On February 7th, 2012, business journalist Joe Nocera published in the Op-Ed pages of The New York Times an opinion piece titled “Poisoned Politics of Keystone XL”. The argument moves along the lines that basically given the Obama administration’s failure to approve the Keystone XL pipeline (a politically and environmentally charged decision in an election year), the Canadian government has been actively seeking alternative buyers for the oil extracted from their tar sands, and namely seeking actively buyers in China through a recent trade mission headed by the Canadian Prime Minister.
The Keystone XL pipeline was supposed to pour oil from Alberta, Canada, to the US Gulf where it could be processed and consumed in the US. The pipeline project was rejected on concerns about its impact per se on the environment, but also it seems it was rejected under an orchestrated effort by environmental groups, like the Sierra Club, that perceive oil from tar sands to be so energy-demanding and environment-polluting in its production as to intend to choke its production (and sale) at any point of the chain from investment to production to consumption.
As apolitical as the Captain wishes to be, he could not resist elaborating further on the impact political decisions can have on the maritime industry. Canada is an extremely stable country and a staunch US ally, and they traditionally sell most of their mineral resources to the US. No doubt, it great makes economic sense; as long as you are not in international flag shipping, of course! (It’s good for the Great Lakes shipping, though!) Oil from Alberta could be transported via continental pipeline, very economically once the pipeline was installed, to the Gulf of Mexico without ever touching a tanker. Feel bad for the poor independent tanker owners!
Enter now to the picture a political/environmental variable, and all of a sudden, there is a new equation with new set of unknowns. If Chinese prove to be the buyers for the oil from the Canadian tar sands, obviously tankers will be involved in transporting oil from the west coast of the North American Continent to China. Obviously, it’s great news for shipping and the tanker owners. Almost like by divine doctrine a new market/trade automatically is created and ton-mile definitely goes up. It’s still premature to figure out what type of tankers will be benefit from such trade, but the Captain may hazard to guess that oil could be transported from Middle East to west coast US / Far East with VLCC or suezmax tankers, which then would proceed in ballast condition to Canada to load oil from tar sands for China discharge and then proceed in ballast to Middle East to load anew. Clearly such cycle reduces the ‘ballast leg’ of the trip to less than 40%.
Again, it’s still very premature to perceive the above scenario as a catalyst or remotely a panacea for the current slump in the tanker markets. For instance, the pipeline may still be approved next year once presidential elections in the US are out of the picture after November 2012. The point the Captain wishes to emphasize is that in shipping, with its extreme volatility, often variables and shocks outside the industry can make a great difference. After all, all can model a predictable trade and the tonnage required when all is moving along like a Swiss clock. But when there are shifts due to political concerns, environmental considerations, geo-political events, changes in public opinion and societal trends, sovereign and governmental reshufflings, etc, then there can be a game changer! For shipping, as international and crucial as it is an industry, it is but another cog on the tableau of international trade and re-allocation of power.
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