Cheap oil is taking shipping routes back to the 1800s
bbc.com
bbc.com
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
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.
According to the link below between 2008-2013 the world capesize fleet increased from 817 ships to 1505 ships.
Thanks for the context. Any way we could compare the TEUs going each way? Unlikely the 400 ships that went around the Cape are 44 times larger than the 17 483 that went through the Canal (17483 / (4 * 100)), but I'm curious by how much the gap narrows.
There's some resdiual value accruing to the public from getting goods faster, but urgent goods aren't generally sent by sea.
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.
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.
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 , 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?
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.
There are alternatives to both cases. They are more expensive.
which currently goes to Egypt
Either the current scheme contributes less to public value than the previous privatized scheme, or it doesn't.
Is additional extortion by local crews better for public value than higher fees by foreign owners?
Figuring that out requires making a political judgement, rather than leaving the discussion on the abstract concept of 'pure rent extraction'.
(As the canal is artificial, and Egypt does maintain and develop the canal, and creates new wealth by providing an alternative transportation connection, I really don't see how it is 'pure'.)
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.
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.
I'm with you on this. Especially because of the fuel these ships use[1]:
bunker oil is literally the bottom of the barrel;
in oil distilling, the only things more dense
than bunker fuel are carbon black feedstock and
bituminous residue which is used for paving
roads (asphalt) and sealing roofs
Yes, they're burning the thickest, nastiest shit that will still actually burn, but they're doing it about as well as can be done.
In fact I recently saw an article [1] talking about the Soo Locks in the Great Lakes and how devastating it would be if they shut down because there would be no way that much cargo is getting sent over land by trucks or trains. So much that the US government is afraid the national economy would crash if these "no one has ever heard of them" locks stopped for any amount of time.
Sure ships burn nasty shit and spew a ton of pollutants, but compared to other forms of transportation, they's so vastly superior in almost every way.
[1] http://www.freep.com/story/news/politics/2016/03/03/us-michi...
I wonder how much slack there is in steel consumption. 2/3 of US steel production is already from recycled material, I can see the volume of recycled material increasing with higher scrap prices (so steel production would be able to stay at 65+ percent of current levels), and low value producers would be the first ones to shut down (so probably consumer products like low quality chain or fencing, things that people can pretty well do without). I think it's an easy strategic decision to build a second larger lock, but the probability of catastrophe seems overblown.
https://en.wikipedia.org/wiki/Environmental_impact_of_shippi... indicates that up to 4% of climate change gasses come from ships.
https://en.wikipedia.org/wiki/Environmental_impact_of_transp... has a breakdown of CO2 per ton-mile. It shows that ships are the most efficient followed by zeppelins and trucking is the source of 20% of the UK's carbon emissions.
I think that the Suez channel has no recent upgrades, but the Panama channel is currently being expanded, and the expansion cost a los of money and a lot of CO2. And there are some projects to build a channel in Nicaragua ...
It's hard to find reliable numbers for the weight of a TEU, but I'm seeing references to a "maximum gross mass" of 21 and change metric tons, and an empty weight of 2.4 mt. Let's make the math easy and suppose each of the 15k TEUs on a single ship are filled to half capacity, netting a little under 140000 mt.
The "long way" is some 3500 extra miles, which, at .04kg/ton-mile, is 1.96 million kg, or 19.6 thousand (metric) tons of CO₂. Per ship. Per trip. And that's just the extra emissions for going the "long way".
For sake of comparison, the notional "average" car emits about 4 metric tons of CO₂ per year.
I have no idea what the maintenance costs of the canals are in terms of emissions, but they'd have to be amortized across every ship that traverses them. Per another poster, almost 17.5k ships sailed through the Suez Canal in 2015, so you're looking, with very back-of-the-envelope math at a little under 20000 metric tons versus 1/17500th of the annual maintenance emissions for a ~200km long canal. For a single ship's passage through the canal.
The construction costs of a canal, on the other hand, have to be amortized across every ship that has ever traversed it. The fractions get ludicrously small there (though they are, admittedly, of a rather larger number).
Without knowing the actual emissions numbers for construction or maintenance, I can't be sure, but I'm going to go ahead and predict a clear winner...
EDIT: Corrected some bad inputs to my math. Please, someone double-check my calculations. It is, after all, the end of the day on a Friday. My brain may be a smidge soft...
It's far from obvious that CO2 emissions from excavating millions of tons of sand and earth would be dwarfed by the savings in the transit emissions of high-tonnage freight ships, which, unless I'm much mistaken, represent by far the most efficient means of transportation humanity has ever come up with.
OTOH, I assume there weren't many bulldozers in the mid 19th-century (I actually have no idea how suez was built). But, it's not really reasonable to just throw human power at something and declare it CO2-friendly.
And here's the bottom line. For better or for worse, externalities don't actually count. You can piss in the pool. People banding together and deciding otherwise - when their ancestors have gotten most of the pissing their hemisphere will ever need to do out of the way, and the rest of the world is still clawing their way out of abject poverty - is... maybe well-intentioned, but don't hold your breath. Poverty is really fucking awful. People on their way out of it will not tolerate if their governments try to put on the brakes because they watched an Al Gore movie. It's just not going to happen.
The good news is that the consequences likely aren't going to be too severe. We're not facing extinction (that many other species are is irrelevant, that ship sailed a long time ago). Florida goes away, sure. Indonesia loses a lot of it's land area. It's not going to happen overnight, people are not going to drown. They will move to higher ground. And at the end of it all, you have a world population that's not poor. That's a good trade, and I have every confidence in humanity's ability to manage whatever other consequences follow, we're pretty damn good at making tough decisions once we have something to lose. But right now, that's just not the case, except in the developed world.
According to numbers I found, an "average" bulldozer burns 4 gallons of diesel an hour, yielding an annual emission rate of around 66 tons. Let's assume for sake of easy math that other earthmoving equipment has a comparable enough emission rate that we can just call it the same. If it takes 10000 pieces of earthmoving equipment 10 years to dig a canal (a complete wild-assed guess, admittedly), that works out to 6.6 million tons of CO₂.
Per my previous comment, we'd established a long-way extra emissions rate of ~20000 tons (19.6k metric tons is 19.9 and small change thousand long tons; call it 20k for easy math) per ship, per trip.
Remember that, to calculate whether the canal is a "clear winner" in terms of emissions, we have to compare the emissions saved by ships using the canal, not the extra burned by ships that don't. At 17 and a half thousand ships in 2015, saving 20000 tons of emissions each, that's 350 million tons in 2015 alone — over fifty times our estimate of the emissions from constructing the canal.
Yes, it's WAG envelope math, but even if we up the estimate by an order of magnitude — 100000 pieces of equipment over 10 years, or 10000 pieces over 100 years, or however you want to factor it out — that's still a five-fold win, in just one year. On a canal that's been in operation for some 150 years.
So, yeah. Unless someone can offer better numbers than I have, I'm going to run with "clear winner", thanks.
All that aside, I'm not even going to attempt to rebut to your naïve optimism over technology and good ol' Team Humanity's problem-solving spirit coming along to save the day, or your blasé "Extinctions, shmextinctions" tone. They're, IMO, premised on beliefs so divergent from reality, they don't even warrant the effort.
I think that your confidence is a little too high on this one. It's very possible to paint yourself into a corner that no amount of magical economics "a solution to any problem will present itself if the price is right" thinking can get you out of. You sound like a politician making appeals of "smart people will work out the details of the impossible promises I'm making."
That ship sails only when every other species on Earth is extinct. And humans would be extinct long before that happens.
Biodiversity isn't a "nice to have." It's essential for our long-term survival on Earth (or any other planet/space colony, for that matter).
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"
One does not follow from the other.
In the case of the Suez Canal, though, it wasn't finished in 1869 for the income it could deliver in 2016, since discounted at 7%, even the headline figure of $350000 would've been worth in 1869 ~$17. (Which is just as well for the French investors in 1869, since they and the later UK investors would eventually be expropriated by Nasser in 1956 and would see nothing of any revenue after that.)
Same thing applies here.
The failure of economics, that you should look at is in the price of oil. The are polluting the atmosphere and damaging the climate and not reimbursing anyone for the damage they are causing.
Give me a break with this sanctimonious drivel. Ship owners don't drive around the oceans aimlessly for fun. They are facilitating global trade. The computer you wrote your post on was probably delivered via cargo ship. Ditto half the stuff in your life that you obviously take for granted. So I hate to break this to you, but you are just as responsible for "polluting the atmosphere" and "damaging the climate" as the ship owner, because without you that ship has no need to sail.
Please let me know how you plan on reimbursing me. I accept Paypal.
Granted that we have collective responsibility for human activity, then only by collective action can we assume stewardship of our responsibilities. The basis of collective action is first consensus, which is achieved through communication. Therefore the grandparent is taking a perfectly rational action in communicating their distaste for the system.
I feel second-hand embarrassment for your combative and flimsy dismissal.
Really great that economics, innovation and competition have driven down the cost of shipping (larger containerized ships, better fuel efficiency, smaller crews / labor component) and oil extraction down so low that there's now a cheaper option than that imposed by the canal folks. It's not merely an expensive toll that has brought this situation about, it's also cheap shipping.
It has the flop sweat of desperation to it.
The more that happens in That Region, it just makes the people who live there harken back to the Caliphate under the Ottoman Empire only even moreso.
Is this even a significant phenomenon? The article mentions 100 ships going the long way but wikipedia says the Suez averages 46 ships per day, or more than 16,500 per year.
[0] The definition of efficient in economics is roughly "It's not possible to make anyone better off without making someone else worse off".
That's a terrible definition, because a lot of the economy is not a zero sum game, and it's hard enough as it is to break people out of that kind of thinking.
That's somewhere between 1 and 1.5 ships a day, which is between 2-3% of daily entrance figures. That's certainly not nothing.
- 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 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.
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.
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.
houses cheap = bad
That's the narrative.