Fuel efficiency has become one of the hottest topics in shipping. Any new design now comes equipped with a whole host of ‘Eco’ features to reduce consumption and emissions. But shipping is not alone in this shift. The car drivers of the US form one of the largest parts of global oil demand (12%) and they have also been reacting to recession and high oil prices by reducing fuel consumption. Yet, paradoxically, this has turned out to be a net positive for product tankers
Motorists in North America accounted for 10.4m bpd of oil demand in 2012, forming the lion’s share of the 23.7m bpd of overall North American oil demand. This has long made the US the largest single component of global oil demand. But since a peak in summer 2007, the growth in the amount of driving being done by Americans has ceased: the latest figures are around 10 billion miles per month below the peak, and the impact of the often discussed sea-sonal upturn during the “driving season” (US holidaying promotes long-distance driving) has been weak.
Circling the Station-Wagons
US driving patterns have been interrupted before: in the early 1990s, in 1978-9 and 1973-4, as the graph shows. That is to say, during the other periods in the last 40 years when shocks to the US economy have dampened consumer demand for car usage. But post-2009, this has been compounded by a significant improvement in new vehicle fuel economy – just like the one now on its way in new ships.
All this is problematic for the major import trades into the USA, both in terms of direct gasoline imports, and crude imports for refining. Transatlantic gasoline trade remains a mainstay of MR requirement. However, demand is less than it was: in 2008 the US imported 0.63m bpd of products from Northern Europe, but this was down to 0.40m bpd in 2012. At the same time, crude imports by the US have also been declining steadily.
Actually a Good Thing?
So, is this an exclusively negative story for products tankers? Not necessarily (though lower US crude imports certainly don’t help their larger cousins). The shale oil boom and weak local demand have generated strong growth in US product exports. Most of this is gasoil, with much being exported to Europe, allowing triangulation, or to South America (up 30% y-o-y in 2012). US gasoline exports to South America have also grown: by 69% in 2010 and 41% in 2011. At 0.62m bpd of total products trade, US-South America is now a significant trade flow exceeding the transatlantic gasoline trade.
Moreover, the distances from the US Gulf to the west and east coasts of South America are more than that from Rotterdam to New York: by around 25% and 60% respectively. So, the more parsimonious attitude of US drivers towards fuel consumption is actually producing a net tonne-mile boost for product tankers – the drop in demand at least generating some good news. Have a nice day.