Oil Flows

A rising tide of American oil could lift all the world’s ships

November 15, 2012
Obsession
Energy Shocks
November 15, 2012

Recent projections that the US could become the world’s biggest oil producer much sooner than anyone expected have got American politicians and investors excited about the potential boost to the US economy. Turns out it may be a boon for the global shipping industry too.

Ioannis Lazaridis, CEO of international shipper Capital Product Partners, explained on a conference call two weeks ago (webcast) why he was excited about projections from the International Energy Industry (IEA) that showed the US to be an up-and-coming player in global energy markets.

A recent oil market outlook report by the IEA confirm the favorable fundamentals of the product tanker trade over the next five years, as is suggested that the change of the U.S. to a net products exporter with Mexico and other South American countries increasingly turning to imports to satisfy the growing product demand. The shutdown of refineries in Europe and the growing European middle vessel deficit, as well as the dislocation of refinery capacities all bode well for an expanding product trade both in terms of volume but also in terms of average voyage distance.

And that was before this week’s report from the IEA saying that the US could be the world’s biggest gas and oil producer by 2015 and 2017, respectively. Admittedly, the US and Canada (which is also part of the boom in energy production from previously hard-to-reach oil deposits such as shale) would need a great deal of excess energy to begin to consider shipping it elsewhere. The US would have to repeal legislation that prohibits it from exporting oil to countries outside Canada. Finally, drilling efforts would have to overcome significant challenges from environmentalists who might curtail such projects. But if the IEA’s predictions are correct, and such exports take off, then that’s cause for celebration for shippers, who have been fighting to make ends meet in a world with too many ships and too little trade.

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