Last month, with little publicity, a significant shipment of oil took place that could foreshadow a major change in the movement of energy around the world. Under a special arrangement a license was granted in the US for a single shipment of crude oil from Texas to South Korea and a vessel laden with light Texas crude set sail.
Why does this matter? It is perhaps a signal that the ban on crude oil exports, which has been in place since 1979 and the second “oil shock”, is about to be relaxed. It is also just one of the several indicators of the potential for the US to become a major oil exporter, with the US now overtaking Russia in oil and gas production. It is important to note the perhaps unexpected stability in oil price this summer, despite the worrying regional instability in the middle east which, in normal circumstances, might have caused a “spike” in gasoline prices.
There are obvious connections here. This untightening of the US energy tap has been clearly caused by the entry into production of shale gas, which has come on stream with unexpected speed. The US, which has already record amounts of oil in storage, is now producing nearly 8.5 million barrels per day, and while it remains the world’s biggest consumer, has an estimated potential to export the best part of a million barrels per day, if crude exports are indeed to be permitted.
The US government has reacted to this apparent glut of energy by releasing some 5m barrels of oil from storage for sale in domestic markets. There can never be complete confidence about US oil politics, but the smart money is on crude exports being started, sooner, rather than later.
What other signs are there? Observers have remarked on the number of applications for LNG terminals which have been “stood on their heads”, with the original applications for import terminals being changed into facilities for energy export.
Nothing to do with energy is uncomplicated, and the implications of falling energy prices, driven by US production, are considerable, not least for the offshore industry, where the drive for exploration in deeper waters and more extreme weather, and in more difficult places may well moderate.
Who knows where all this oil will go to and in what directions? Even this is becoming a guessing game, with the effects of the “new” Panama Canal due to open next year throwing all shipping’s tonne-mile calculations into confusion. Will oil go east or west, north or south through the new waterway? It might be significant that SIGGTO has published advice about using the Panama Canal for LNG carrier transits, a case perhaps of being well prepared! Plenty of “known unknowns” here as the shipping industry reviews its options in the months and years ahead!
Author: The Watchkeeper Source: BIMCO