"Trump Hostage to Saudis"

[Marina Schwarz + 1,576]

“It seems President Trump has been taken hostage by Saudi Arabia and a few producers when they claimed they can replace 2.5 million barrels per day of Iranian exports, encouraging him to take action against Iran,” Hossein Kazempour Ardebili told Reuters. 

“Now they and Russia sell more oil and more expensively. Not even from their incremental production but their stocks.”

So said Iran's OPEC governor. These are still estimates but they are Reuters estimates, so they should have some foundation in facts. If OPEC numbers prove this, it will be hilarious. (I would admit to a weird sense of humour)

[Jan van Eck + 7,558]

In 2020 the International Maritime Organization  (IMO) requires that current-use heavy sour bunker oil be discontinued, to be replaced with fuel of 0.5% sulfur content.  As a practical matter, that would require use of diesel distillate.  

Now, let us postulate for a moment that Trump, through his new EPA appointee, requires that all merchant shipping within the 12-mile zone  (or 20-mile zone, or whatever zone he demands)  cannot use any fuel that produces any combustion gases other than CO2 and water vapor  (H2O)   Now what?

There are only two fuels right now that would qualify:  methanol and ethanol.  The methanol comes in large part from conversion of natural gas - a product in abundance in the USA.  The ethanol comes from the distillation of starches or sugars,  sourced either from Brasil's abundant cane sugar crops and distillation capacity, or from US corn producers and prairie alcohol distillers.  So, bottom line:  if you want to ship into the USA, then your ship will end up bunkering with USA liquid fuels. 

How much world diesel will that displace?  And at prices dictated by US producer markets, to the profit of US producers, incidentally.  I suspect quite a lot.  The alternatives would be to be towed in, and that gets pricey fast, or to install some alternative power plant, such as a packaged nuke reactor (entirely doable and perfectly logical, but you have to contend with long lead times).  So, the world shipping fleet better get used to bunkering up with some US liquids.   Would that displace the 2 million bpd being argued about with Iran?  I dunno, not having run the numbers - but it sure would make a big dent. 

For those of you who are curious about these things, right now (2017 numbers) the US farmers have 85.8 million acres planted in corn, of which 31.4 million acres are intended for ethanol production. That distills out to 0.98 million bbl/day, But remember that ethanol can be distilled from more than just corn:  barley, which right now is being refused as an import from the USA into China, can easily be distilled into ethanol.  For that matter, so can wheat.  And, although more difficult to do, so can "switchgrasses," wild grasses from the Western Plains.  Constructing additional ethanol distilling plants in the Midwest is easy enough to do; there is a huge accumulated experience in doing that.  Can you produce another 2 million Bbl/day of alcohols?  Sure you can.  Can you do that for less than $13 billion, the cost of one new aircraft carrier?  Sure you can.  Can you run those new plants for less than the payroll and sortie cost of that new aircraft carrier?  Of course you can.  

The USA, if it wants to, can use its agricultural might to crush Iran. The USA simply gets into the alcohol business on a big-time scale. End of story, and sayonara, Iran. 

[DanilKa + 443]

10 hours ago, Jan van Eck said:

There are only two fuels right now that would qualify:  methanol and ethanol. 

should add caveat - "liquid at normal conditions". Methane in form of CNG/LNG or higher carbon gases as LPG are fairly clean. But converting maritime transportation to it won't come cheap and won't happen w/o serious incentive in form of high fuel cost. Moreover, alcohol is corrosive to engines unless heavily diluted (like 90% for E10). Not to mention cost aspect, need for fertilizer and herbicide (Bauer/Monsanto will be most grateful).

Trump miscalculated with volume of spare production capacity. Any military action in Iran's vicinity likely to disrupt supply so if US is serious about it - we shall see stock buildup in anticipation. Opposite is true. I'm expecting US to back-pedal on Iranian sanctions.

Btw, transition from high-sulfur (<3.5%) to low sulfur (<0.5%) marine fuel is mandated by 2020. Good news for LNG fleet conversion as LTO is suited for dilution but not making diesel.