coronavirus-infested economy in which demand has dropped 20 percent in just a few weeks. As Berman points out, estimated U.S. oil consumption has returned to a level not seen since 1971.

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

Trump Could Use ‘Nuclear Option’ To Make Saudi Arabia Pay For Oil War

Trump Could Use ‘Nuclear Option’ To Make Saudi Arabia Pay For Oil War

US Saudi flags

President Donald Trump is considering all options available to him to make the Saudis pay for the oil price war as the crash that followed has done significant damage to the U.S. oil industry

With last month having seen the indignity of the principal U.S. oil benchmark, West Texas Intermediate (WTI), having fallen into negative pricing territory, U.S. President Donald Trump is considering all options available to him to make the Saudis pay for the oil price war that it started, according to senior figures close to the Presidential Administration spoken to by OilPrice.com last week. It is not just the likelihood that exactly the same price action will occur to each front-month WTI futures contract just before expiry until major new oil production cuts come from OPEC+ that incenses the U.S. nor the economic damage that is being done to its shale oil sector but also it is the fact that Saudi is widely seen in Washington as having betrayed the long-standing relationship between the two countries. Right now, many senior members on Trump’s closest advisory circle want the Saudis to pay for its actions, in every way, OilPrice.com understands.

This relationship was established in 1945 between the U.S. President Franklin D. Roosevelt and the Saudi King at the time, Abdulaziz, on board the U.S. Navy cruiser Quincy in the Great Bitter Lake segment of the Suez Canal and has defined the relationship between the two countries ever since. As analysed in depth in my new book on the global oil markets, the deal that was struck between the two men at that time was that the U.S. would receive all of the oil supplies it needed for as long as Saudi Arabia had oil in place, in return for which the U.S. would guarantee the security of the ruling House of Saud.

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“We Are Moving Into The End-Game”: 27 Tankers Anchored Off California, Hundreds Off Singapore As Oil Industry Shuts Down

“We Are Moving Into The End-Game”: 27 Tankers Anchored Off California, Hundreds Off Singapore As Oil Industry Shuts Down

Back in the late fall of 2014, when Saudi Arabia broke up OPEC for the first time and unleashed a torrent of crude oil on the world despite the protests of its fellow cartel members, oil prices crashed as a result of what then seemed to be a “calculated” move by Riyadh which hoped to put US shale out of business amid a flawed gamble betting that shale breakeven prices were around $60-80. They, however, turned out to be much lower, which coupled with Saudi misreading of the willingness of junk bond investors to keep funding US shale producers, meant that despite a 3 years stretch of low oil prices, US shale emerged stronger than ever before, with the US eventually eclipsing both Saudi Arabia and Russia as the world’s biggest crude oil producer.

Fast forward to March 2020, when Saudi Arabia doubled down in its attempt to crush shale, only to avoid angering long-time ally Donald Trump, the Crown Prince pretended that the latest flood of oil was an oil price war aimed at Moscow not Midland. And this time, unlike 2014, with the benefit of the global economic shutdown resulting from the coronavirus pandemic, the Saudis may have finally lucked out in the ongoing crusade against US oil, because as Bloomberg writes with “negative oil prices, ships dawdling at sea with unwanted cargoes, and traders getting creative about where to stash oil”, the next chapter in the oil crisis is now inevitable: “great swathes of the petroleum industry are about to start shutting down.”

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Oil Price Crash Was Inevitable

Oil Price Crash Was Inevitable

The oil price crash was inevitable. 

To understand why we have to review a bit of history.

In 2013, I began warning of the risk to oil prices due to the ongoing imbalances between global supply and demand. Those warnings fell on deaf ears.

Nobody wanted to pay much attention to the fundamentals at a time when near-zero interest rates were pushing banks, hedge funds, and private equity firms, to chase the “yield” in the energy space. Naturally, with money flooding into the system, companies were forced to drill economically unproductive wells to meet investor demands, which drove supplies higher.

Disclaimer

This week’s #MacroView is a broader commentary on the more general issues of the oil market. However, given this backdrop of what oil prices will likely remain suppressed far longer than most currently imagine, some opportunities exist in the energy space.

We recently added positions in Exxon (XOM), Chevron (CVX), and the SPDR Energy ETF (XLE) to our portfolios. We believed the companies offered significant value before the crisis, and offer even more due to the sell-off in oil.

Based on our discounted cash flow model for XOM and CVX, we think both companies are 25% undervalued. The model assumes very conservative earnings projections for the next three years and a low EPS growth rate after that. In addition to trading at a steep discount, we think their strong balance sheets put these companies in a prime position to purchase sharply discounted energy assets in the months ahead.

These stocks, and the sector, will be volatile for a while, but we intend to add to these positions in the future and potentially hold them for a long time.

Now, for the rest of the story.

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‘We Need Water Before Oil’: Kenyan Communities Scarred by Chinese Oil Exploration

‘We Need Water Before Oil’: Kenyan Communities Scarred by Chinese Oil Exploration

A herder walks a Merti road

The repeated honking of a speeding Tawakul shuttle announces the return of travellers to Merti from distant towns at dusk. It also marks the close of another searing and slow day in this part of northern Kenya.

Idling villagers’ faces are suddenly lit by the prospect of seeing their families as they rush to meet the late arrivals, stirring this sleepy shopping centre into activity.

Wako Ade, a local motorbike taxi rider nods towards a reunited couple as the dusty vehicle empties its passengers at the bus terminal and says with frustration: “We are tired of this life. The bus is our only connection with Kenya through Isiolo town. I think the rest of the country forgot us.”

It wasn’t always like this.

About a decade ago, all eyes were on this weather-beaten and marginalized part of the country. Ade remembers seeing visitors from as far as the capital city, Nairobi, flocking to the town, positioning themselves for prospective business. For good reason: Merti was about to strike oil.

But it never materialised.

Destruction

In 2008, the China Offshore Oil Corporation (CNOOC) announced it had identified 15 wells which showed strong signs of holding oil and gas deposits. But by January 2011, CNOOC had left, leaving the community with damaged land and $2 million worth of shattered hopes.

“There was excitement everywhere. We began preparing for an economic turnaround that has eluded us since Kenya gained independence,” recalled 75-year-old Dika Bidu from Dadach Basa village, which sits 12km away from CNOOC’s Bhogal rig.

As a village decision maker, the government told Bidu of the new health facilities, schools, piped water and tarmac roads that would be built to improve the lives of the people there.

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

Overcapacity / Oversupply Everywhere: Massive Deflation Ahead

Overcapacity / Oversupply Everywhere: Massive Deflation Ahead

The price of a great many assets will crash, out of proportion to the decline in demand. 

Oil is the poster child of the forces driving massive deflation: overcapacity / oversupply and a collapse in demand. Overcapacity / oversupply and a collapse in demand are not limited to the crude oil market; rather, they are the dominant realities in the global economy.

Yes, there are shortages in a few high-demand areas such as PPE (personal protective equipment), but across the entire spectrum of global supply and demand, there is nothing but a vast sea of overcapacity / oversupply and a systemic decline in demand as far as the eye can see.

Here’s a partial list of commodities that are in Overcapacity / oversupply:

1. Overvalued assets

2. Overpriced income streams (as income craters, so will the asset generating the income)

3. Labor: low-skill everywhere, high-skill in sectors experiencing systemic collapse in demand

4. AirBnB and other vacation rental properties

5. Overpriced flats, condos and houses

6. Overpriced rental apartments

7. Overpriced commercial office space

8. Overpriced retail space

9. Overpriced used vehicles

10. Overpriced collectibles

I think you get the idea.

Should China restart its export factories, then almost everything being manufactured will immediately be in oversupply, as the global export sector was plagued with mass overcapacity long before the Covid-19 pandemic crushed demand.

Incomes will crater as revenues and profits crash, small businesses close their doors, never to re-open, local governments tighten spending, and whatever competition still exists will relentlessly push the price of labor, goods and services lower.

Globalization has generated hyper-specialization in local and regional economies, stripping them of resilience. Fully exposed to the demand flows of a globalized class of consumers with surplus discretionary income, regions specialized in tourism, manufacturing, commodity mining, etc.

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Slash Oil Output Or Else! Senate Bill Would Remove US Troops From Saudi Arabia In 30 Days

Slash Oil Output Or Else! Senate Bill Would Remove US Troops From Saudi Arabia In 30 Days

A new bill has been introduced in the Senate which if passed would punish Saudi Arabia over failure to cut oil production by removing all US troops from the kingdom within 30 days

Sen. Bill Cassidy (R-LA) introduced it after Louisiana and other states have been impacted by the ongoing OPEC+ crisis and price war between Russia and Saudi Arabia. As of Friday OPEC+ appears to be closing in on a deal which would see a production cut of 10 million barrels a day, which S&P Global Platts still warned “isn’t enough to plug the 15- to 20-million b/d near-term imbalance in the marketplace and avoid tank tops in May.”

Sen. Cassidy’s bill would also impose tariffs on all Saudi oil imports within ten days of enactment, also aiming to ensure prices would not dip to below $40 a barrel.

American forces arrive at Prince Sultan Air Base in Saudi Arabia in June 2019, via US Air Force.

“The extra oil from Saudi Arabia, the world’s largest oil exporter, has made it impossible for energy companies in the United States, the world’s top oil and gas producer, to compete, Cassidy said,” as cited in Reuters.

The Republican senator noted of the long-term close US-Saudi partnership: “Withdrawing troops placed to protect others recognizes that friendship and support is a two-way street.”

“Our nation’s economy, national security and the economic welfare of families across Louisiana is threatened by oil being dumped on the world market at below-production costs. The US spends billions protecting other oil producing countries and their ability to safely transport oil around the world. Now is the time to protect ourselves. Tariffs will restore fair pricing,” said Cassidy

The bill would also ensure defense funds cannot go to maintaining American troops on Saudi soil. 

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

In Late Thriller, OPEC Production Cut Deal Collapses After Mexico Gives Crown Prince The Finger

In Late Thriller, OPEC Production Cut Deal Collapses After Mexico Gives Crown Prince The Finger

Earlier today we reported that following a dramatic objection to the OPEC+ production cut which was agreed upon by Russia and Saudi Arabia (but few other OPEC members), Mexico had initially threatened to quit OPEC as it refused to comply with the imposed 23% cut forced on all members, but less than an hour later the southern US neighbor reportedly had changed its mind as Reuters reported that Mexico had in fact agreed to the OPEC+ production cut deal after all.

Well, scratch all that because it appears the Reuters “news” was fake, sourced from some conflicted Saudi minister who wanted to put Mexico in a position where it had no choice but to accept the reality that had been imposed upon it. Unfortunately for the Saudis, this “plan” was laughable and late on Thursday, Mexico logged off the OPEC+ alliance’s videoconference emergency meeting after nine hours of talks Thursday, without agreeing to the landmark 10 million b/d production cut accord that members were hoping could stem a bruising rout in oil prices caused by the coronavirus pandemic and send the price of oil surging, S&P Global Platts reported, whose sources we can now confirm are far more credible than those of Reuters.

The rest of the coalition, led by Saudi Arabia and Russia, were in discussions over how to proceed, with many ministers angry over the potential blow-up of the deal.  The coalition will likely try to convince Mexico again Friday at a G20 energy ministerial that was originally scheduled to seek the participation of the US, Canada, Brazil and other key producers outside of OPEC+ to join its efforts.

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Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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