Dr. Sal Mercogliano, a maritime historian, reviewed four big stories this week. One of the most interesting is the EU’s cap on Russian oil. After all the threats, it is meaningless right now, and we’re glad about it. Too many people would suffer and even die.
RUSSIAN OIL CAP
The European Union is banning the import of crude oil produced by Russia by sea. Some exemptions, like Bulgaria, can ship it by pipeline. Overland oil by Russia will be sanctioned in February. The oil cap is not impacting Russia because they trade under $60. So, everything is flowing as it was.
The big key here is insurance. International companies won’t insure, and while Russia has its own insurance company, not everyone recognizes it. In any case, it doesn’t matter since Russia is below $60 a barrel.
In other words, the cap is moot at this point.
SHRINKING PORTS OF LA AND LONG BEACH
Shipping is sailing past the West Coast to the East Coast instead of to Long Beach and LA. Only a third stays on the West Coast. A lot of it is their own doing. The law went against independent truck drivers; emission standards removed a batch of drainage trucks from the pool that can move cargo; the threat of hyper demurrage when LA and Long Beach had allowed cargo to sit on their terminals for years; and the inefficiency of some of the ports there [ill-conceived union contracts?].
It’s cheap to send to LA, but it’s a reliability problem.
These are still the largest ports and aren’t going to disappear.
Russia has been hitting Ukrainian infrastructure, especially power, which is hampering the movement of grain. The Port of Ukraine was shut down on Sunday. Russia is slowing down Ukraine’s exports. The war is escalating. The danger is neutral powers could enter the war, greatly affecting shipping.
Dr. Sal also discussed tanker issues and illegal shipping using slave workers. He hit on the Jones Act problems at the end.