Much has been said about the concerns of a tonnage surplus developing across several sectors in the shipping industry. The growing trading inventory of tankers, bulkers and containerships is a topic of spirited discussion in the market today. Thinking optimistically, 90% of world trade is carried on ships, and the existence of a modern, abundant merchant fleet will underpin growing world trade with an ample supply of vessels as the global economy gains momentum and sustains a trajectory of sustained growth.
Contrary to popular opinion, nothing has materially changed in the US crude export policy after the recent Commerce Department ruling granting Enterprise Product Partners and Pioneer Natural Resources licenses to export a refined condensate. However, the ruling may be the beginning of a process to do just that. The US shale oil revolution has been made possible by rising crude prices making it economical to extract unconventional oil using fracking technologies. The increased production; however, has been unable to reach domestic or in some cases, Canadian refiners without the steep discount required to mitigate the mismatch in refinery configurations (PADD III) and transportation costs (PADD I and PADD V). In this note, we take the opportunity to summarize the historical and current developments surrounding the US ban on crude exports and share some thoughts about a relaxation of the policy going forward.