
Cheap oil is taking shipping routes back to the 1800s - altstar
http://www.bbc.com/future/story/20160303-cheap-oil-is-taking-shipping-routes-back-to-the-1800s
======
rgbrenner
100 ships have taken a route around south africa during the last quarter of
2015.

For comparison, 17483 ships used the Suez Canal last year (about 1450/month).
And the number of ships increased by 335 in 2015 (compared to 2014).
[http://www.suezcanal.gov.eg/TRstatHistory.aspx?reportId=2](http://www.suezcanal.gov.eg/TRstatHistory.aspx?reportId=2)

Edit: in fact, clicking through the data on that page.. it looks like 2015 was
a record year (by tonnage) for the Suez.. along with record toll collections.
They did handle more, but smaller, ships in 2008.. but that could just be
caused by the trend in the industry toward larger ships. More cargo passed
through the Suez than any year previous.

~~~
twelvechairs
Surely it also has to do with there being simply more ships being built which
are too big to fit in the suez canal ('Capesize' in shipping parlance)?

According to the link below between 2008-2013 the world capesize fleet
increased from 817 ships to 1505 ships.

[https://shippingresearch.wordpress.com/tag/capesize/](https://shippingresearch.wordpress.com/tag/capesize/)

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yason
In other words, the canal pricing is just about right. As a canal owner you
will want some of the ships to take a detour because if all ships used your
canal you wouldn't necessarily know if you're actually charging too little. In
that case you would start raising prices until some ships, presumably with
less urgent cargo, begin to drop out.

~~~
barrkel
Yes; but make no mistake, it's pure rent extraction. The canal has a
substantial public value (to the degree that improving the international
economy creates public value) but by setting a price that is only just below
the cost of avoid the canal, almost all of the potential public value is
captured by the people who control the canal.

There's some resdiual value accruing to the public from getting goods faster,
but urgent goods aren't generally sent by sea.

~~~
dalke
> it's pure rent extraction

And this is bad because ... ? Is there a more reasonable alternative for how
to set the fee? Would that shift in value, which currently goes to Egypt,
instead go to the public? And if so, how? Or will it go to the owners of the
shipping companies?

Perhaps there should be some sort of Suez Canal authority, which follows a
neutrality convention in regards to the national origin and type of shipping?
In that way, it wouldn't have some of the crises which might occur with pure
rent extraction. For example, a country might invade if its ships aren't
allowed through, or face exorbitant fees compared to other countries.

~~~
barrkel
Capitalism is useful way to organize certain social activity because it uses
prices to coordinate production and consumption, and uses profit to encourage
competition. Competition reduces profits, and the surplus goes to the
consumer.

Capitalism isn't a naturally right or better thing in and of itself; its end
effects are what matter. It has bad sides too; for example, it's easy to fund
immoral practices when the only input you need to make is decide whether to
purchase something or not. It's easy to make a purchase decision, and not
worry about the effect that has on prices and incentives further down the
line, that your purchase may be inflicting misery on other people.

So, capitalism: good sides and bad sides. Overall though, it's mostly good.
But break some of the underlying assumptions, and the good sides may not be
enough to outweigh the bad sides.

Apply this to the situation at hand. How does one compete with a canal like
the Suez? Without some major technology innovation, it's either build another
canal or go the long way around. The profit isn't actually encouraging much
competition here, and probably won't for a few more decades, until we have
ships powered by other forms of energy, probably. So we (the consumer) are not
getting the benefit of a capitalistic approach to this problem. So market
effects are probably not the right way to price this thing - they're not
economically or socially efficient.

This kind of rent extraction isn't good for countries like Egypt either. Like
oil, getting a big dose of rent without needing much input means the money
goes in at the top, and only a little bit trickles down. It's a great
situation for a corrupt government. It can fund authoritarianism, cronyism,
and keep a population underfoot for decades to come.

Like Egypt, I guess.

~~~
dalke
> How does one compete with a canal like the Suez?

Aircraft, railroads, slow- and superslow steaming, and supertankers come to
mind. The latter two are variants of "go the long way around". The high-speed
railway to Eilat is an example of the second form of competition.

> The profit isn't actually encouraging much competition here

I don't understand. Are you complaining that the profit isn't enough, because
it doesn't encourage enough competition? I thought you were arguing that the
profit was too high.

> This kind of rent extraction isn't good for countries like Egypt either

This sounds like the language of an ex-colonial power tsk-tsking at one of its
ex-colonies.

Are your proposed alternatives to the existing situation also is this vein?
Are you arguing against nationalization, and that it would be better for Egypt
if the Suez Canal Authority were re-privatized and/or put under more foreign
control, like the Suez Canal Company was? How would that help "the public"?

I'll be a bit more specific - what does "like Egypt" mean? Are you making an
argument about economics, or an argument about your political preferences?

We need only compare the UK and Norway to see how a difference in politics in
how to handle the North Sea oil has a big difference in economic outcomes.
Egypt's politics are far more different than either of those. Your complaint
sounds more like you want to deny revenue to governments you don't like,
rather than an indication that the rent seeking is a causative agent. (Surely
US military support of the Egyptian government doesn't help, as does ex-
colonianism, so it's not simple to deconvolve the different factors.)

So let's lift it out of recent politics.

Was Denmark "like Egypt" when Eric of Pomerania imposed the Sound Dues on
Øresund traffic? "By this he secured a large stable income for his kingdom
that made it relatively rich and which made the town of Elsinore flowering."
says
[https://en.wikipedia.org/wiki/Eric_of_Pomerania](https://en.wikipedia.org/wiki/Eric_of_Pomerania)
, to the displeasure of the Hanseatic League. By the 1800s it was clearly a
bad idea, but was it a bad idea even in 1500?

~~~
barrkel
_Are you complaining that the profit isn 't enough_

If anything, I'm arguing that the canal is a monopoly.

 _Are your proposed alternatives_

I haven't proposed any alternatives.

 _sounds like the language of an ex-colonial power tsk-tsking at one of its
ex-colonies_

 _you want to deny revenue to governments you don 't like_

You're projecting some political ideology onto me here, and missing the mark,
amusingly.

I don't think this conversation is either productive or interesting.

~~~
dalke
Egypt has a monopoly over the Suez in the same way that the US has a monopoly
on connections between Mexico and Canada.

There are alternatives to both cases. They are more expensive.

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gleenn
Really sad that economics makes a bunch of massive ships travel thousands of
miles out of their way, burning tons of extra fuel, just because a bunch of
guys charge way too much to drive through a canal that was built a long time
ago.

~~~
mathattack
Let's put externalities (CO2, etc) aside...

The only reason that things like canals get built is because people can charge
money to recoup their costs. Many infrastructure projects get built and don't
earn their capital investment back. (One might argue most) The reason people
still build them is a few are enormously profitable.

Once "going the long way" gets significantly cheaper, the folks in charge of
the canal will lower their price so that equilibrium still means going through
them.

~~~
rosser
No, let's not put externalities aside. That's the whole problem with
externalities: putting them aside.

However negligible the contribution to global CO₂ concentrations these 100-odd
ships over the last couple of quarters have made, they still made it, and it
was done to the world _I have to live in_ without consulting anyone or
anything but their owner's own bottom line.

That's why there needs to be something like a carbon tax (however poorly
designed so many of the proposals thus far have been). Because those
externalized costs _aren 't free_, and they should be borne by the people who
impose them on everyone else.

There is absolutely no penalty for pissing in the pool the rest of us happen
to be swimming in, and I call bullshit on that.

EDIT: And the canal wasn't built so its owners could charge for the privilege
of using it. It was built because it took weeks off transit times. Charging
for its use is _how it was paid for_ , not _why it was built_. That is some
serious cart-before-the-horse action, right there.

~~~
moistgorilla
>However negligible the contribution to global CO₂ concentrations these
100-odd ships over the last couple of quarters have made, they still made it,
and it was done to the world I have to live in without consulting anyone or
anything but their owner's own bottom line.

You are consulted every time you purchase something created via the global
economy. We had our chance to say something and we said "We want iphones"

~~~
aninhumer
It's completely unreasonable to expect consumers to research the entire supply
chains of everything they purchase in order to factor in all their social
costs.

~~~
piceas
It would be awesome if someone did it on their behalf though. I would love a
metric that let me evaluate the energy, water, pesticide, units of child
labour needed to get a product to the store/my door just as I can compare the
fat and sugar content of my lunch or the efficiency of a new car if I were to
tape all the sharp edges and drive carefully.

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jssmith
There is a lot more substantive detail in one of the linked articles:
[http://gcaptain.com/canals-feel-ripples-of-container-
shippin...](http://gcaptain.com/canals-feel-ripples-of-container-shipping-
crisis-as-vessels-go-the-long-way-round/)

\- Ships are going the long way on "back haul", from Europe to Asia, not the
other way around.

\- Overcapacity is a significant problem for the shipping industry (see,
[http://www.bloomberg.com/quote/BDIY:IND](http://www.bloomberg.com/quote/BDIY:IND)
over the last year to get a sense). This is a critical factor in making round-
about trips economically desirable.

\- Techniques such as "slow steaming" or "super slow-steaming" keep fuel costs
in check.

~~~
iofj
Because the world economy is currently overproducing (more supply than demand)
to prevent prices from falling, these ships (esp. oil tankers) are being
"transformed" into storage. Either by taking a longer path, or by outright
idling them in front of harbours.

Since nobody wants to pare back production (because the last one to reduce
production will retain marketshare and revenue and jobs and ...) this is
providing a short intermission where prices don't have to drop.

This extra capacity that slower shipping provides is filling up fast, it will
be full in less than 2-4 months (measured starting in december), and the next
leg down for the global economy will begin.

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xenadu02
Pro tip: cheap oil won't last forever. There will be future crashes in prices
but the long-term trend is up.

------
GreaterFool
That can't be good for the environment. I recall reading that those big ships
pollute like crazy. After all when you're on international waters (1) who
cares and (2) who's going to do anything about it?

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vacri
Given how offended you are by shipping emissions, I really hope you don't use
any products that require shipping - if you're not in China or South East
Asia, I hope you avoid the cheap clothing and electronics that are made there,
for example.

The Suez Canal cuts just one part of those shipping trips if you're in Europe,
and if you're in the Americas, there is nothing to shorten the trip between
the world's manufacturing hub and the west coast - indeed, you have to travel
over an ocean that literally takes up half the globe.

So, to use your own argument from above, I hope that you only use locally-
sourced equipment, clothing, and food, because I have to live in this world
and I doubt you consulted anyone or anything about the shipping requirements
for your stuff. I hope you're paying for more expensive locally-produced
goods, because if you're getting the cheap imports, you're only caring about
your own bottom line.

~~~
rosser
Oh, for fuck's sake. Way to straw-man my position. I'm calling out the waste
in taking the long way around Africa just to save a few bucks, not saying
"DOWN WITH THE GLOBAL SHIPPING SYSTEM, MAN!"

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jamilaliahmed
I don't think so, its a good era now that we have cheap oil available.

~~~
tosseraccount
oil cheap = good

houses cheap = bad

That's the narrative.

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eternalban
Costs less than bottled water. Fuels empires' navies and industry. "It is
market driven". (discuss)

