Month: July 2009

If you have heard of the Northern Lights, then you may know that they’re generated by electrical currents from the earth’s surface (both sea and land). Telluric current is the name for these naturally occurring low-frequency electrical currents. Oil companies examine the currents when analyzing petroleum reserves.

There are two modes of transportation for inter-regional trade: tankers and pipelines. Tankers have made global (intercontinental) transport of oil possible, and they are low cost, efficient, and extremely flexible.  Pipelines, on the other hand, are the mode of choice for transcontinental oil movements. Not all tanker trade routes use the same size ship. Each route usually has one size that is the clear economic winner, based on voyage length, port and canal constraints and volume.   Thus, crude exports from the Middle East — high volumes that travel long distances — are moved mainly by Very Large Crude Carriers (VLCC’s) typically carrying over 2 million barrels of oil on every voyage.  The VLCC’s economies of scale outweigh the constraints imposed: they are too large for all the ports in the United States except the Louisiana Offshore Oil Port.  Thus, they must have some or all of their cargo transferred to smaller vessels, either at sea (lightering) or at an offshore port (transshipment).  In contrast, ships out of the Caribbean and South America are routinely smaller and enter ports in the United States directly.  Because of such ship size differences, a long voyage can sometimes be cheaper on a per barrel basis than a short one. Pipelines are critical for landlocked crudes and also complement tankers at certain key locations by relieving bottlenecks or providing shortcuts.  The only inter-regional trade that currently relies solely on pipelines is crude from Russia to Europe.  Export pipelines are also needed for production from the Caspian Sea region, where the protracted commercial and political debate illustrates the greatest negative for pipelines crossing national boundaries: their political vulnerability. Pipelines come into their own in intra-regional trade.  They are the primary option for transcontinental transportation, because they are at least an order of magnitude cheaper than any alternative such as rail, barge, or road, and because political vulnerability is a small or non-existent issue within a nation’s border or between neighbors such as the United States and Canada.  (Pipelines are also an important oil transport mode in mainland Europe, although the system is much smaller, matching the shorter distances). The development of large diameter pipelines during World War II allowed the development of the vast pipeline network in North America that moves crude oil and product within Canada, from Canada into the United States, and within the United States.  Domestically, the 200,000 miles of pipelines account for about two-thirds of all the oil shipments, when adjusted for volume and distance. 

Lengths of pipe may expand with varying temperatures of the flowing crude oil.