OIL CARGO PREFERENCE LEGISLATION:
ITS POTENTIAL IMPACT ON NEW ENGLAND
Joseph L. Barker
Working
Paper No. MIT-EL-77-012WP
May 1977
S
INTRODUCTION
On January 6, 1977 Bill HR(1037), most commonly referred to as
the Oil Cargo Preference Bill or the Energy Transportation Security
Act of 1977, was introduced to the U.S. House of Representatives.
The bill would initially require that the Secretary of Commerce insure
that 20% of the gross tonnage of all oil imports transported in bulk
on ocean vessels be carried on U.S. flag vessels.
the quantity would increase to 25%.
After June 30, 1978
A further increase to 30% would
be required after June 30, 1980.
Under the bill the term "oil" includes:
crude oil and the following
products: unfinished fuels, gasoline, kerosene, aviation fuels, naptha,
cracking stocks, distillate heating oil, diesel oil, and residual oils.
Currently, the United States is transporting approximately 4% of
its imported oil on its own flagships.
This study has been undertaken
to determine an estimate of the short term price impact of oil cargo
preference legislation on the New England consumer and the short term
economic impact on New England as a region that is heavily dependent
on foreign oil.
[90% of all energy used in the region is petroleum
based and 70% of the petroleum and petroleum products are imported].
Other similar legislation has been concurrently proposed in Congress
that would provide for a wide range of revisions in current policy and
regulations governing the shipping and transportation of oil and other
commodities into the United States.3
-2-
Some of the provisions of this additional legislation would 1).
require retrofitting of existing tankers to meet stricter safety and
operating standards;
2). require all vessels using U.S. ports to have
double hulls and bottoms;
3). require minimum vessel construction,
operating and equipment standards, as well as require personnel training
standards to be applicable to foreign and U.S. flagships using U.S.
ports; and
4). provide for intense, continuous monitoring of shipping
within the 200 - mile jurisdictional limit established off U.S. coastlines.4
To accomplish the analysis of HR(1037) and its potential effects,
this study will provide
1). estimated probable price increases (per
barrel) that could result and
2). a short-term economic impact analysis
by sector and state reflecting the various possible price increases.
The long-term implications of oil cargo preference are not analyzed
here, rather, the intent of this study is to offer timely and useful
impact data to the consumer, the policymaker, and the other components
that would be affected by this legislation.
Some of the longer-term
considerations are, however, discussed in Section V.
-3-
SECTION I - PRICE DETERMINATION AND ANALYSIS
Two facts are recognized
in the general
scope of this analysis.
The first is that shipping costs are and have historically been
appreciably greater for U.S. tankers than for equivalent foreign
vessels.
The reasons for these higher costs are due primarily to
higher component costs (e.g., operating costs, personnel costs,
building and maintenance costs, investment costs).5
Appendix A
and C provide examples of more specific descriptions of operating
cost determination.
Accordingly, the second fact is that any increase in U.S.
shipping involvement in oil imports would correspondingly increase
the per-barrel cost of the oil shipped on U.S. ships, a price increase
that would
be relatively
distributed
to all oil imported
to the
United States.
Currently, the average price differential between a barrel of
oil shipped via an American vessel and a foreign tanker is approximately
$2.00/bbl.6
This figure is derived from single voyage charter rates
(or spot rates) and reflects the average differential of rates on oil
shipped from the Middle East as well as voyages from the Caribbean to
the U.S. east coast.
The estimation of the price differential is key
to the analysis of the impact such legislation may have and further serves
as a mechanism for analyzing marginal price impact on the energy user.
This study proposes four different scenarios and correspondingly
four different price differentials that we feel could materialize if
this legislation is enacted and implemented.
-4-
The first differential price increase used here has been suggested
by the American Petroleum Institute in its survey and analysis of cargo
preference legislation.7
The API study relies heavily on projected
shipping and shipbuilding data to estimate costs for importing oil
during the period covered by the legislation (1978-1990).
Appendix B
demonstrates the API approach and provides their cost and projected
cost data through 1990.
Essentially, the API study compares the cost
for U.S. ships and shipbuilding to costs for foreign ships and shipbuilding and calculated import costs that were then applied to all
foreign-source oil imported to derive
a $/barrel cost.
The API analysis
projects an increased price differential by 1978 of $1.11/bbl. on oil
imported solely on U.S. ships.
Under the proposed shipping percentage
of 22.5%, this estimate would average 25t/bbl. on all imported oil.8
The second price differential used in this study is provided by
the data submitted by the American Maritime Association.
The calculations
cost determination methods used by the AMA are essentially the same as
the API calculations, which consider capital costs, fixed costs, operating
and estimated annual operating costs for both U.S. and foreign vessels.
Their estimate takes into account a weighted average cost for imports as
would be reflected in the price fixed for entitlements under FEA regulation,
thus the cost will enter into the importer's domestic price; with the
additional cost will be spread across the whole spectrum of American
consumption.9
The third scenario for estimating a likely price increase and
differential
is determined
by the transportation
rates
in the current
market and on the premise that these rates will remain relatively
constant and justifiable at the time of passage of cargo preference.
-5-
As mentionedearlier,
this average differential is currently approximately
$2.00/bbl. on U.S. transported oil and has remained relatively constant
since January 1977.
Under the proposed shipping percentage of 22.5% this
estimated increase'would average 45¢/bbl.
A fourth scenario for estimating a likely price increase is promulgated
on the notion that as the transition to cargo preference develops, the
average cost of shipping imported oil on U.S. tankers will "float" to
that rate which is the highest rate being charged by any one U.S. vessel
at the time of enactment.
If, hypothetically, the bill were passed
immediately, that price could be as high as $2.80/bbl., which is the
spot rate recently received by the Thomas M., a 28,000 DWT American
vessel carrying oil from the U.S. Gulf to the U.S. east coast, north
of Cape Hatteras.lO
When compared to current average foreign import
cost of 50t/bbl. this renders a differential of $2.30/bbl. (.52¢/bbl.
at 22.5%).
In addition to the American Maritime Association and API studies,
other studies of this bill are currently underway to provide evidence
to the House Merchant-Marine & Fisheries Committee.
These include
studies by the National Maritime Union of America, AFL-CIO and the
Transportation Institute.ll
It is our opinion, however, that the data
generated from the sources mentioned in our study reflect the range
of most likely possibilities and in subsequent sections we take each'
of these and determine the impact.
-6-
Scenario
Differential per Barrel
U.S. Transported
Oil Only
American Maritime Association
-~~~~~~~~~
All Oil
Proposed 1978 Level
.95
.21
I-nstitute
1.11
.25
Present Average Differential
2.00
.45
Present High Differential
2.30
.52
American
Petroleum
22.5%
Projected Price Differential of Oil Shipped under HR(1037)
Over Oil Shipped in Free Market Used in this Study.
-7SECTION II - METHODOLOGY OF SHORT-TERM ANALYSIS
For this short term analysis we were able to utilize the
12,13,14.
ISEC (Interactive Sectorial Energy Consumption) model.
Essentially, the model is able to take the price increases per barrel
of oil and, using ADL's coefficients, determine by sector and by state the
net effect of those price increases.
The model assumes no demand elasticities,
however, as the incremental price increases are so slight (21¢-52¢ additional
cost on a barrel of oil at $13.00) it will be assumed for the purposes of
·this analysis that any impact on demand will be negligible.
As the model
was designed to accept as input tariff or OPEC price increases, the
following procedure was implemented in order to arrive at a realistic
method of converting transportation cost increases per barrel of oil to
a price increase that could be readily entered for processing on the ISEC
modeling facility:
Step 1)
Select price differentials to be utilized for the analysis
(.see Section
Step 2)
1)
Define the increments of the increased U.S. flagship
involvement (e.g., 20% initial, 22.5% by 1978, 25% after
1978, 30% after 1980, etc.)
Step 3)
Determine the percentage mix of foreign and domestic oil
shipped to New England
Step 4)
Determine the effect of additional fixed and variable
costs (e.g., annual inflation rate, projected annual
oil price increase, if any)1 5
Step 5)
Formulate mode of input based on above criteria
-8-
Steps 1 and 2 of the preceding methodology have been identified in
Step 3 (the percentage mix of foreign and domestic
the previous section.
oil shipped to New England) has been estimated as a 70:30 ratio foreign:
domestic sources.16
The foreign oil includes crude oil, refined products,
oil shipped directly from foreign sites as well as crude oil transported
from foreign producers to domestic refineries for refining and eventual
distribution to New England ports.
The domestic oil referred to here
includes oil which is stored either in New England ports or domestic
oil trans-shipped from another domestic port to New England.
The user
of the ISEC model, for example, has five alternative inputs from which
to choose:
1) OPEC increase,
tariff increase,
2) crude oil tariff increase,
4) FEA old domestic oil decontrol data, and
3) product
5) FEA
The last two elements are not utilized
price tilt regulation data.
here due to the specific situations in which they are applied (e.g.,
decontrol affects only domestic oil and price distribution (entitlements),
regulations are currently being revised by FEA and are dependent on
domestic pricing policies). The tariff increases would be difficult to
utilize on the basis of the different methods of tariff application and
the many exceptions to tariff assessment which are allowable under the
Oil Import Regulations.1 7
Either of these criteria, however, could
be quickly included in a future analysis
f this nature to further expand
the spectrum of possible events if the legislation passes.
The most expedient and efficient data input mechanism, therefore, was
to translate the transportation cost per barrel increase into a corresponding
OPEC price increase category.
-9-
The reasons for this selection are many.
Foreign crude oil prices are
based on the price of the MARKER CRUDE, which is Arabian Light, 340 API.
This price is set by OPEC and is, in actuality, the basis on which all other
foreign crude oils are priced.l8
As of January, 1977 when OPEC raised the
price of crude , the price of Arabian Light was $12.09/bbl.
The average
price per barrel from the Persian Gulf was $12.44/bbl.)9
If OPEC raises its price of oil, this price increase would be reflected
in the composite foreign market and, as such, the average price of foreign oil
should rise correspondingly.
It will also be assumed for the purpose of
the analysis that an equivalent average increase in domestic oil prices will
occur as a result of an OPEC-generated increase.
The following additional assumption is built into the ISEC model:
the changes in price of gasoline, distillate, and residual oil in New England
will be a weighted average which reflects the proportion of products from
the following sources:
-
imported crude oil
-
imported refined product
-
old domestic oil
-
new domestic oil
See Appendix D for the ADL Product Sources Table which demonstrates the
above assumption.
By using the ISEC model we are now able to equate on;.a oneforone basis an
average transporation increase of foreign oil with an
OPEC price increase of oil.
average
Each price differential was input on the model which
then generated direct impact output data for New England as a region, each
New England state, and for each of the sectors of the New England economy
-10-
(commercial, industrial, residential, and transportation).
As our primary
concern is the immediate direct impact, the output series in this shortterm analysis represents
1978,
1) the AMA,
2) the API price differential for
3) the current market price differential, and
4) the shipping
industry's market price differential based on the rate determination
hypothesis described in Section 1.
-11-
SECTION III - RESULTS
The results obtained in our analysis are contained in computer output
form in Appendices E-H
and are categorically segregated by region, state,
and sectors, reflecting each of the proposed price increases.
For the
commercial, industrial and residential sectors a breakout is given for
product source and demonstrates the varying costs of distillate (heating
fuel oil), residual fuel oil and the cost of oil used in generating electricity.
These results are aggregated by states for each of the most likely
price differentials in the table below. Frommthis data a total direct impact
is given for the state and region for each price increase.
It is noted that
Massachusetts alone consumes 58% of petroleum and petroleum products consumed
in New England and would pay an additional $31 million to $76 million under
the legislation
by 1978 alone.
#1
#2
#3
#4
REGION
.21/bbl.
.25/bbl.
.45/bbl.
o52/bbl.
New England
53,595,240
74,116,836
133,410,305
154,163,021
Massachusetts
31,076,109
36,964,773
66,536,592
76,886,730
Maine
12,590,059
8,538,130
15,368,635
17,759,314
New Hampshire
10,216,882
5,193,966
9,349,138
10,803,448
8,370,710
2,493,281
4,487,905
5,186,023
Connecticut
15,923,045
15,415,830
27,748,495
32,064,926
Rhode Island
10,499,271
5,510,855
9,919,539
11,462,579
STATES
Vermont
-12SECTION IV - CONCLUSION OF SHORT-TERM ANALYSIS
Caution should be exercised in interpreting the results of this
short term analysis as other factors could greatly affect the price
implementation and impact.
For example, given the wide swings of which the
world tanker market is capable ana tne explosive nature of the tanker rates,
any attempt to provide a highly accurate prediction of future transportation
costs will suffer some degree of uncertainty and risk.20 This analysis has
utilized four specific cost increases (some of wnicn were proposea by oners)
which are felt to represent reasonable possibilities.
The study has then taken
these projected cost increases and determined the potential impact on the
New England energy user in the short run scheme.
In summary, our use of the most likely estimates of transportation
costs indicate that the initial direct impact of cargo preference
legislation, if adopted, could range from $54,000,000 (using American
Maritime's transportation costs)to $154,000.00 (using the present 1977
high prices) in additional energy costs for New England0
These estimated
short term costs could, however, be greatly modified by the long term
impacts discussed in Section 5 and the results should therefore be
interpreted and utilized with this in mind.
-13-
SECTION V - BRIEF DISCUSSION OF LONG-TERM ISSUES
As mentioned previously, this analysis focused primarily on the
immediate and short-run impact of oil cargo preference legislation and
did not attempt to assess the possible longer-term issues that, although
extremely important for consideration prior to the passage of such
legislation, are not readily quantifiable at this time.
Some of these
longer-term issues are now briefly discussed here.
1)
Environmental Impact of Such Legislation.
Studies have
demonstrated that the greatest proportion of tanker losses (normalized
for tonnage and the number of ships) and resulting oil spills have
involved foreign vessels.
Appendix I demonstrates the tanker accident
21
track record of fifteen countries from 1964-1976.
Some proponents,
therefore, argue that with increased U.S. participation in the shipping
of its own oil
the probability of future severe oil spills on the U.S.
coastline will be greatly diminished.
This same study indicated that the higher percentage of tankers
involved in losses were older than 10 years.
This fact suggests an
interesting phenomenon, however, when reviewed in the context of the
total world tanker age picture as demonstrated in Appendix J.
Further
analysis suggests that there may not, in fact, be a strong positive
correlation between tanker age and accident incidence.
Three of the
six leading countries with loss rates greater than 50% have fleets in
which at least half of the ships are younger than 9 years (Italy, 72%;
Greece, 50%; Liberia, 70%).
Given this situation, it becomes apparent
that other factors must strongly affect the causes of tanker accidents
namely operation methods, safety features, training of personnel and
construction standards, etc.
-14-
Although the U.S. demonstrates a reasonably admirable track
record for tanker accidents, a significant percentage of its fleet
is over 20 years of age (see Appendix J).
Nevertheless, to satisfy
the increased shipping capability as would be required by cargo
preference, and to meet the revised safety and construction standards
that would likely be imposed by this and/or similar legislation, the
U.S. would be faced with having to re-evaluate the condition of its
shipping fleet and its ability to transport oil and other commodities
under the safest and most modern conditions possible.
This may require
extensive revitalization and/or scrapping of these older tankers, thus
creating additional transition costs which would be brought to bear on
the oil consumer.
2)
The Effect of Increased Shipbuilding in the U.S. and New England.
Currently, the United States shipyards are producing at near maximum
capacity, with orders on file well into 1980.
While this productivity
is apparently beneficial to the economy, any full-scale increase in
activity to accommodate cargo preference requirements may well pose a
practical improbability to the shipbuilding industry.
Additionally, the
possibility of retrofitting and renovating tankers (currently not engaged
in the transportation of oil or oil products) for inclusion in the U.S.
oil-carrying fleet would require added manpower and expense.
world shipbuilding industry is under-utilized.
Yet, the
Hence, there could be
a duplication of capacity in the world and the creation of strained
relations with countries with excess capacity.
It could also be very
difficult to attract.capital to support this additional building and
retrofitting in a market which is already extremely supply-heavy.
-15-
U.S. shipbuilders generally maintain contracts to build a significant
number of vessels for foreign countries and shippers as well as for
U.S. companies.
A-good deal of legal and regulatory supervision could
result in attempting to determine whether
this transition would result
in possible governmental regulation of contracts to build vessels for
inclusion into the U.S. tanker fleet.
Both the negative and the positive
aspects of these issues must be carefully-weighed.
3)
The Effect on Employment.
Consistent with increased demand
for shipbuilding as would be required with cargo preference, it would
be reasonable to assume a substantial rise in employment in the shipbuilding and marine industry, and in supporting industries (e.g., steel
manufacturing, rubber manufacturing, metals and other related manufacturing).
It has been suggested, however, that the reverse could occur, namely that
any significant rise in the price of oil as a result of cargo preference
would have serious inflationary and employment consequences.23
API
argues that the additional $5.5 billion cost that it feels would result
with the eventual 30% cargo preference would be charged as an additional
$5.5 billion in the costs of goods and services that the American consumer
could not spend for other goods and services.
Thus, API suggests the
real Gross National Product (GNP) is lowered by this amount. In their
opinion this would result in a reduction of about 284,000 jobs spread
throughout the economy (See Appendix K for their formula for calculating
jobs
lost).
-16-
4)
The Domestic and International Shipping and Transportation Industry.
Should the U.S. increase its own oil-carrying capacity to 30%, an
already imbalanced world tanker market could be further strained by
the addition of more U.S. tankers.
(See Appendix L for further general
information regarding the tanker market).
The following chart demonstrates
the world tanker supply/demand imbalance and the projected supply/demand
from 1977-1989.24
Millions Tons DWT
1977
1978
1979
1980
Supply
267
277
281
276
Demand
208
225
245
263
Surplus
59
52
36
13
However, even optimistically, it will be at least well into 1980
before this trend begins to level off.
To relieve this predicament,
many countries have resorted to voluntary dry-docking and stockpiling
of tankers.
Shipbuilding in the world markets has declined drastically due to
the tanker surplus.
Orders in 1/75 stood at 170 million DWT; by 6/76
orders were reduced to 50-60 million DWT.2 5
The U.S. would well consider
the impact of committing additional tankers to an existing crisis situation.
With the anticipated transition to cargo preference, another consideration
emerges and would be of interest to the long range analyst.
A significant
proportion of world tanker trade is conducted on vessels which fly "flags
of convenience".
Liberia has taken the lead in world tanker tonnage (see
Appendix F), however, this tonnage group is largely owned by American and
Greek companies. The owners register their ships under PANHOLIB (Panama,
-17-
Honduras, Liberia) flags of convenience and have been able to speed the
rate of ship acquisition through capital accumulated from untaxed profits
and in the case of American nationals, they have obtained the additional
advantages of lower crew costs compared with the high wages ruling on
American flag vessels.
About 15% of world merchant tonnage operate this
way and present formidable competition to strictly national shipping
companies subject to higher taxes and more stringent laws regarding
manning and safety requirements.26
Should cargo preference be enacted,
a certain portion of these companies' current comparative shipping and
operating advantages could be diminished, possibly resulting in an
additional transportation cost to the companies which would likely be
passed to the consumer.
6)
Impact on U.S. Foreign Policy.
As a consequence of any of these
considerations, the resultant implications on U.S. foreign policy and
foreign relations may become critical.
The extent of this impact and
the problems therein can only be speculated.
However, the long-run
costs and benefits of such legislation would need to be carefully
evaluated to include all these variables.
7)
Possible OPEC Cargo Preference and Price Imitation.
27
been suggested
It has
that with the advent of U.S. oil cargo preference, other
oil producing countries would choose to impose cargo preference on oil
exported from their countries.
Such imitation could also cause an increase
in the cost of foreign transportation of oil and oil products, a cost that
again, would be absorbed by the consumer.2 8
-18-
8)
World Oil Pricing Strategy.
Any or all of these factors could
exert additional pressure on world oil-pricing mechanisms by oil-exporting
countries, who in an attempt to counter potential losses in the tanker
market, might increase oil prices equivalently.
9) Possible Conflict with Other U.S. Oil Transportation. If Oil Cargo
Preference were to become a reality, even to the point of transporting oil at
any rate greater than what is currently being shipped on U.S. vessels(4%),
it could seriously conflict with other pending commitments for U.S. tankers.
American tankers will be required to move Alaskan oil and will also be utilized
in building the strategic petroleum reserve of 1 billion bbl., a program that
already requires that 50% of the oil be transported by U.S. tankers.2 9
Given the constraints on the U.S. shipbuilding industry (as mentioned
earlier in this section) and the problems that would be faced in accomodating
new building, it is likely that any additional construction that would be
necessary to satisfy cargo preference legislation would require even further
government subsidies to the industry, thus representing an additional indirect
cost element.
-19-
FOOTNOTES
1.
Energy Users Report, 3/3/77, No. 186, Bureau of National Affairs,
Washington, D.C., p 28.
2.
Fuel Trade and Fact Book, Yankee Oil Man, March 1974
3.- HR711 (Whitehurst), HR712 (Whitehurst), HR3336 (Lent-Emery), HR776
(Braggi), S682 (Magnuson), S715 (Case), Congressional Record, Jan. 6,
1977, Government Printing Office, Washington, D.C.
4.
On 1/31/77, the'Coast Guard revised its regulations (33 CFR 164) to
require: l) long-range navigation equipment on all tankers greater
than 1600 gross tons; 2) reporting of all ships' positions; 3) testing
of ships' manoeuvring systems before entering and getting under way
in U.S. waters; 4) notifying the Coast Guard if navigation equipment
is out of order.
5.
The Merchant Marine Act of 1920 (U.S.C. Title 46, Ch. 24, Sec. 883). Specifies
stricter personnel and building requirements for U.S. tankers involved in shipping oil.
6.
Spot Rates--courtesy Dietze, Inc., Ship Brokers, 30 Rockefeller Plaza,
N.Y., N.Y., Tanker Market Spot Rates 3/2/77. This differential represents average spot rates for the week of 3/2/77. The average
differential from Jan. 5, 1977 to 3/2/77 is $1.52/bbl. The $2.00/bbl.
differential is justified for this analysis for the following reasons:
The U.So rate has demonstrated steady increases from 1/5/77-3/2/77.
The US. tanker market has not been directly affected by the world
tanker surplus nor is it characterized by the volatility which is
present in the world market. [See Zannetos, Zenon S, The Theory of
Oil Tankship Rates, MIT Press, 1966 for a further discussion of the
world tanker rate structures and the economics of tanker markets].
This increase is also due to the severe winter and impending commencement of the Alaskan movement. The world scale rate increased
briefly also during the height of the cold winter in the U.S, however,
these inflated rates have begun to return to previous levels of
45-55/bbl.
7.
Views on Cargo Preference Legislation, 1977.
Institute, Washington, D.C. 20006.
8.
Ibid.
9.
Energy Users Report, op. cit. 3/3/77, p. 29.
10.
Dietze, Inc., Feb. 2, 1977.
11.
Energy Users Report, op. cit. 3/3/77, p.29.
American Petroleum
Tanker Spot Rates.
-20-
12.
NEEMIS (New England Energy Management Information System)was developed
(in part) under contract from the New England Regional Commission
(NERCOM) by MIT's Sloan School's Center for Information Systems Research
(CISR) and the MIT Energy Laboratory.
13.
Preliminary Projections of New England's Energy Requirements, prepared
for the New England Regional Commission (NERCOM) by Arthur D. Little,
Inc., 1975.
14.
Demonstration of the Economic Impact Analyser for the New England
Regional Commission, 7/76.
15.
This element would only be utilized for the input of projected increases
beyond the initial impact period. Our analysis assumes a direct impact
based on the current levels of prices.
16.
Donovan, John J. and Walter P. Fischer, "Factors Affecting Residential
Heating Energy Consumption", Tech. Rep. No. MIT-NEEMIS 76-002TR, 7/16/76.
17.
Oil Import Regulations, Federal Energy Administration, 10 CRF 213,
41
FR
223.41,
6/3/76.
18.
International Crude Oil Product Prices, Oct. 15, 1976, prepared by
Parra, Ramos and Parra and Energy Economics Research Ltd. in cooperation with Middle East Economic Survey, Middle East Petroleum and
Economic Associations.
19.
Petroleum Economist, 3/77, Vol. XLIV No. 3, Petroleum Press Bureau Ltd.,
London,
20.
21.
p. 9 - 119.
Discussion with Zenon Zannetos, Professor of Management, Alfred P. Sloan
School of Management, Massachusetts Institute of Technology, Cambridge,
Mass.
"Loss Ratio For Liberian Tankers not Highest", Oil & Gas Journal, Vol. 74
No. 37, 9/13/76,
1/31/77,
p.
91.
The Petroleum
Publishing
Co. Tulsa,
Okla.
Vol.
75, No. 5,
-21-
22.
Ted Wett, "Tanker Trade sick despite intense remedial efforts",
Oil & Gas Journal, Vol. 74, No. 37, 9/13/76, The Petroleum Publishing
Co, Tulsa,
Okla.
p. 35 - 38.
23.
American Petroleum Institute, op. cit.
24.
E. Stanley Tucker, "Moving Towards a Better Balance", Petroleum Economist,
2/77, Vol. XLIV, No. 2, Petroleum Press Bureau Ltd., London, p.48 - 50
25.
Oil & Gas Journal, 1/10/77, Vol. 75 No. 2, The Petroleum Publishing Co.
Tulsa,
Okla. p. 51.
26.
A. D. Couper, The Georgraphy of Sea Transport.
Publishers Ltd. London 1972 p. 75.
27.
American Petroleum Institute, oP. cit.
28.
It is noted that the API study includes an additonal differential which
is added to their basic derived differential. In constructing this
added cost API assumes the inclusion of 1) cargo preference imitation by
exporting countries, 2) a captive market premium, and 3) an inflexibility
premium. In 1978, for example these hypothetical factors would add .99t
to their original 1.11 price differential. This equates to a .47¢/bbl.
increase on all oil or an impact of $119,951,250 on the New England Region.
These assumptions are not given full credit in the analysis due to the
hypothetical nature of these possibilities.
29.
Hutchinson & Co.,
"The Tanker Bill Sinks or Swims with Carter", Business Week, No. 2485,
May 30, 1977, McGraw-Hill, Inc., New York, N.Y., pgs. 26-27, 104.
APPENDIX
A
.
34
s
*, UH
0O
P4
O
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APPENDIX
B
1978
COST OF IMPORTED OIL
U.S. FLAG VERSUS FOREIGN FLAG TANKERS (1)
30 MWT
U.S. SHIP COST-M$/YEAR
(w/o SUBSIDY)
NUMBER OF SHIPS FOR U.S. IMPORTS (2)
COST OF IMPORTS-MM$
(1)
80 MDWT
250 MDWT
TOTAL
5488
9544
17,611
98
244
124
466
538
2329
2,184
5051
3176
MM BARRELS OF IMPORTED OIL
$/BARREL COST OF IMPORTED OIL
$1.59
2099
3053
4,743
NUMBER OF SHIPS FOR U.S. IMPORTS (2)
r 98
244
124
466
COST OF IMPORTS-MM$
206
745
588
1539
FOREIGN SHIP COST-M$/YEAR (1)
MM BARRELS OF IMPORTED OIL
3176
$/BARREL COST OF IMPORTED OIL
0.48
$1.11
$/BARREL COST DIFFERENTIAL
(1)
Based on annual vessel operating cost data developed from data in Tabs 2 & 5
This table shows the relative costs of importing all foreign source oil
by either U.S. flag or foreign flag tankers.
(2)
Based on fleet size distribution
SOURCE: AMERICAN PETROLEUM INSTITUTE
statistics shown in Tables 5a & b.
1980
COST OF IMPORTED OIL
U.S. FLAG VERSUS FOREIGN FLAG TANKERS
(w/o SUBSIDY)
NUMBER OF SHIPS FOR U.S. IMPORTS (2)
COST OF IMPORTS-MM$
MM BARRELS
(1)
250 MDWT
6193
9922
19,572
98
207
182
487
607
2054
3,562
6223
3477
OF IMPORTED OIL
$/BARREL COST OF IMPORTED OIL
$1.79
FOREIGN SHIP COST--M$/YEAR (1)
NUMBER OF SHIPS FOR U.S. IMPORTS
COST OF IMPORTS-MM$
MM BARRELS OF IMPORTED
TOTAL
80 MIWT
30 MDWT
U.S. SHIP COST-M$/YEAR
(1)
(2)
2549
3181
4,900
98
207
182
487
250
658
892
1800
OIL
$/BARREL COST OF IMPORTED OIL
$/BARREL COST DIFFERENTIAL
3477
0.52
$1.27
(1)
Based on annual vessel operating cost data developed from data in Tabs 2 & 5
This table shows the relative costs of importing all foreign source oil by
either U.S. flag or foreign flag tankers.
(2)
Based on fleet size distribution statistics shown in Tables 5a & b.
1985
COST OF IMPORTED OIL
U.S. FLAG VERSUS FOREIGN FLAG TANKERS
(1)
TOTAL
80 MDWT
250 MDWT
7474
10,879
21,761
NUMBER OF SHIPS FOR U.S. IMPORTS (2)
100
183
193
476
COST OF IMPORTS-MA$
747
1, 991
4,200
6938
30 MDWT
U.S. SHIP COST-M$,/YEAR (w/o SUBSIDY)
(1)
3541
MM BARRELS OF IMPORTED OIL
$ 1.96
$/BARREL COST OF IMPORTED OIL
FOREIGN SHIP COST-M$/YEAR (1)
NUMBER OF SHIPS FOR U.S. IMPORTS
COST OF IMPORTS-MM$
MM BARRELS
OF IMPORTED
(2)
8,181
3153
3,573
100
183
193
476
315
654
1,579
2548
3541
OIL
$/BARREL COST OF IMPORTED OIL
$/BARREL COST DIFFERENTIAL
.72
$ 1.24
(1)
Based on annual vessel operating cost data developed from data in Tabs 2 & 5
This table shows the relative costs of importing all foreign source oil by
either U.S. flag or foreign flag tankers.
(2)
Based on fleet size distribution statistics shown in Tables 5a & b.
1990
COST OF IMPORTED OIL
U.S. FLAG VERSUS FOREIGN FLAG TANKERS (1)
30 MWT
80 MDWT
250 MDWT
TOTAL
8877
12,731
24,390
NUMBER OF SHIPS FOR U.S. IMPORTS (2)
103
203
210
516
COST OF IMPORTS-MM$
914
2,584
5,122
8620
U.S. SHIP COST-M$/YEAR
(w/o
SUBSIDY)
(1)
3687
MM BARRELS OF IMPORTED OIL
$2.34
$/BARREL COST OF IMPORTED OIL
FOREIGN SHIP COST-M$/YEAR (1)
NUMBEROF SHIPS
IMPORTS (2)
FOR U.S.
COST OF IMPORTS-MM$.
MM BARRELS OF IMPORTED
S/BARREL
5194
6,317
9,508
103
203
210
516
535
1,282
1,997
3814
3687
OIL
COST OF IMPORTED
OIL
$/BARREL COST DIFFERENTIAL
1.03
$1.31
(1) Based on annual vessel operating cost data developed from data inTabs 2 & !
This table shows the relative costs of importing all foreign source oil by
either U.S. flag or foreign flag tankers.
(2)
Based
on fleet
size distribution statistics shown in Tables 5a & b.
1990
COST OF IMPORTED OIL
U.S. FLAG VERSUS FOREIGN FLAG TANKERS
(1)
250 MDWT
TOTAL
30 MWT
80 MDWT
8877
12,731
24,390
NUMBER OF SHIPS FOR U.S. IMPORTS (2)
103
203
210
516
COST OF IMPORTS--MM$
914
2,584
5,122
8620
U.S. SHIP COST-M$/YEAR
(w/o SUBSIDY)
(1)
3687
MM BARRELS OF IMPORTED OIL
$/BARREL
COST OF IMPORTED
FOREIGN SHIP COST-M$/YEAR
(1)
NUMBER OF SHIPS FOR U.S. IMPORTS
COST OF IMPORTS--MM$
MM BARRELS
$/BARREL
$2.34
OIL
(2)
5194
6,317
9,508
103
203
210
516
535
1,282
1,997
3814
3687
OF IMPORTED OIL
COST OF IMPORTED
OIL
$/BARREL COST DIFFERENTIAL
1.03
$1.31
(1) Based on annual vessel operating cost data developed from data inTabs 2 &
This table shows the relative costs of importing all foreign source oil by
either U.S. flag or foreign flag tankers.
(2) Based on fleet size distribution statistics shown in Tables 5a & b.
APPENDIX
C
Estimated Costs of H.R. 1037
By American Maritime Association
Estimated Total Capacity Required
To Meet 30/ Preference at Projected 1980 Imports
Class
Required
Trade
Capacity
(mill. DWT)
30,000 DWT
25
.75
60,000 DWT
20
1.20
Dirty Products,
Short Haul Crude:
120,000 DWT
37
4.40
Africa, Indonesia
250,000 DWT
46
11.50
Clean Products
Persian Gulf
17.85
Waterborne Imports in 1980 Projected at 9.5 million
'barrels/day
'*
N,B. Since the critical factor involved here is the
differential between American and foreign rates,
the difference in comparative costs will be sufficiently indicative without attempting to predict the
swings in market prices as such. The cost of money is
included in our estimate on the present most advantageous terms available, namely, the leasing basis. This
presents a better picture than our previous estimates,
about $.21/bbl in 1978, rising to about $.26/bbl in
1985, operating costs escalating at 8% per annum compounded.
Attachment #1
2.
1978 Book Capital Costs (millions)
Size of
Class
Foreign **
30 M DWT
$ 32.0
$12 MM
60
II
48.0
15 MM
120
It
75.0
20 MM
250
I
125.0
30 MM
*
New Tonnage
**
Est. Avg. Cost of Existing Modern Fleet
Foreign Terms
U.S. Financing Terms
8/o Cost: of Money, Based on Title XI
Guarantees, Lease Financing &
10/ Investment Tax Credit -
9.5% Cost of Money,
Based on 20 Year Financii
Level Debt Basis,
3/4 of 1% Title XI Guarantee Premium
on 65% of Total Capital Cost
4%o/Year Depreciation
Annual Fixed Costs/Vessel (millions of $)
Class
60
11,
120
250
Foreign
Diff.
2.70
1.4
1.30
25
32.5
4.00
1.7
2.30
20
46.0
6.25
2.3
3.95
37
146.15
10.40
3.4
7.00
46
322.00
U.S.
30 M DWT
'"
Total
Capital
Differential
# of
Vessels
546.65
Fixed Costs Differential
=
$0.158/bbl
3.
1978 Operating Costs
U.S. (New)
_$/Yr.
(000' s)
Foreign
$/Yr.
(000' s)
30,000 DWT
Labor
Stores, Supplies & Others
M& R
Insurance
Total
1,600
225
225
475
225
350
200
200
2,400
1, 100
Added Operating Cost/Vessel
$1.3 MM/Year
60,000 DWT
Labor
Stores, Supplies & Others
M& R
1,625
225
275
450
Insurance
Total
2, 575
500
225
250
250
1,225
Added Operating Cost/Vessel =
$1. 350 MM/Year
120,000 DWT
Labor
Stores, Supplies & Others
M & R
Insurance
Total
1,650
250
325
600
500
250
275
300
2,825
1, 325
Added Operating Cost/Vessel =
$1.5 MM/Year
250,000 DWT
Labor
Stores, Supplies & Others
M& R
Insurance
Total
1, 200
600
300
475
650
3,750
2,025
1,700
300
550
Added Operating Cost/Vessel
$1.825
=
MM1/Year
4.
Estimated Annual Operating Costs for
U.S. & Foreign Flag Tankers in 1978 & 1985
(000's of /Year)
Assumptions:
Escalation @
8%//Year Compounded
U.S. Crew:
28 men
Foreign Crew:
32
",
Foreign
U. S.
30,000 DWT
S. European Manned
Differential
1978
2,400
1985
4,100
1978
1985
1978
1,100
1,900
1,300
2,200
1985
60,000
"
2,575
4,400
1,225
2,100
1,350
2,300
120,000
"
2,825
4,850
1,325
2,300
1,500
2,550
250,000 "
3,750
6,600
2,025
3,500
1,725
3,100
TOTAL OPERATING COST DIFFERENTIAL
(millions of $)
-
1978
30,000 DWT Class (25)
60,000
120,000
250,000
"
"
(20)
"'
(37)
"
(46)
I
Total
Divided by 9.5 MM B/D
=
1985
$ 32.5
$ 55.00
27.0
46.00
55.5
94.35
79.35
142.6
194.35
337.95
$0.056/bbl
$0.098/bbl
5.
Total Cost Differential
in 1978
Operating Cost Differential =
Capital
in 1985
$0.056/bbl
Cost Differential --
$0.098/bbl
0.158/bbl
$0.214/bbl
A_
0. 158/bbl
$0.256/bbl
-
/
APPENDIX
D
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APPENDIX
E
l)ii
', i
oEF
31,TS:
1ST ST
OF VALU S.
PNEW ENGLAND
1. VALUES OF THE VARIABLES
TRANSPORTATION INCREASE:
FOR THIS
RUN:
$.21
$. 0 0
CRUDE TARIFF INCREASE:
PRODUCT TARIFF INCREASE: $.00
3. INCPEASES/DECREASES BASED ON THE ABOVE ESTIMATES:
INCREASE
$. 21
TMPORTED CRUDE:
IN CRE
RA SE
$. 21
IMPORTED PRODUCT:
INCREA SE
$.21
NEW I r,:
OLD OIL: (EFFECTIVE INCREASE) $.00
4. INCREASE/DECREASEIN MARKETPRICES:
PER BARREL
GASOLINE
DISTILLATE
RESIDnUAL
$
$
PER GALLON
$
$
$
.1218
.1281
$
.1932
.003
.003
.005
INCRFASE
INCREASE
INCREASE
5. INCREAS PER KWH ELECTRICITY (BASED ON 562KWH PER BARREL
OF RESIDUAL FUEL OIL) $.00034
7.
INCREASE/DECREASE
COM
0MERCIA L:
I
DISTILLATE:'
RESIDUA L
ELECTRICITY
INDUSTRIAL:
COSTS FOR FOUR MAIN SECTORS:
$4 ,625,179
$8,863,823
$5 ,532,670
TOTAL
$19,021,672
DISTILLATE
RESIDUAL
$1 ,195,942
ELECTRICITY
TOTAL
RESIDENTIAL: DISTILLATE
$5,030,735
$6,024,780
$12,251,457
$8,007,659
$o
RESIDUA L
ELECTRICITY
TOTAL
$7,298,285
$15,305,944
TRANSPORTATION: TOTAL INCREASE: $7,016,167
'OTAT,n.re CCT .TIPAr T (INCRREASE):
$53,5 95,2 4 0
MASSA CHUSE TTS
1. VALUES OF THE VARIABLES
TRANSPORTATION INCREASE:
FOR THIS RUN:
$.21
CRUDE TARIFF INCREASE:
$.00
PRODUCT TARIFF INCREASE: $. 00
3. IT.NCREASES/DECREASrS
ARBOVE ESTIMATES:
BASED ON TF
TPORT'ED CRUDE:
IMPORTED PRODUCT:
$. 21
$. 21
INCREASE
NEW OIL:
$.21
INCREASR
OLD OIL: (EFFECTIVE INCREASE)
$.00
IN CREASF
4. INCREASDECRACREASE IN MARKET PRICES:
PER BARREL
CA SOTINE
DISTILL A TE
PRESIDUAL
$
$
$
PER GALLON
,
$
$
.1218
.1281
.1932
.003
.003
.005
IN CREA SE
I! CREASr,
INCREASE
5. INCREASE'PER KWH ELECTRICITY (BASED ON 562KWH PER BARREL
OF RSIDUAL FUEL OIL) $.00034
7.
INCREASE/DECREASE
COMMERCIAL:
IN COSTS FOR FOUR MAIN SECTORS:
DISTILLA TE
RESID UA L
ELECTRICITY
TOTA L
I~DUSTRIAL:
DISTILTLA TE
RESIDUAL
ELECTRICITY
TOTA L
RESIDENTIAL: DISTIL LATE
RESIDUA L
ELECTRICITY
TOTAL
$3,421,807
$5,946,696
$2, 971, 567
$12,340,070
$623,591
$1,412,485
$2,914,157
$4,950,233
$3,184,438
$0
$3 ,585,201
$6,769,639
TRAYSPORTATION: TOTAL INCREASE: $7,016,167
TOnT.,
nTRECT IMPA CT (IN7CREASE): $31,076,109
I Ail __
1. VALUERS OF THE VARIABLPLS FOR THIS RUN:
$.21
TRANSPORTATIONINCREASE:
$.00
CRUDE TARIFF INCREASE:
PRODUCT TARIFF INCREASE: $. O00
3. INCREASES/DECREASES BASRD ON THE ABOVE ESTIMATES:
INCREASE
$. 21
IMPO TED CRUDE:
IM~PORTED PRODUCT:
$.21
INCREASr
qFW OIL:
$.21
INCREASE
INCREASE)
OLD OIL: (EFFECTIVE
$.00
4. INCREASF/DECREASE IN MARKET PRICES:
PER BARREL
CA SOLINE
$
.121 8
DIST TLrATE
$
.1281
$
RESIDUAL
.1932
5. INCREASE PER KWH ELECTRICITY
OF RESIDUAL FUEL OIL) $.00034
7.
INCREASE/DECREASE
COMPFERCIAL:
PER GALLON
$
$
.003
.003
$
.00oo5
(BASED ON 562KWH PER BARREL
IN COSTS FOR FOUR MAIN SECTORS:
DISTIL LA TE
$131 ,046
$776,278
ELECTRICITY
$412,527
TOTAL
$1,319,851
RESID) A L
INDUSTRIAL:
DISTILLA TE
$173 ,063
RESIDUAL
$1,603,753
ELECTRICITY
$749, 767
TOTAL
$2,526,583
RESIDENTIAL: DISTILLATE
RESID UA L
ELECTRICITY
TOTAL
$999,692
$o
$727,766
$1,727,458
TRANSPORTATION: TOTAL INCREASE: $7,016,167
_.,, " ",
- I -" ,. .
INCREAS .
INCREASE
INCREASE
NElJ IM fPSIllJRE
1.
VALUES OF THE VARIABLES
TRANSPORTATION INCREASE:
FOR THIS
CRUDE TARIFF INCREASE:
$.00
PRODUCT TARIFF INCREASE: $.00
3.
$.21
BASED ON THE ABOVE E STIZMATES:
INCREASES/DECREASES
TPORTED CRUDE:
$.21
TPOT0T7TD)PRODUCT:
, 7 ',
RUN:
.....
.$.21
IN CREAS
INCREASE
INCREASE
$.21
O.ITL:
OL, OIL: (EFFECTIVE INCREASE) $.00
4. ICREASPEDECREASE IN MARKETPR.TC7ES:
PER BARREL
G7A
SOLIN
DISTILLA TE.
$
.1218
$
.1 2 8 1
R.SID DUA L
$
.1932
PER GALLON
$
.003
IN CREASE
IICREASE
$
.005
INCRFEASE
$
.003
5. ICREASE PER KWH ELECTRICITY (BASED ON 562KWH PR
OF RESIDUAL FUEL OIL) $.00034
7. INCREASE/DECRRASE IN COSTS FOR FOUR MAIN SECTORS:
COMFMERCIAL:
DISTILLATE
RESID UA L
ELECTRICITY
TOTAL
INDUSTRIAL:
DISTILLA TE
RESIDUA L
ELECTRICITY
TOTAL
RESIDENTIAL: DISTILLA TE
RESI
$11 ,248
$410,164
$255,423
$706,835
$74,298
$305 ,642
$615 ,352
.$995,292
$851 ,609
UA L
ELECTRICITY
TOTA L
$0
$646,979
$1 ,198,588
TRANSPORTATION: TOTAL INCREASE: $7,016,167
T : ,OAT,
IRF:T IPACT
(INCREASE;):
$10,216,882
BARREL
DISPLAY
OF RESULTS : 1ST SET OF VALUES.
VERMONT
1. VALUES OF THE VARIABLES
FOR THIS 'RUN:
$. 21
TRANSPORTATION INCREASE:
$.00
CRUDE TARIFF INCREASE:
PRODUCT TARIFF INCREASE: $.00
BASED ON TE
3. ICREASES/DECREASES
IplPORTED CRUDE:
I'rPORTEDPRODUCT:
$.21
- $.21
rNEW OIL:
$.21
OLD OIL: (EFFECTIVE INCREASE)
$.00
4. INCREASE/DECREASE IN
DISTILLA TE
$
$
.1218
.1281
RE SIDUA L
$
.1 9 3 2
5. INCREASE PR KUH ELECTRICITY
OF RESIDUAL FUEL OIL) $.00034
7.
INCREASEF
INCREA SE
ARKET PRICES:
PER GALL ON
PER BARREL
GA SOLINE
ABOVE ESTIMATS:
IN CREASE
$
$
$
.003
.003
.005
(BASED ON 562KWH PR
NCREASF/DECREASE IN COSTS FOR FOUR MAIN SECTORS:
COWIERCIAL:
$145,009
$103,169
ELECTRICITY $128,227
DISTILLATE
RESID UAL
$376 ,405
TOTAL
INDUSTRIAL:
DISTILLATE
$10 ,2148
RESIDUAL
$76,894
ELECTRICITY $168,964
TOTAL
$256 ,106
RESIDENTIAL: DISTIL LATE
$442, 201
$0
RESIDIUA L
E r,ECTRI.TIT
TOTA L,
Y
.$279,831
$722,032
TRANSPORTATION: TOTAL INCREASE: $7,016,167
",t, - ,
INCREASE
I/ICREA SE
I, CREASE
r
r r8f
T77?'Rr Tr'n (7T ( T
RI,RC ):
,3 7 0,710
BARREL
TN0CR0EAS~'
:
$O00
ProDUClT TARIFF INCR, ASE: $.00
CPIIUD? TARIFF
3. INCREASES/DECREASES BASED ON THE ABOVE ESTIMATES:
IMPORTED CRUDE:
$. 21
INCREASE
IMPORTED PRODUCT:
$.21
INCREASE
NEW OIL:
$.21
OLD OIL: (EFFECTIVE INCREASE)
$.00
INCREASE
4. INCREASE/DECREASE IN MARKET PRICES:
PFR BARREL
GASOINE '
DISTILLATE
RESIDUAL
$
$
$
.1218
.1281
.1932
5. INCREASE PER WH ELECTRICITY
OF RSIDUAL FUEL OIL) $.00034
7.
PE,? GALLON
.003
$
.003
INCREASE
$
.005
IN CR A SE
(BASED ON 562KEWHPR
INCREASE/DECREASE IN COSTS FOR FOUR
COMMERCIA L:
INDUSTRIAL:
AIN SE-CTORS:
DISTILLATE
$640,500
RESIDUAL
$966,000
ELECTRICITY $1,299,459
TOTAL
DISTILLATE
$2,905,959
$256,200
RESIDUAL
$1,352,400
ELECTRICITY $1,082,883
TOTAL
RESIDENTIAL: DISTILLATE
$2,691,483
$1,793,400
RESIDUA L
$0
ELECTRICITY $1,516,036
TOTAL
$3,309,436
TRANSPORTATION: TOTAL INCREASE: $7,016,167
TOTALr,
DIRECT TMPACT (INCREASE):
INCREASE
$
$15,923,045
BARREL
DISPLAY OF RESULTS : 1ST SET. OF VALUES.
RQDE
ISLAID
1. VALUES OF THE VARIABLES FOR THIS RUN:
TRANSPORTATION
INCREASE:
$.21
CRUDE 1'ARIFF INCREASE:
$. 00
PRODUCT TARIFF INCREASE: $.00
3. INCCASES/DECREASES BASED ON TIIHE
ABOVE ESTIMATES:
IMPORTED CRUDE:
$. 21
INCREASE
IMPORTED PRODUCT:
$. 21
INCREASE
NEW OIL:
$. 21
INCREASE
OLD OIL: (EFFECTIVE INCREASE) $.00
4.
INCRRASE/DECREASE IN M1ARKET PRICES:
PER BARREL
GASOLINs
$
DISTIJLLTA TE
RESIDUA L
$
5.
INCRRASR
$
$
$
.1218
.1281
$
PER KWH
PER GALLON
.1932
ELERCTRICITY
OF RESIDUAL FUEL OIL)
(BASED
.003
.003
.005
INCREASE
INCREASR
INCREASE
ON 562KW
PR
$.000314
7. INCREASE/DECREASPE IN COSTS FOR FOUR MAIN SRCTORS:
COMMERRCIAL:
DISTILLA TE
RESID UAL
ELECTRICITY
TOTAL
INDUSTRIAL:
$245,568
$661 ,517
$465 ,68
$1 ,372,553
$58,542
DISTILLA TE
RESIDUAL
$279,560
ELECTRICITY
$493 ,657
TOTAL
RESIDENTIAL: DISTILLATE
RESIDUAL
ELECTRICITY
TOTAL
$831,759
$736,319
$o
$52 ,473
$1 ,278 ,792
TRANSPORTATION: TOTAL INCRRASE: $7,016,167
TOTAL DIRECT IMPACT (INCREASE):
$10,499,271
BARREL
APPENDIX
F
r"rr ,r,rc,
;r)rA T7
y
7r.
.
P7rft tzot
.
VALr' c ''
Tr,
VAJT
TA
P R
TRANSPORTATION INCREASE:
1.
J
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rT l
3*
"'VA TF
,)
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7)
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$
.00ol
,$
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$
.
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5
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Tr., (OcT", F
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5170
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TATA
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$9,532,027
$0
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$1R,221 ,361
T1?,4lqP0_PMATT0l':
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$18,6r,5.5r,0
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...
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SA£7
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.:-
1. VA Ir, S 0 '..
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F('7
TRANSPORTATIONINCREASE:
$. 5
tcUD' T? rF" T'A,-:
':CR'
PRO.!lT
3.
TRIFF
'
.!C~AS.:=
S
rIACPAS7S/SPECR5.ASF
T
! r
$. r)o0
.0,0
r T!r' AP nT' rSTIAT
ASDZ
IPORTRFrPr'OUCT:
P7.7 OIL:
F
?T"r."A,)
T 7
TI!'r'P,^2Sp
$ . 25
$. 25
$. 25
rI.'PODO"'
rRVDn:-
OTLP
OIL: (FTIV
rrr
I"'r'A'
I."oTA S:'
$.0
4. I.rP.RAS?/DFCFCP7ASr I:' V.P.'T PPIrS:
PER ?Rr,
rp
.
IAS,
T".T $ .15n $
$
DI.Ir.LATR
.R*SIPUAL
5.
$
IRr'AS? .rR
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-:.!
r
t'
".S!AL, .r'"
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.1525
$
.230n
$
rPlF"CTr'"'y (p/.!
$. r) t41
.005 IT 'RA?"
0"
7. T?1r7PASF/PDC.P-'ASF'
r,rFt U"'
T .'r
FP 'U
T*AL:
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Pr
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,7 .!7n, u n
$3,537, 5 R n
$14,6qn ,5FO
$7 1 2 ,3 7 )
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pR?.SIPUAL.
$.1,, 53
:L, CTPI
....
.r
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RLSCTITV
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$3,7qoq)n7
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$0
PLFCTRI'IT? $4,?6 , nf
TOTAL
TAPrS.ORTA
TIO'.:
TOTAr.
IRt7.T
$8 ,o5-,ni3
TOt'Ar, lrCP.r'AS: $8. 3?1 ,95
IT?'PAC.T(I"(trA.)):
$3r,9qt,773
I
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7' T7
1. VAr,; 'rF
rTDn:
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mVI TJ//p7APTrIP; T'f
$
TRANSPORTATION TNCREASE:
¶, 0
. r
T'(7 PA[
rpporTrTT APIFF
5
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TP?7
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,
.003
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. 005
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,$15 P,nO7
pIS T' T, Ti
,20 , 027
:
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T'T, '
$1, 0 ,23
I
$0 2 , 5 P 0
,$3 , n
P:rSTP".TIAL
:
I . ,T,
nr,'I
PCTO'T
?O
7
v
7 , n 3'7
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A r,
$2,056
I ':
Tv AS P P'TAT
T'
7, T
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TO-"AT,
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$.0
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r2,5ft5
.8,53.,130
4)7'~'
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n(2 5F2 "'
,V1,571 ,250
.T"TST.'TIA
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7.Drn OrA,
41
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7
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$.25
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I'CP?!IS
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PF
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Pr.SIDPUAL
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A
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$
.no04
$
.o05
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$363,R8F
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pnyIcrT,
TAT
,732 ,5R2
$1 ,184,872
TOTALr,
Rr nSI ~ rf
,3n04,075
$841, 470
TOTAL
I"nUST'IAL:
M
T
$1,013 ,R?n
RPSIPUnA
FlCTICITY
TOTAL
TRA?.SPOPTAIO":
TOT
r, I
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$o
$77 0,21
$1 ,784, 034
$1,383,590
"OT'Al,TI"CPFAS!!:
.T'PA T
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$.0ooo1
nIT,)
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.003
$
.1525
.2 3 r'
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7. IrW 7AR"/PAS/
u
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PPICTr7:
.1450
$
$
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$
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,. 2255
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4. Tr'CPrASF/PTC?
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$ .O
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r1p
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$. 2 5
TRANSPORTATION INCREASE:
PRODUCOT?PIFF
*
?
r !5?
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r.lA
(I!".;
):
$5,
193,.
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TRANSPORTATION INCREASE:
.tr)O
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$.°O
P.POUCnTAPIFF r:'?.PAS5:
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PER ?AP!O.r
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r
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TOTAL,
·.
.
.
.
Pr SIPYTIAL: : PIT T T
P.SIT.T'A T,
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$52,, 430
.
0
,¢ 3 33,132
$R5q,562
'AT, Tr':CPAF: $,R80,73
0:
TOTAL DIPFCT I?'PACT (7"r°D.S?):
$2,43,
7
.7
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2Ftr'rt
172, 3
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PrTSIPt'A
rLFCTOI I"v ,7152, 51
TOTAL
T:
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.1450
S/k.PA S
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1>
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$.25
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II
APPENDIX
I
Number of Ships Lost
Country
%Loss Rate*
Greece
26
0.76%
Netherlands
2
0.70%
Italy
9
0.64%
Spain
3
0.58%
Panama
17
0.51%
Liberia
68
0.50%
Norway
18
0.27%
Denmark
1
0.26%
Sweden
1
0.17%
U.S.
9
0.15%
U.K.
11
0.12%
Japan
3
0.06%
France
3
0.06%
West Germany
1
0.05%
U.S.S.R.
0
0.00%
*Loss ratios were obtained for each country by
dividing tonnage lost by tonnage at risk for
the 13 year period 1964-1976
Source: "Loss Ratio for Liberian Tankers Not Highest", Oil and Gas
Journal,
1/31/77,
vol. 75, no. 5, pg. 91
APPENDIX J
AGE DISTRIBUTION OF WORLD TANK SHIP FLEET' )
BY MAJOR FLAGS OF REGISTRY
AS OF DECEMBER 31, 1974
(THOUSANDS OF DEADWEIGHT
TONS)
AGE DISTRIBUTION
Average
Age
FLAG OF
REGISTRY
WESTERN
HEMISPHERE
Panama
United States
1-4 Years
D.W.T. Percent
5-9 Years
D.W.T. Percent
10-14 Years
D.W.T. Percent
15-19 Years
D.W.T. Percent
20 Years
of Total
and Over
Total
Tonnage
D.W.T. Percent Tonnage Percent (Months)
2,999
2,555
31
25
1,174
1,110
12
11
1,675
1,052
17
10
2,178
1,890
23
19
1,639
3,629
17
35
9,665
10,236
100
100
133
175
7,844
3,662
4,611
;2,887
16,035
4,889
17,253
60
23
49
63
51
63
47
2,736
4,174
2,186
989
10,635
2,025
11,680
20
26
23
21
31
26
32
1,414
2,858
734
590
3,340
521
4,588
11
18
13
11
7
12
762
3,609
I,QT7
124
902
243
2,631
6
22
12
3
3
3
7
359
1,844
734
0
211
49
569
3
11
8
0
1
1
2
13,115
16,147
9,342
4,590
31,123.
7,727
36,721
100
100
100
100
100
100
100
61
119
80
54
58
49
66
384
7
1,605
29
2,286
42
817
15
383
7
5,475
100
126
40,821
48
18,644
22
10,090
12
11,027
4,352
5
84,934
100
80
19,496
54
11,876
33
3,511
10
709
2
172
1
35,764
100
56
14,554
40.
9,286
26
4,018
11
4,354
12
3,821
11
36,033
100
91
137,990
46
78,120
26
36,677
12
30,323
10
17,762
6
300,872
100
81
EUROPE-
WESTERN
France
Greece
Italy
Denmark
Norway
Sweden
United Kingdom
8
EUROPE-EASTERN
U.S.S.R.
NEAR EAST
Liberia
'13
FAR EAST
Japan
ALL OTHER
TOTAL WORLD
.
(1) Ocean-going vessels 2,000 gross tons and over.
AUTHORITY: "ANALYSIS OF WORLD TANK SHIP FLEET"
TANKER PRODUCTS
GROUP
SUN SHIPBUILDING AND DRY DOCK COMPANY
SUN OIL COMPANY
.
I..
.
APPENDIX
K
GROSS JOB LOSS RELATED TO CARGO PREFERENCE
1)
Transportation cost increases at least $5.5 billion/yr.
2)
Consumers must ultimately pay this increase.
3)
Therefore consumers' discretionary spending in all other sectors
must be reduced by a like amount.
4)
On average, dividing 1976 GNP ($1.692 trillion) by total civilian
employment (87.485 million) yields the ratio of $19.340/job.*
5)
Therefore,..throughout the economy there will be a reduction of
$5.5 x 109/1.934 x 104 = 284,000 jobs. These lost jobs will
be spread throughout the economy with no way to directly link
them to this legislation. These lost jobs would more than offset
employment gains in the capital intensive shipping industry.
* Source of GNP and civilian employment figures is the January 1977
"Economic Report of the President."
SOURCE: AMERICAN PETROLEUM INSTITUTE
APPENDIX
L
CHART NO. ZU
- -1
WORLD
TANK
SHIP
FLEET
BY FLAG
OF REGISTRY
0
.L
0
500
420
4_
-
-_
_
_
rO
TL
W019t 0
_
j
o I _.
DeGolyer - and
" SOURCE:
1960
1970
1975
1980
MacNaughton,
Statistics,
Io .o 20th
IA Century Petroleum
__
_ _
_ _1197I_ _ ____
I
1960
65
-65
=
1
'I
S,
ooI-.
I
_
_
I
I
.. _
1970
1
1910119
SOURCE: DeGolyer and MacNaughton, 20th Century Petroleum Statistics,
197~
i
i
-·
i
WORLD TANK SHIP FLEET BY FLAG OF REGISTRY AS OF DECEMBER 31, 1974
OCEAN-GOING
!
-A
Flag of Registry
No.
NORTH AMIERICA, T()TAL
Canada
Mexico
United States
354
22
26
306
SOUTHI ALMERICA, T()TAI,
Argentina
Brazil
Panama
Venezuela
Others
WESTERN EURO'IE, TOTAL
Denmark
France
Germany, West
Greece
Italy
._
I
VESSELS2,000 GROSS TONS AND OVER
Netherlands
Norway
Spain
Sweden
United Kingdom
Others
Egypt
liberia
Others
MIDDLE
Iran
EAST, TOTAL
Iraq
Kuwait
Turkey
Others
FAR EAST AND OCEANIA, TOTAI,
Australia
India
Indonesia
Japan
Kore:L
Singapore
Others
SINO-SOVIET C)U.NTRI'S, , TOTAL
China
Cuba
U.S.S.R.
Eastern Europe (excluding U.S.S.R.)
TOTAL WORLD
10,95
31.000
267
462
10,236
12,200
17,800
33,400
13.48{I
890
1,.)48
38,200
17,400
11,270
173
299
5,7!98
7.852
598
1,119
5,498
314
323
1,972
48
146
60
344
174
72
353
86
84
469t
136
75,294
2,428
7,172
2,830
9,00!)
5,316
2,0!90
16,835
2,5)96
4,143
20,299
2,576
13,115
5,262
16,147
9,342
1,0i3
20
44,501
112
109
43,!127
353
32
5
7
5
14
1
760
56
150
316
221
17
586
15
33
12
384
28
31)
484
32
5
3!)2
55
4,878
AUTIIORITY:
Average
I).W.T.
353
51
42
221
18
21
1,097
6
8
AFRICA, TOTAL
Algeria
Gross Tons D.W.T.
(000'ss)(000')
43,700
26,100
868.0
54.9
125.3
625.1
29.7
4.3
0.3
0.6
3.2
136.592
69.300
4,590
95,600
89,800
87,700
8.830.3
293.9
855.7
340.1
1,035.0
617.8
233.5
3,636
31,122
4,626
7,727
36,721
4,304
46,900
53,700
50.500
88.200
53,800
2,021.3
293.9
504.2
0.1
0.1
3.6
0.1
0.1
45.4
1.5
4.4
1.7
5.3
3.2
1.2
10.4
1.5
2.6
12.2
1.4
!)2,000
78.300
2,363.0
31,600
271.9
85,859
146
171
84,934
608
78,300
5,552.4
10.0
10.1
5,49!4.8
37.5
28.6
1,2!)4
86
246
581
354
27
40,400
17,100
85.1
5.6
16.1
3!9.0
0.4
5,405
404
49
3,791)
1,153
8,153
652
73
5,475
1,953
T.ANKl:1 1'I())UC(,T
3.8
33.0
44,520
"ANALYSIS O(F WORtL,DTANK
733.8
15.8
28.0
690.0
24,500
516
24,871
277
1,057
58
19,866
664
1,1!94
1,755
164,953
46,400
T2-SE-AI
Equivalents
Percent
of World
No.
447
1,825
86
35,764
1,204
2,098
3,096
300,872
24,300
21,400
79,900
30,400
35,100
116,200
0.1
0.1
28.2
0.2
0.0
0.1
0.2
0.1
25,300
27,000
22.6
1.8
0.0
76,000
29,800
55,300
7,200
93,100
43,000
2,870.0
14.8
0.2
5:3,800
41,330
28.4
116.9
4.7
2,312.7
75.9
*135.2
196.2
0.6
0.0
11.9
0.4
0.7
1.0
2.7
14,600
14,000
35,500
513.5
40.:
4.8
342.7
125.1
61.700
19,453.1
100.0
11,800
20,400
SIIP FLEET"
GI(OSUP
ANI) I)RY I)OCK COMPANY
SUN SIIIIPBUII)ING
SUN Oil, CO.MPIANY
0.2
0.0
1.8
0.7
CHART NO. 23
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UNDER
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SHIP
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OR ON ORDER
AT
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CONSTRUCTION
END
YEAR
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2205*
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AVERAGE
SIZE'
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0...00
Ir.m
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1960
40000
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SQ.!:..;W
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_______
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1965
1970
i i
1975
·
1980
Source; DeGolyer and MacNaughton, 20th Century Petroleum Statistics, 1976
.
I
,,~~~~~~~~~~~~
19?5
23
ANALYSIS
OF TANK SHIPS ON ORDER OR UNDER CONSTRUCTION
AS OF DECEMBER 31, 1974
OCEAN-GOING
VESSELS 2,000 GROSS TONS AND OVER
No. Ships
D.W.T.
(000's)
Average
D.W.T.
Percent of
Total D.W.T.
Deadweight Tonnage Analysis
0.8
5.1
225
219
17,126
29,744
9.6
16.7
76,100
135,800
394
156
20,000 to 50,000 D.W.T.
280
50,000 to 100,000 D.W.T.
100,000 to 200,000 D.W.T.
200,000 D.W.T. and Over
Total
9,400
1,473
9,074
Under 20,000 D.W.T.
-
32,400
121,004
67.8
307,100
1,274
178,421
100.0
140.,000
73
39
55
48
114
312
178
35
35
83
56
246
1,274
7,684
6,889
8,041
5,953
16,987
54,625
26,848
4,712
5,920
11,292
2,039
27,433
178,421
4.3
3.9
4.5
3.3
9.5
30.6
15.1
2.6
3.3
6.3
1.2
15.4
100.0
105,300
176,600
146.200
124,000
149,000
175,100
150,800
134,600
169,100
136,000
36,400
111,500
140.000
73
21
64
55
47
487
26
78
50
107
45
23
198
1,274
7,684
4,601
8,448
10,092
4,620
83,156
2,524
7,085
9,325
16,339
5,790
1,365
17,392
178,421
4.3
2.6
4.7
5.7
2.6
46.6
1.4
4.0
5.2
9.2
3.2
0.8
9.7
100.0
105,300
219,100
132,000
183,500
98,300
170,700
97,100
' 90,800
186,500
152,700
128,700
59,300
87,800
140.000
Intended Flag of Registry
United States
France
Greece
Italy
Japan
Liberia
Norway
Panama
Spain
United Kingdom
U.S.S.R.
Others
Total
Country of Construction
United States
Denmark
France
Germany, West
Italy
Japan
Netherlands
Norway
Spain
Sweden
United Kingdom
U.S.S.R.
Others
Total
AUTHORITY: "ANALYSIS OF WORLD TANK SHIP FLEET"
TANKER PRODUCT GROUP
SUN SHIPBUILDING AND DRY DOCK COMPANY
SUN OIL COMPANY