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The Ready Reserve Force had seven tanker vessels that carry petroleum, oil, and lubricants. As of 2003 product tanker capacity was woefully short for future government and military operations abroad. Maersk Sealand consequently re-flagged its 35,000-deadweight-ton Maersk Rhode Island from UK-flag to US-flag under expedited reflagging procedures.

Tankers are exactly what the name implies. They are a series of tanks welded together to hold some liquid product. The most common is the oil tanker. Tankers will range in size from less than 100 feet to over 1,000 feet in length. These larger ships are generally referred to as "Super-Tankers" and they displace over 400,000 tons. Although oil tankers are most familiar, tankers also serve other purposes in transporting coconut oil, molasses, water, and other liquid products. The smaller tankers may work along coastal communities and supplies gas and fuels, or provide drinking water for some islands.

Tanker traffic in U.S. waters will increase substantially by 2020 as U.S. oil imports rise. Increasing energy demand in the United States and decreasing domestic petroleum production will drive oil imports from 46 percent of U.S. petroleum consumption in 1996 to 66 percent in 2020. The demand for increased oil imports will be met with more transits rather than growth in tanker size. Domestically, Alaskan oil production will decrease, while oil drilling in the Gulf of Mexico will move farther offshore. These trends will bring accompanying changes in tanker movement patterns. By 2020, more foreign tankers will be entering U.S. waters, especially the Gulf of Mexico. The Gulf will be the area of primary activity for two reasons. First, most of the U.S. oil refining capacity is in Gulf ports. Second, increased deepwater oil production in the Gulf likely will require tankers as well as pipelines to move oil ashore. On the West Coast, fewer U.S. tankers will be transiting from Alaska to refineries in Southern California, because of the drop in Alaskan oil production. However, there will be more foreign tankers bringing oil to West Coast refineries.

The contribution of shipping to the growth and prosperity of the global oil industry has been immense. Shipping has been (and still is) an integral part of the development of the oil industry for the simple reason that the main centers of oil demand tend to be a considerable distance away from the producing areas, and that shipping offers the most economical and most flexible way of transporting oil in bulk.

More than two-thirds of oil consumed worldwide is transported by sea from the producer to the consumer in a dedicated fleet of 2,619 tankers totaling 294 million deadweight tons (dwt). While the oil trade is dominated by the world's super-majors, independent oil companies, traders and refiners, the vast majority of shipping is done by independent shipowners.

Fire safety provisions are much more stringent for tankers than ordinary dry cargo ships, since the danger of fire on board ships carrying oil and refined products is much greater. It is not just fire which is dangerous - in certain circumstances a single spark can cause a disaster, for even tanks which contain no oil are filled with flammable gas which can explode unless proper procedures are followed. The normal method is to fill these tanks with inert (non-explosive) gas from the ship's boiler flue: it is cleaned and then pumped into the empty tanks, or into the spaces left above the oil in loaded tanks. An inert gas system is required on all new tankers and most existing tankers of 20,000 dwt and above.

Ranging upward from 900 feet in length, they are some of the largest ships ever built. Such large ships are not very maneuverable. Many ships make this maneuverability even worse by having only one rudder and propeller. Historically the ships have been little more than powered oil tanks. Between their cargo and the sea there was only a single steel skin.

Bulk shipping markets in general, and the tanker market in particular, are highly cyclical. The balance between vessel demand and supply drives day-rates. Add market psychology to the mix, and it is no surprise that tanker rates can be quite volatile. During periods of high volatility, day-rates can move by 50 percent or more within a few days. While revenues can fluctuate significantly, most shipping companies have a high proportion of fixed costs. In these circumstances, well capitalized companies with strong balance sheets have an advantage.

International shipping is heavily regulated. As a result of shipping's inherently international nature, regulations concerning the industry are developed at a global level. It is vital that companies worldwide are subject to uniform regulations on matters such as construction standards, navigational rules and standards of crew competence. In the shipping industry, the principal regulator is the International Maritime Organization (IMO), which is the United Nations agency responsible for the safety of life at sea and the protection of the environment. In recent years, safety and quality standards covering the seaborne transportation of crude oil and petroleum products have been raised significantly and mandatory international regulations have become much more stringent. This requires continuous investment in systems, equipment and training, an area on which large, public companies can focus.

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One Billion Americans: The Case for Thinking Bigger - by Matthew Yglesias

Page last modified: 07-07-2011 12:59:39 ZULU