[ReverseEngineer]

$this->bbcode_second_pass_quote('cube', 'T')here's a lot of people here who think just because they are PO aware they must have the amazing ability to predict the future. There's a lot of stupid ideas and theories that have been proposed on this website. That's what debate is for.
To weed out bad ideas from the good.
Hopefully I have not proposed too many bad ideas myself.

BTW here's a post I made awhile back.
It's "only" 1/3 rd of a page long and it is related to shipping.
The last mile and PO

[skeptik]

$this->bbcode_second_pass_quote('BlueGhostNo2', ' ')This is vs Bill saying container based shipping will continue more or less as it is for a long time to come although they might switch to burning other fuels, no problem as they can burn pretty much anything.

[yesplease]

According to this and recent prices from Google's new search feature dealy, bunker fuel only accounted for ~5% of transportation costs as of 2006. After doubling as of recently, that's still only a ~5% increase in shipping costs, which is undoubtedly a much smaller part of the overall cost. If anything I'm guessing that the return of manufacturing in the US has more to do w/ the consistent 30% devaluation of the dollar compared to historic norms. I suppose LTL shipping could be impacted the most, possibly to the point where moving locally would be advantageous, provided their margins were tight enough, but for the most part globalization is here to stay short of something catastrophic IMO.

[ReverseEngineer]

$this->bbcode_second_pass_quote('skeptik', '')$this->bbcode_second_pass_quote('BlueGhostNo2', ' ')This is vs Bill saying container based shipping will continue more or less as it is for a long time to come although they might switch to burning other fuels, no problem as they can burn pretty much anything.

[cube]

$this->bbcode_second_pass_quote('GASMON', 'T')he Southampton to Glasgow container train passes my house at around 10pm every day. Allways nearly full, mostly chinese / german boxes. God knows the cargo, but there heavy, this long train passes at about 80mph with 2 electric locos on front. Makes ornaments in my house shake a little.

Other freight trains seem longer & heavier too. No economic downturn here, yet, judging from passing freight trains.

Gasmon

[ReverseEngineer]

$this->bbcode_second_pass_quote('cube', 'a')hh but how much of this demand for shipping is based on the "free market" vs. "government manipulation".

How much demand for global shipping would there be if China were to stop artificially lowering the value of it's currency to remain export competitive?
Furthermore, it's not just China but east Asia in general doing this. This is what I mean by government manipulation.
I think it's a safe bet the collapse of the US dollar would lead to "peak shipping". Whether this happens in 3 years or 30 who knows? How much longer will those freight trains continue to rumble past your house Gasmon is anybody's guess.

[MrBill]

I hope no one interpreted my comments to mean that I believe there will be more container traffic in a post peak oil world? A decline in world trade would, of course, require fewer ships. The switch to larger ships, containers, intermodal transport and automated ports is in response to higher fuel costs and the search for efficiency gains to offset those higher costs.

But looking back at trade patterns during the merchantile period we see trade in low volume, high value products like coffee, tea, tobacco, etc. Bulky, low value goods were produced locally or sourced regionally and/or they were only available seasonally or in very limited quantities.

I do not happen to believe that we will run out of oil in the next 10 or 20-years. And I believe any die-off as the case may be will be more by attrition and declining birth rates. But these opinions of mine are a separate discussion. The difference between now and 1750 is not only do we have more than 10-times more people to support, but we are also facing over-fishing, collapsing wild fish stocks and marine habitat destruction, so it is not just peak oil that we are struggling with, but climate change and other survival issues at the same time. A return to the past is not currently an option.

My point was that IF you believe the whole world will run out of oil at roughly the same time; AND if you believe there is no alternative; AND if you believe that this will cause a fracture in, for example, agriculture and our ability to generate an agricultural surplus; HENCE the die-off; THEN there will be no demand for container ships, but also no demand for sailing ships either.

I do not believe that is the case. Some have suggested that we will have alternative sources of energy. We have no shortage of energy, but we do have a limited ability to convert sunshine into usable energy. Especially liquid transport fuels. However, stationary power is less of an issue. Ports can run on stationary power. Even if labor costs were very low a man simply cannot do the work of a machine as efficiently. As men need to be fed and housed in order that they can work you have to count the amount of food and the number of calories in order that they can perform that work, and compare it to the amount of calories that are needed to run a machine that can be turned off and on only as needed and does not have to be 'fed' when it is not producing any useful work. That is work that produces some positive economical value.

The switch from draught power to the internal combustion engine had the effect of freeing up approximately 25-percent of all agricultural production from animal feed for draught power to food production. An enormous jump in productivity that lead to lower food prices and subsequently higher living standards. As fuel prices rise, so do the costs of food and ferilizer. We start to give back some of those gains. As we have to spend more for food and fuel we have less disposable income for all other purchases. As we start to devote more arable land to the production of bio-fuels that have a lower EROEI than petroleum, for example, then we lose more of those productivity gains. Fuel, food and fertilizer become relatively more expensive. And living standards slip again.

We can only offset some of that loss in productivity if we have reliable sources of renewable alternative energy. If not, then living standards will irreversibly decline. A net loss of our ability to produce food combined with food, fuel and fertilizer being more expensive in absolute terms mean less disposable income and therefore less trade. Less trade, less demand for ocean going vessels. Fewer fish, fewer fishermen.

However, where any residual demand exists in a post peak oil world then a larger ship sailing less often is still economically more efficient than many smaller ships sailing more often. Even if it calls on a port less often. And containers are more efficient than bulky transport. Especially, if sources of alternative energy are found. Whatever changes in technology that we make on land will find their application at sea as well.

Therefore, as far into the future as I can see intermodal transport using ships, containers, barges and rail will be the predominate economic model. That means the bulk of our economic activity will take place in clusters around sources of renewable energy - hydro, wave, wind, geothermal, solar, nuclear, bio-fuels, etc. - and along coastal ports and inland waterways. Inland agriculture will be connected to ports by rail.

In poorer countries where they cannot maintain that infrastructure and/or they cannot produce anything of value to trade with there will be wide spread misery as food, fuel and fertilizer all become more expensive. Some of these countries may evolve, say becoming large producers and exporters of bio-mass, but that is far from a given seeing their current state of development even now with as yet abundant fossil fuels.

No one can accurately predict the future. There are too many variables and feedback loops. However, the value of scenario planning is in the analysis. Assiging probabilities to each outcome. But more importantly identifying the red flags. One of the biggest red flags we have identified is will there be economical sources of alternative energy in whatever shape or form in reasonable quantities? Change that assumption and the outcome changes.

But basically anyone that has not been able to successfully predict and act on economic developments, say in the last 5, 10 or 20-years, probably does not have any special or accurate insights into what will happen in the next twenty years or a century either. Just my opinion. I am just hear to learn from others that may have their own little piece of the overall puzzle. Like nobodypanic's concept ship. Will it ever get built? Who knows, but someone out there is thinking about it, so that is already a first step.

[ReverseEngineer]

<I do not happen to believe that we will run out of oil in the next 10 or 20-years. And I believe any die-off as the case may be will be more by attrition and declining birth rates. But these opinions of mine are a separate discussion.>

For the most part we agree Mr Bill. I also do not think that the majority of the die off will come in a catastrophic form, but comes more gradually through attrition. There probably will be some blips in this die off from War or Disease, comes faster for while but overall it matches the general lifespan at least to the 50 year age range. The number of really old folks we currently support through expensive medical care though cannot be supported long. An interesting question is how many people in America are say 70 or above? If we just removed them from the population, how far back into balance do we get? Knocks off the Social Security and Medicaire problems pretty quickly. LOL.

Basically, to get at least a short term balance, I would bet if all the people 70 or above comitted volutary suicide, we would go a long way to resolving our economic problems. They aren't producing, they are a drain on society. Old folks need to DIE sooner. Love my mom who is 80, but really the amount of money in Medicaire these days it takes to keep her going is ridiculous. I personally will walk into the Soylent Green recycle bin the minute I am no longer productive in society.

<My point was that IF you believe the whole world will run out of oil at roughly the same time; AND if you believe there is no alternative; AND if you believe that this will cause a fracture in, for example, agriculture and our ability to generate an agricultural surplus; HENCE the die-off; THEN there will be no demand for container ships, but also no demand for sailing ships either.>

Here we do not agree, at least in these propositions which I realize are not what you believe, just what you state in abstract. I don't think that you see an immediate dropoff, rather I think it takes some time to occur. Some global systems will fail, but intermediate systems will not. One thing for sure though, total volume of trade has to decrease here and as it does in terms of what works in the shipping biz you over time work away from the large container ship down to smaller vessels. Powered by sail or bunker fuel who knows, but the ships just HaVE to be smaller to be economic if the overall volume gets smaller.

You have two choices, you can WAIT to fill up a big ship until its full enough to justify a voyage, or you can send out a smaller ship immediately since it fills quickly. If the volume is large, the big ships are more economic. Samll volume, small ships are more economic, that is obvious. Samll ships also have the advantage or being able to hit small ports. they are more flexible in this way.

As long as you do not think the failure will be catastrophic but rather a gradual devolution, then it definitely is true that the same technologies which worked on the upslope work on the downslope also, yo move toward them gradually as the movement in the reverse direction was done gradually. You would have to accept catastrophic failure to make the argument that the same structures which worked in 1750 would not work in 2050. You argue against the likelihood of catastrophic failure though, so it seems to me you have to accept that small vessels can trade economically as the volume decreases. Or am I missing something? LOL.

Reverse Engineer

[MrBill]

I suppose if I had to argue, that I would argue that a hub and spoke inter-continental intermodal shipping model combines large vessels with smaller feeder vessels and trans-shipping.

When I used to work in the grain business we used all forms of transport. There was no either or. We used trucks, railcars, barges, lakers and large ships. Lakers (10k-40k tonnes) used to take smaller loads down the Great Lakes where they were then cross-loaded onto larger vessels bound for Europe (or ME). It was not cost efficient to send a smaller vessel in place of a large ship.

Again in ARA the larger ships were then cross-loaded onto barges, rail or truck for their onward journey to end user. But we also shipped specialty grains like feed peas in containers as the cargo sizes were much smaller. Many of these boats are self-loaders/unloaders so they require less port infrastructure.

We could run large trains with 100, 200 or more railcars filled with grain from Canada to the Gulf in direct competition from barge freight on the Mississippi. However, to be fair that was comparing on price alone. If there were any hidden subsidies I do not know? The rail companies may have offered such low rates on a loss leader basis to increase volume and reduce their fixed costs per tonne of freight? Or they wanted to use excess capacity? Regardless, as a grain trader for import and export you are watching all freight markets, and you move the cargo in the most efficient and/or economical manner to minimize your costs and maximize your profits.

My friend that studied shipping and works here for the largest shipping company on the island tells me that there is no way that rail can compete with water when all subsidies are taken into account. Just like trucking cannot compete fairly with railroads over distance either. But then bunker fuel is normally sold without any taxes on it, and ports are often subsidized as well, so to get the real, true picture we have to back those subsidies out so we are comparing likes to one another.

But in a post peak oil world energy will be more expensive in absolute terms as petroleum is replaced with less efficient alteratives that will increase the cost to generate and supply energy, but also we may have less net available energy, so both factors will affect the size of the economy, the economics of long-distance transport and the level of trade between nations.

[ReverseEngineer]

$this->bbcode_second_pass_quote('MrBill', 'I') suppose if I had to argue, that I would argue that a hub and spoke inter-continental intermodal shipping model combines large vessels with smaller feeder vessels and trans-shipping.

[MrBill]

Apparently you can run Lakers in fresh water for 70-100 plus years, so you can convert existing ships for other purposes. However, saltwater is much more corrosive, so after twenty or thirty years the ship is a write-off. It either needs to be melted down or abandoned depending on the cost of new steel versus the cost of recycling. If left to rot then rust will make the steel all but unusable.

Therefore, any prolongued disruption in intercontinental shipping would by necessity followed by the need to start from scratch as far as shipping fleets go. However, even in times of turbulence there will be an ad hoc need for ships and transport, so those still left in commission will be able to charge a hefty premium, whether that premium is paid in money or goods in kind.

[Tanada]

$this->bbcode_second_pass_quote('MrBill', 'A')pparently you can run Lakers in fresh water for 70-100 plus years, so you can convert existing ships for other purposes. However, saltwater is much more corrosive, so after twenty or thirty years the ship is a write-off. It either needs to be melted down or abandoned depending on the cost of new steel versus the cost of recycling. If left to rot then rust will make the steel all but unusable.

Therefore, any prolongued disruption in intercontinental shipping would by necessity followed by the need to start from scratch as far as shipping fleets go. However, even in times of turbulence there will be an ad hoc need for ships and transport, so those still left in commission will be able to charge a hefty premium, whether that premium is paid in money or goods in kind.

[MrBill]

Hi Tanada! Yes I stand corrected. Of course, that assumes the vessel is well-maintained. Canada still uses some of its WWII-era naval vessels. Mind you they spend a lot of time being maintained and there is no commercial reason to maintain them. If there is no economic need for a vessel, however, then there is no income coming in to pay for that needed maintenance. We were talking about a cessation of economic activity for one reason or another.

Secondly, corroded steel can be reworked, but not steel that has rusted through due to the salt air. So if a ship is taken out of service its salvage needs to take place before it rusts away. The sooner the better. But that also means dealing with contaminants (hopefully), so again whether a ship gets recycled depends on the demand for steel, and the cost in terms of energy and manpower to recycle it compared with new steel. All factors to consider.

[CarlosFerreira]

If we consider all but the hardest of declines, like a massive die-off situation, bunker fuels made out of renewable sources (yes, I am talking plant derived fuels, like soy oil and stuff - please don't shoot me) will likely be available. That would be a source of trash recycling, wouldn't it?

My guess is that most reduction will come from demand destruction in western countries, because of increased costs of food, energy and basic needs. I'll even go as far as saying most shipping towards western countries will be of raw materials needed (food, water, stuff people need to live on) or the odd consumer product. In essence, due to rising prices, only cargoes with a high value will make sense.

This hits home with my concept of simpler, more local living. What do you guys think? The very first conclusion is that unnecessary consumer goods ("grown up toys") will be available, but rarer and MUCH MORE EXPENSIVE. That follows the past availability of consumer goods before globalization, here in Portugal: you wanted a nice VCR in 1980? Sure, there were shops that had them for sale - if only people could afford them. People couldn't, of course. The fight back then was to change the 1960 black and white TV. The second conclusion is that Asian countries, whose economies are highly dependent of a positive trade balance, might just get the sharp end of this.

[cube]

$this->bbcode_second_pass_quote('CarlosFerreira', 'I')f we consider all but the hardest of declines, like a massive die-off situation, bunker fuels made out of renewable sources (yes, I am talking plant derived fuels, like soy oil and stuff - please don't shoot me) will likely be available. That would be a source of trash recycling, wouldn't it?

[CarlosFerreira]

Yes, I agree. I read before that fuel costs were in the vicinity of 5% costs of shipping, so there's no rush in pouring soy milk into the fuel tanks of ships. I was pointing at a situation where there are potential shortages - shipping will not stop because of the "end", or unavailability, of oil. Although the all-renewable ship you (?) posted above was really interesting, maybe a substitute bunker fuel, from renewable sources, could be developed and available within interesting prices, which would help offset the cost increase of transported goods, even if that's just in a few percent.

My point is that reduced shipping will probably not come from the costs of shipping itself, which have been shown to be quite low, but from economic downturn.

Shipping may be a very efficient activity, and could maintain most of that efficiency, but the Last Mile, the increasing cost of extraction of raw materials - all those activities will be losing efficiency, causing a price increase and therefore reducing demand, in positive feedback.

[Canuk]

$this->bbcode_second_pass_quote('ReverseEngineer', '
')As we spin down, no doubt intermodal shipping will morph into some form suitable to whatever economic activity is going on...

[MrBill]

Thanks for those links, Canuk. I remember reading about how the container revolutionised shipping, but it is nice to find a source for the information again. Cheers.

RE: grain from Manitoba to Texas. Not really a natural flow.

One, exports of wheat, oats and barley from Alberta, Saskatchewan and Manitoba are handled (at the moment) exclusively by the Canadian Wheat Board (CWB). So most Prairie grain gets shipped west-east for export out of Vancouver, Prince Rupert, Thunderbay or Churchill and not north-south of the 49th.

Secondly, yields on the Prairies for wheat, oats and barley as well as canola (rapeseed) do not approach yields of corn and soybeans in the Midwest. One we have a shorter growing season. Not enough heat units for feed corn. And secondly, we have less irrigation, so our yields per acre are generally lower. Comparing dryland farming in Manitoba for wheat to irrigated corn production in Iowa dramatically so.

Thirdly, as the Midwest is located near the Ohio and Mississippi Rivers the natural way to move corn or soybeans to Texas would be via barge, although I suppose that would compete with train as well? But I doubt rail from Canada can compete with rail from the Midwest.

Most corn and soybeans grown in Canada are in Ontario that is further south, gets more heat units per year and has a more favorable climate. There is two way border trading with corn and soybeans moving both north and south depending on the year, supply and demand, cost of local transport and price. Most of the corn and soybeans that moves from Ontario to Quebec is by truck, but rail is an alternative. To the Maritimes by rail mainly. Fishmeal from the east coast is one backhaul for the animal feed industry.

North-south exports to the Gulf of Mexico would be either hard red spring wheat for bread making or soft spring wheat for making pastas. But again from western Canada only by the CWB monopoly. Whereas from Ontario it might be the private grain companies. Some specialty grains like heavy feed oats get cleaned and polished in Ontario and then exported to places like Kentucky for the racehorse industry.

That is perhaps a little too much detail, but just to illustrate that the logistics are quite complicated, but that there is an almost seamless interconnection between truck, rail, barge, laker and ship when moving grain. It is not an either or decision, but one based on price. In the future it might be based on price and availability of fuel. The last numbers I saw - and they may be out of date by now - is that for 50-cents per bushel you can ship grain across the continent and for another 50-cents send it to another continent. If I have the chance I would be interested to know if those numbers are still close to reality?



This graph just shows that wheat prices have sunk 16% year to date so far. Despite higher fuel and fertilizer prices, and the increased use of corn for bio-fuel. Wheat generally trades at a premium to corn as corn is primarily an animal feed whereas wheat is mostly used to make bread or pasta for human consumption. That relationship does not always hold, but overtime it has shown to be quite stable.

I think it just goes to prove that when we speak of the consequences of higher fuel prices on food and fertilizer that it is much more complicated then we might assume. Add in freight differentials and the picture gets much more complex. Projecting these relationships - import, export, domestic consumption, grain versus meat production, etc - into the future is not so black and white.