If we assume that vessels sized at 100,000 barrels were used to move the increased USLD volume, approximately 20 vessels would be required to load, travel to the Northeast, unload, and travel back to maintain 100,000 bbl/d. If larger vessels are available, fewer would be needed. For example if 170,000-barrel vessels were used, then about 12 vessels would be required, and if large tankers could be devoted to this route, even fewer vessels would be needed. While a sizeable share of existing vessels may be needed, the industry has indicated the capability to respond would be there.
Cost is one of the issues that will vary with how much product needs to be moved and how quickly. Consider a trip from Houston to Philadelphia. A 325,000-barrel tanker has economies of scale that make it more economic than the smaller barge movements that typically move on this route. While terms may vary with specific circumstances, such a tanker might cost around 7 cents per gallon for a round trip. ATB's would be less efficient than tankers, but more efficient than a towed barge. A barge cost for this route might run around 15 cents per gallon, perhaps a little less for the ATBs and a little more for towed barges. Tankers are in high demand and are usually booked well ahead of time. ATBs and large barges would likely be used for some of the movements to the Northeast, at least initially.
With transportation rates around 15 cents per gallon reportedly for Gulf Coast-Northeast barge movements, imports may be more economic for some of the needed volumes of ULSD. Foreign tankers are available, and a tanker moving product from Europe to New York Harbor (3,400 nautical miles) cost around 5-9 cents per gallon this past year, similar to the tanker costs from the Gulf Coast to New York Harbor.
As indicated in our report, the largest costs would likely be incurred during the initial transition period following a shutdown of the Sunoco Philadelphia refinery as the market resolves initial supply dislocations. While the maritime industry is flexible and confident of its ability to supply needed volumes, short-term flexibility is more limited than long-term flexibility. If the initial volume need is high, rerouting vessels from existing service may come at a higher cost than usual rates. Imports would play an important balancing role, potentially reducing the need for domestic shipping. While we acknowledge the U.S. maritime industry's confidence, it remains unclear exactly how and at what cost the Northeast would be supplied, and what, if any, additional costs might be incurred outside of the Northeast if significant domestic shipping is diverted from other uses in the short run.