free html hit counter Peak Oil Debunked: 55. WILL PEAK OIL MAKE LONG DISTANCE SHIPPING TOO EXPENSIVE TO CONTINUE?

Wednesday, August 24, 2005

55. WILL PEAK OIL MAKE LONG DISTANCE SHIPPING TOO EXPENSIVE TO CONTINUE?

MYTH: The rise in fuel prices occasioned by peak oil will make it too costly to transport food over long distances. Food production will have to be relocalized. As the peak oilers say: "The 3000-mile salad will be a thing of the past".

REALITY: A kilogram of rice (in Japan, where I live) costs about $3.64. The fuel cost of transporting this rice by container ship, at current fuel costs, over a distance of one-half the circumference of the earth, is about $0.015 (one and a half cents). Ship fuel accounts for 0.4% of the cost of the retail product.

So let's look at how fuel costs for long-distance shipping will affect the price of this bag of rice as oil prices skyrocket:

If crude=$65/barrel, rice=$3.64/kg
If crude=$130/barrel, rice=$3.655/kg
If crude=$260/barrel, rice=$3.685/kg
If crude=$2600/barrel, rice=$3.775/kg

Clearly, demand destruction is going to occur long before crude costs make long-distance shipping too expensive. Fuel costs for long-distance shipping are a minute fraction of the retail price of food.

==== CALCULATION DETAILS ====

Shipping is by far the most energy efficient method of moving goods around. Careful analysis has found that a long-haul truck uses between 0.7 to 1.2 megajoules per tonne-kilometre , while a train hauling a load of freight wagons consumes around 0.6 megajoules per tonne-kilometre. A fairly fast ship carrying around 25,000 tonnes of cargo at 18.5 knots uses only 0.12 megajoules per tonne-kilometre.Source

Using the above figure, we need 0.12 million joules (= 120,000 joules) to move 1 tonne (= 1000kg) a distance of 1km by cargo ship. This means it takes 120 joules to move 1kg over 1km.

The circumference of the earth is roughly 40,000km, and half of that (20,000km) is a good upper limit on transport distances. (If you were going to travel further, it would be shorter to go the other way around.)

To move a 1kg bag of rice 20,000km will, therefore, take (120)(20,000)=2.4 million joules.

Converting this to btus (using the nifty conversion calculator listed in the "Links" section on this page), we get: 2275 btus.

One barrel of residual fuel oil contains 6,287,000 btus. (Source)

A barrel contains 42 gallons, so one gallon of residual fuel oil contains about 150,000 btus.

The price of residual fuel oil (New York Harbor, July 2005) is $1.01 per gallon.Source (pdf)

So the cost of residual fuel oil, per btu is: $0.0000067.
Transporting the rice will therefore cost: (2275 btu) ($0.0000067/btu)= $0.015.

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Thanks to nero for the hints on this calculation.

13 Comments:

At Thursday, August 25, 2005 at 3:57:00 AM PDT, Anonymous WW said...

http://www.iea.org/textbase/nptable/Modal%20Energy%20Intensities.pdf

More infomation on energy intensity from the IEA.

 
At Thursday, August 25, 2005 at 4:35:00 PM PDT, Anonymous Anonymous said...

hmm, what about the fuel used to farm the rice, transport it to the mill, from the mill to factory, from the factory to the ship, from the ship to the warehouse, from the warehouse to the store, from the store to the home? How does that effect the cost of your kg of rice?

 
At Thursday, August 25, 2005 at 4:45:00 PM PDT, Anonymous Anonymous said...

Not to mention each small increase in the price of food and fuel is money not spent on other less necessary activities, for a consumer based economy like the U.S. this will have significant effects. You have not satisfactorily explained away oil shock price inflation and its obvious economic effects.

 
At Thursday, August 25, 2005 at 7:12:00 PM PDT, Blogger JD said...

hmm, what about the fuel used to farm the rice, transport it to the mill, from the mill to factory, from the factory to the ship, from the ship to the warehouse, from the warehouse to the store, from the store to the home?

All of that fuel will still be used even if production is relocalized. If you grow Thai rice in the U.S., rather than importing it from Thailand, you still have to use fuel to farm the rice, transport it to the mill, from the mill to factory, from the factory to the truck, from the truck to the warehouse, from the warehouse to the store, from the store to the home. The only money you saved was the $0.015/kg calculated in the post. In fact, you probably didn't save any money at all because land transport is less fuel efficient than sea transport. Furthermore, you lost a lot of money because Americans get paid higher wages than Thais.

 
At Friday, August 26, 2005 at 12:34:00 PM PDT, Blogger The Sampo said...

All of that fuel will still be used even if production is relocalized. If you grow Thai rice in the U.S., rather than importing it from Thailand, you still have to use fuel to farm the rice, transport it to the mill, from the mill to factory, from the factory to the truck, from the truck to the warehouse, from the warehouse to the store, from the store to the home. The only money you saved was the $0.015/kg calculated in the post."

do you not even realize that you just debunked your own little pet hypothesis? do you not realize that you just argued every point against yourself and showed how flawed your original calculation was when you failed miserably to take into account that all these other fuel costs will be factored into the cost of the rice?

by only focusing on one single aspect of fuel cost increase, you make the picture look rosy when in reality the shipping is (as you correctly point out) only a tiny fraction of the cost of the finished product. There are many other more significant uses of fuel in the production of a kilogram of rice and ALL OF THEM will be multipled by the same factor as your shipping costs. redo the math for those using your 2600$/bbl figure and you will see the truth.

 
At Friday, August 26, 2005 at 10:10:00 PM PDT, Blogger JD said...

by only focusing on one single aspect of fuel cost increase, you make the picture look rosy when in reality the shipping is (as you correctly point out) only a tiny fraction of the cost of the finished product. There are many other more significant uses of fuel in the production of a kilogram of rice and ALL OF THEM will be multipled by the same factor as your shipping costs.

Yes, that's true. But all those other costs will be multiplied by the same factor whether the rice is produced in California or in Thailand. The only money you save by relocalizing to California is $0.015/kg.

 
At Wednesday, November 16, 2005 at 4:47:00 AM PST, Anonymous p said...

It is not just the money. It also is the airline that needs a part that price to exist. Airlines are currently suffering losses due to high priced fuel. If they will go bankrupt as a result of growing fuel prices that will never show up in your calculation.

 
At Saturday, April 22, 2006 at 11:25:00 PM PDT, Blogger Mel. said...

Uh. It states that the equation is built around transport SHIPS. NOT PLANES.

Read, then rebut.

 
At Wednesday, May 3, 2006 at 9:51:00 PM PDT, Blogger Matthew Whiting said...

Great arguement JD!

On food production I read an article in our local news about farmers having to eat the fuel price increases because they can't pass them on to the consumer. At some point farmers stop planting because it's to expensive compared to the price the crop would fetch, (my father-in-law doesn't plant every year b/c of that already). Farming of commodities in high cost-of-living countries may die out, (unless subsidized more than they already are - speaking of the U.S.)

 
At Wednesday, August 23, 2006 at 12:39:00 AM PDT, Blogger telboy said...

Yes, nice analysis on the marginal shipping cost of fuel. In conclusion if your math is correct shipping is the least of our worries on high oil costs. Anyway, global warming will become much more of an issue than oil shortages in the first half of this century, so I would not even worry about peak oil. ...Telboy

 
At Wednesday, October 24, 2007 at 8:54:00 AM PDT, Blogger HowardKoolman said...

When Peak Oil talk about localising food production they are talking about growing the food within a few miles of where it is consumed. So shipping is still going to be unviable because of the large transport costs between distribution sites (due to highway maintenance, price of gas, repairs to vehicles).

Also, nobody has mentioned the cost of building and maintaining the ships! Your calculations are based on a ship that magically appeared out of nowhere and repairs itself without using any energy! LOL

 
At Friday, June 27, 2008 at 3:10:00 PM PDT, Anonymous Simon said...

I think you overlooked one really important point. The fuel burned by the ship will be in an internal combustion engine which at best are about 20% efficient. Not all of the BTUs available in the fuel will be converted to movement. So you need to multiply your costs by 5. Ooops.

 
At Sunday, September 7, 2008 at 11:30:00 AM PDT, Anonymous Tim said...

Good Job! :)

 

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