2013 October Port Bureau News

Port Bureau News Greater Houston Port Bureau

OCTOBER 2013

Spotlight on: CAPT Brian Penoyer Commander, Sector Houston-Galveston

Gasoline Trends in Consumption, Imports and Exports

Foreign Waterborne Trade Statistics on Foreign Import and Export Performance for Texas Ports

Brownwater U Recap of USCG-industry cooperation event

M E M B E R D R I V E N - M A R I T I M E B A S E D - VA L U E A D D E D

Captain’s Corner

TRADITIONS

What I learned at the Ring Ceremony was that every symbol on Rachel’s ring points to the values each Aggie is expected to uphold: excellence, integrity, leadership, loyalty, respect and selfless service. What proud father wouldn’t want that instilled in their child? Later, on

The Ring Ceremony reminded this old military guy that traditions can offer us a valuable foundation upon which to build progress, and, at their heart, the core values of each tradition should propel us forward to a stronger, better future.

Texas Monthly once commented that the love for Texas A&M and respect exhibited by all Aggies for its traditions and values is the university’s greatest strength.

Alums claim they can spot the ring on a fellow Aggie from across a crowded room and feel an immediate bond with one another.

2 | October 2013 www.txgulf.org

COVER PHOTO © CAPT LOU VEST

My daughter, Rachel, called a few weeks back inviting the family up to her Ring Ceremony at Texas A&M. As with most fathers, a daughter mentioning ring and ceremony in the same sentence gets my attention. I was quickly educated that the Aggie Ring, almost unchanged since 1894, and its attendant Ring Ceremony is rich with symbolism and is a tradition dear to the Aggies. So, off we went last week to the ceremony. It was a splendid moment for us all. Rachel was beaming with her shiny new ring, and we got to experience yet another wonderful Aggie tradition.

the drive back, I couldn’t help but reflect on our own maritime customs and think of how these are qualities shared by the seafaring community as well.

One of the best known examples of loyalty, respect and selfless service is the tradition among mariners to always assist another mariner in distress. Mariners follow this mandate whether the peril stems from an aboard situation, arises from the ocean, or from a call to assist another vessel. While this is true at sea, today it appears to be fading in our ports.

Our own state has a long held reputation for friendliness in a big-hearted, Texas-sized way. Unfortunately, this hospitable tradition is sometimes questionable to the hardworking seafarers arriving at our docks. Instead of finding a welcome wagon, they typically find the wagons circled against them.

Our post 9/11, security-mindedness is building an impersonal culture that has really closed in on our docks, leaving little room for the seafarer to breathe.

I’m by no means advocating for lessening our security, but urging that we be more thoughtful of the sailors in our delivery and be open to reconsideration of policies that lack compassion. This is why I really believe in what Father Patout and his fellow chaplains at the Houston International Seafarers Center are doing in serving the sailors and in acting as goodwill ambassadors on our behalf. However, shore leave, opportunity for respite, and isolation relief are recurring issues that the Seafarers Center Staff regularly brings to our attention.

The tradition of honoring the mariner is important to this community, especially in light of security. I can tell you that one sure way to up our security risk is to

treat sailors in such a manner that they become disenchanted with us. Yes, our chaplains at the Seafarer’s Center do a great job serving mariners, but we cannot delegate the role of kindness to a few. When our chaplains tell us there is a problem, we need to help solve it.

The role of the seafarer in facilitating global trade was recently praised by U.N Secretary-General Ban Ki-moon when he commented that international trade would “simply grind to halt” without their efforts. Our business is built on their willingness to endure the hardships and the hazards of life and work at sea. We need them on the job 24/7 to ensure our success.

NBC reported in August that the “U.S. became a net exporter of petroleum products just two years ago and is now the largest exporter in the world.” Our ports are the leaders in these exports. Let’s build on that position by being the ports that honor our visiting seafarers and shows appreciation to all who are helping us keep our maritime business afloat.

“Howdy” is a traditional Aggieland greeting on campus, and our seafarers should be honored with a similar greeting every time they visit us. Let’s live up to the traditions of our Texas reputation and the mariners’ code of always assisting another in distress by ensuring our visitors feel welcomed at our docks. ò

Greater Houston Port Bureau | 3

September Commerce Club Mr. Glenn Carlson, the Executive Director/CEO of Port Freeport, joined the Port Bureau at the Commerce Club Luncheon on September 12. Carlson provided valuable insight into Port Freeport’s current financial position and strategic objectives, focusing on how the port can maintain or improve its ranking of 21st largest U.S. port by foreign tonnage. Under the guidance of Mr. Carlson, who has only been at Port Freeport since 2012, the port management is redeveloping their strategic objectives to provide better customer service for its container and reefer customers and to continue growing to meet the needs of the area’s rapidly expanding petrochemical sector. In addition, Freeport is pursing cargo diversification to mitigate the risk associated with relying too heavily on a single customer type for services.

Port Freeport is considering two main port infrastructure improvement projects: first, widening the channel to increase the safety and efficiency of vessel movements, and second, a harbor improvement project in partnership with the U.S. Army Corps of Engineers that would make Port Freeport the deepest port facility in the Gulf of Mexico.

Additional investment opportunities include opening a landlord port, modifying existing warehouse space, and building a new RoRo terminal. Carlson also explained the importance of community involvment to the port’s strategic objective, focusing on longstanding committments such as the Annual Take-A-Child Fishing Tournament. ò

Glenn Carlson, Port Freeport; CAPT Bill Diehl, GHPB; and Commissioner Clyde Fitzgerald, SAGCD-ILA

Glenn Carlson, Port Freeport speaking to the Commerce Club

4 | October 2013 www.txgulf.org

Bob Lain, Moran Gulf Shipping; and Rick Shannon, Atlantic RoRo

Commerce Club Sponsors:

Roger Guenther, PHA; and James Nash, Port Freeport

Tom Kornegay; Capt. John Gunning, Brazos Pilots; David Vise, Merrill Lynch; Capt. Robert Thompson, Houston Pilots

Capt. Robert Thompson and JJ Plunkett, Houston Pilots

David Vise, Merrill Lynch; and Art Flanagan, HUB Int’l Rigg

Vinny Pillegge, Manchester Terminal; and Tony Jaworski, Mitch Heiserman, and Andy Gossett, Gulf Stream Marine

Rainer Lilienthal, Richardson Companies

Greater Houston Port Bureau | 5

Tom Marian, Buffalo Marine Service

© CAPT LOU VEST, HOUSTON PILOTS

PORT WATCH

Perhaps one of the most is driving increases in petrochemical exports which are predictable aspects of trends transported aboard these vessels. There was a modicum is their unpredictability. That of regrouping with respect to LPG movements in that Greater Houston Port Bureau Monthly is, just when you think you this shipping component was off by overStatistical 7% for the Report September have a trend figured, out it will month. Yet, it is of note, that the2012 previous month was a not behave in the anticipated record one and LPG vessel movements are up 23% for fashion. Thus, finished August, the year. cumulatively a tad above July placing, it in the number On the non-liquid side of the Houston cargo ledone spot for the year. Notwithstanding that global perger, bulk vessels and general cargo ships also hit their formance, only two Texas ports saw vessel arrival gains. zenith. Bulk movements were up 2.6% over July and In fact, when you discount Brownville’s increase of three remain 12% beyond 2012’s numbers. Likewise, general ships for the month, the Port of Houston carried the day cargo rose nearly 14% for the month resulting in positive with its 6.3% gain which drove the 0.6% total increase year-to-date gains of 1.3%. While containers and cars for the state. did not set a monthly record, these two categories had To Houstonians removed from the waterway this Texas Ports Deepdraft Vessel Arrivals should come as no surprise. The local economy has been in overdrive for the last year as reflected in housing purAug. 2013 YTD Percent Change chases, vehicle sales and overall construction activity. On the shipping front, the port remains below 2012’s overall BROWNSVILLE, 22.3% vessel arrival performance by nearly 2%; however, that is CORPUS CHRISTI, 16.6% primarily due to the 11% fewer tank vessels. Yet, in the FREEPORT, 3.0% month of August, this category followed the majority of GALVESTON, 1.5% all other categories by climbing 4.4%. In terms of HOUSTON, -1.8% sheer volume of ships, chemical tankers rank 2nd PORT LAVACA, -6.7% behind oil tankers and also posted its strongest month for the year with a monthly improveSABINE, 26.4% ment of over 22% - boosting its year-to-date total TEXAS CITY, -7.8% nearly 8%. Clearly, the bounty of domestic crude GRAND TOTAL, 3.9% 6 | October 2013 www.txgulf.org

Port of Houston Deepdraft Vessel Arrivals Aug. 2013 YTD vs. Aug. 2012 YTD

2,000 1,800 1,600

Deepdraft Vessel Arrivals

solid monthly gains to the tune of 1.2% and 20% respectively. Notwithstanding that, both ship types remain in negative territory for the year. The remaining major vessel category - consisting of seagoing tows - dropped 30% in August and remains over 9% lower on a year-to-date basis. To some extent this was compensated by the 3% jump in inland tows that plied the Houston Ship Channel. Unfortunately, 6.4% fewer tows have transited this region since last year. This is partly attributable to lock closures on the lower Mississippi River.

1,400

1,200 1,000 800 600

400 Across Galveston Bay, August’s com200 merce unfolded in a less positive fashion with Texas City and Galveston falling 5% and 0 20% respectively for the month but Galveston remains up for the year by 1.5%. Conversely, Texas City has seen nearly 8% fewer vessels in 2013. Further down the coastline, Freeport and Corpus Christi followed suit 2012 Aug. YTD (Total = 5,604) 2013 Aug. YTD (Total = 5,505) by dropping 2% and 13% in August. Despite that softer monthly performance, both ports Now that 8 months of vessel arrival data are behind are outperforming their 2013 totals by a healthy margin us, will we see a tapering into the fall? Given the initial of 3% and 16%. In fact, the only reason Corpus Christi numbers September is producing that is rather remote. was in negative territory for the month is due to the realThe 2013 Hurricane Season is essentially over for Texas; ity that it was coming off its best month of the year. The regional infrastructure gains should manifest themselves port of Sabine experienced a near-identical pattern as in a healthy round of consumption increases heading Corpus Christi in that it saw one less ship in August as into the gift-giving season; and the threat of a federal compared to July but remains in first place overall for the government shutdown in a state that eschews interferbest year-to-date improvement at over 26%. This bullence on the part of well-intentioned bureaucrats may ish performance is largely an outgrowth of the retooling result in a shrug or two but it certainly will not derail and expansion of the refinery infrastructure over the last private sector growth. Admittedly, it will be quite a feat few years which has resulted in substantial throughput if Houston tops 737 vessel arrivals in September; howevincreases throughout the petrochemical sector. er, whatever the outcome, someone will certainly divine a trend. ò

Greater Houston Port Bureau | 7

Spotlight on CAPT Brian Penoyer Commander, Coast Guard Sector Houston-Galveston Patrick Seeba, GHPB

“Right after the terrorist attacks in 2001, the Captain of the Port and our Deputy at the time said ’Go do great things, secure the nation’, and I’m very proud of the fact that we were considered and thoughtful about what we did.

We made material improvements in security at a time when people needed to know that they were safe, and nobody was very sure about what specifically should be done. Soon after that, people started saying things like “thank you for protecting us”, and it rattled me for a while; I didn’t know what to say. “Thank you” didn’t seem right, and didn’t convey what I felt. The Coast Guard has more than earned my loyalty, not just because of our compelling mission, but also because it gives so many real opportunities to do important things to young people at an early stage. I think that’s pretty rare in our society.

It didn’t feel right to say ‘thank you for saying that’, so I eventually started saying that ‘It’s an honor to serve.’

That’s the truth of it – I feel so unbelievably lucky that the nation has allowed me to serve in this way. So when people thank us, it’s gratifying, but really, we’re the ones who should be thanking them.”

Captain Brian Penoyer has had a distinguished and varied career in the Coast Guard that’s taken him from the beaches of Florida to the mountains of Alaska, and it all started in Chicago. “I was raised in the near-west suburbs of the Chicagoland area; my folks were from the WWII generation, and as soon as the war was over, they went west and built a house with their own two hands. I

had the pleasure of growing up in the house that my mom and dad built, but they also bought a little dairy farm in Hanover, Illinois right on the Mississippi river, so I spent as much or more time out there doing really outrageously dangerous things with heavy equipment. That’s actually an interesting thing to think about - how the safety culture has made changes in America. Looking back, it seemed perfectly reasonable back then for an 11 or 12 year old farm kid to be driving a tractor, pulling powerdriving pasture mowing equipment, that sort of thing.”

Graduating high school in rural Illinois, Brian couldn’t wait to get into the city. Attending the University of Chicago – in the same Hyde Park neighborhood his parents left after WWII – he received a political science degree with a focus in international relations in 1988.

“While I was there, I took a course called War and the Nation State from a professor, John Mearsheimer, a West Point guy. It really stuck with me, and ended up – with a combination of other factors – steering me towards the Coast Guard.”

After college, Brian spent over a year in the Chicago area: “I was a park ranger in DuPage county (just west of Chicago) doing prairie restoration and that kind of stuff.

During that time, the Exxon Valdez accident happened.

Because of that, and Mearsheimer’s class, when I saw boatswain’s mates driving Coast Guard small boats from Station Wilmette on Lake Michigan, I decided I wanted to join the Coast Guard. I spent that year working on my application to Officer Candidate School.” © COAST GUARD NEWS

CAPT Brian Penoyer, new Commander of the US Coast Guard Section Houston-Galveston, can’t imagine a better life than his widespread career with the Coast Guard and is truly honored to serve.

8 | October 2013 www.txgulf.org

Part of the “Class of OPA-90”, Brian joined the Coast Guard as the agency was renewing its environmental response mission. “The Exxon Valdez accident changed the nation’s tolerance for spills. The resource demands of that spill were enormous, and with that, the Coast Guard brought a lot of people in to make sure we were geared up to respond. So, I went into and graduated from OCS with an environmental focus. It’s a funny story actually, I was a kid from Chicago so when I put together my ‘dream sheet’ listing where I hoped to be assigned and what specialty I hoped to practice, all I knew was that I didn’t want to go to New York City and I didn’t want to be a marine inspector. So of course, that’s exactly where the Coast Guard sent me. Best tour of my career – outside of this one of course – and I think I had as much fun as someone can possibly have.”

During a four day span, Ensign Penoyer graduated Officer Candidate School, commissioned, went back to Chicago to see his fiancée graduate from her master’s program, got married, packed up, and moved to New York City.

In New York, ENS Penoyer began the process of qualifications and training at a port that, at the time, also shared responsibility for Coast Guard operations in Europe, Africa, and the Middle East. “I got there, got exposure to everything you could possibly imagine, and then the first Gulf War broke out. We activated the ready reserve fleet and I got a lot of exposure to US shipbuilding/repair/damage assessment/ and operational control that I never would have gotten under normal circumstances.”

ENS Penoyer was part of a team that installed millions of dollars of equipment and hull steel on vessels getting ready to deploy, and followed the vessels across the Atlantic as they made their way towards the operational theatre. “Any accidents, inspection needs, any problems underway that had been waived to get them to the other side needed to be followed up upon, so I spent time following the fleet to Rota, Italy, Athens, the Emirates, and Oman.”

“You know, the fantastic reserve fleet we have today is a result of the first gulf war, when shipping had been laid up since the 60’s and 70’s in lesser states of repair – what we’d call part of the Dead Fleet today. And in fairness to them, MARAD and Sealift Command did a magnificent job of getting the ships back in service to complete the mission. I remember getting onto a ship, and there was no bridge equipment – no engine order telegraph, no

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Greater Houston Port Bureau | 9

radar, nothing – and they were towed up the coast, and while being loaded, the equipment was installed, and the ship sailed days later.”

As a fully qualified marine inspector leaving a feeder/ training port like New York, ENS Penoyer could have expected to go either to the 8th Coast Guard District in Louisiana to inspect offshore vessels and learn about oil rigs, or to Honolulu – where Coast Guard inspectors and investigators covered marine operations for the entire Far East as trade heated up with Singapore, Korea, Japan and others in the early 1990’s. “I was fully prepared to find myself

on the beach in Honolulu when the phone rang – this became a pattern in my career – and the detailer asked “Well, would you consider…” so I called my wife and asked her what she thought about Alaska.” After an enthusiastic response, Brian and his wife packed up for Marine Safety Office Juneau where he was billeted as a marine investigations officer.

“In Alaska, with so much coastline, the world seemed pretty simple sometimes – something happened? One of us would get ‘tagged’ and we would be the entire Coast Guard for that particular incident. I interviewed an Alaskan who owned a relatively small trawler that he’d anchored in a cove, and as fate would have it, with a hull failure hapenning the wind and waves pushed him into the rocks. The vessel pretty quickly down-flooded and sank, throwing him, his dog, and a rifle on the beach, miles from anywhere. This gentleman feels awful about the oil coming out, so he collects what he can using rags and wreckage from his boat, and when he can’t see any more coming out, he sets off along the shoreline with his rifle and his dog and his wet clothes. It’s hard to believe

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www.txgulf.org

With his first Incident Command System classes – given by the local fire chief – under his belt, LT Penoyer took his next assignment at the Department of the Interior as the Coast Guard’s liaison. With renewed interest in pollution response, the Department of the Interior was working to improve the relationships between emergency responders like USCG/EPA and national resource trustees like NOAA/DOI. Brian’s year at Interior was spent learning how to value natural resource damages coming from spills and working on other project and interfaces such as developing protocols for endangered species act consultations – one of any number of issues raised during a response. “That led to my spending a year getting an environmental policy graduate degree at the University of Maryland. When I came out of that, I figured I’d go back to pollution response, but the Coast Guard took one good look at me, and sent me to the headquarters policy shop for marine investigations.”

In the marine investigation shop, Brian was able to address many of the issues that plagued him and his colleagues in the field. “My office chief asked me what had irritated me most when I had been an investigator in the field. When I told him about issues with our computer system, policy for analyzing spill causes and issues with investigation documentation, be basically said “Great!

You’re now the project officer, go forth and do great things.” Probably the one thing I’m most proud of is the job I got to do helping bring the USCG into the forefront of incident cause analysis – particularly human error and human performance assessment. We’re on the leading edge of that now, which wasn’t necessarily the case before. So I helped write the revised Marine Safety Manuals.

You know, it’s funny, for a while I had

the distinction of being the only guy to update a Marine Safety Manual in years.”

Leaving headquarters in the summer of 2001, “I asked my detailer to be gentle, and she replied ‘I’m going to send you to Jacksonville. It’s a port that doesn’t have a lot going on, no refineries, no this and that, just enough to stay interested. It’s the beach, it’s Florida, and you’ll be the chief of port operations.’ My wife told me that it sounded a bit superficial, but sure, let’s go.” Ninety days later, Jacksonville’s new port operations chief learned that his area of responsibility included the submarine base at King’s Bay, GA, Port Canaveral, a national strategic military outlook port, an aircraft carrier at Mayport Naval Base, a naval fuel depot, two Air Force bases, and a Marine Corps strategic loading port. “We were in the same building as the FBI field office, and it turns out that the September 11th hijackers trained in Florida, so everyone was pretty on edge.”

Given a tasking to protect the port, Brian and a colleague from Washington, Captain Tim Close, used their backgrounds in human performance and risk assessment to develop the Port Security Risk Assessment Tool (PSRAT). “I knew Tim from my time at headquarters, so I called him up and explained that I couldn’t protect everything, but wanted to be able to prioritize and give the Captain of the Port something that would allow him to make quick, informed decisions.”

Receiving the 9-11 medal from the Coast Guard for his part in developing the tool was only one of several achievements in Jacksonville where LCDR Penoyer also helped charter and commission the first Area Maritime Security Committee, write their first Area Maritime Response Plan, and serve as the hurricane officer during

© CSIS

but if you wanted to get to Sitka, Alaska, the nearest town, there’s a big mile-wide stretch of Pacific Ocean to cross. Now, seeing this, a normal human being would think “Nope, can’t do that.” but not him. He swims it, with his dog, hikes into town, calls the Coast Guard and says that his boat sank and he’s very sorry he polluted.

That was in a nutshell, one of the many things I loved about Alaska, that spirit and drive, and it led me back into pollution response.”

Greater Houston Port Bureau | 11

2004 when Hurricanes Alex, Bonnie, and Charley hit the Florida Coast.

Leaving Florida, Brian headed back to Washington, DC to “bring some more ICS moxie to the Department of Homeland Security’s National Response Plan team”. As DHS began issuing policy related to the NRP frameworks, he served on a team of nearly

sixty interagency personnel tasked with codifying the coordination between response partners responsible for coordinating law enforcement, public health, disaster relief, and environmental response. After nearly two years in Washington, and after a hiatus to support Admiral Allen during the Coast Guard’s response to Hurricane Katrina, Brian headed up I-95 to take a position as the Prevention Chief in Baltimore. Two years later, he fleeted up to the job of Deputy Sector Commander where he was engaged in every type of business that the newly formed Sectors were engaged in including search and rescue, aids to navigation, and criminal law AW IRM enforcement.

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“As I was getting ready to leave, for another assignment at headquarters the phone rang, and after a short conversation, I called the Sector Commander, said ‘Hey Boss, some folks on Admiral Allen’s staff want me to help out on this Deepwater Horizon thing that’s going on, it should take me about a week’. Admiral Allen asked me to help out on Deputy Secretary of Homeland Security Jane Holl Lute’s office. I was there for six months.

I was with the Deputy Secretary

Greater Houston Port Bureau | 13

for anything oil spill related, and had the opportunity to sit in on and listen to national decision makers at levels I never thought I’d ever experience. It was fantastically educational, and whatever voodoo I was doing, drawing on my oil spill planning days, it resonated well enough, so I stayed there for the entire spill response.”

Leaving the Deepwater Horizon response for “the only job in the Coast Guard with worse hours”, CDR Penoyer spent two years as the USCG deputy chief of

14 | October 2013

congressional and governmental affairs. “The role of the Deputy is that of a link between our people on the hill and Coast Guard Headquarters, so that when something was really bad, our congressional liaisons could hit the emergency button.” Getting a chance to work on larger Coast Guard issues as well as spend a great deal of time learning about the budgeting process, Brian reflects that “It was fascinating to watch the most senior levels of the legislative branch wrestle with fundamental tradeoffs.

Since then, walking around with a different set of ears, I’ve discovered how little people understand that process, how there’s a profound lack of respect for the types of decisions that legislators and members of the executive branch have to make. So now, I find when I talk to the crew, I’ll say something like “Imagine you get to pick between feeding the poor and building Coast Guard Cutters.

What do you choose, and why?” I think it’s important to recognize that there are a lot of needs out there, all of them important, and that it’s very very difficult to balance the totality of national interests.”

www.txgulf.org

Selected for O-6 and senior service school, Brian spent a year between 2012-2013 at the Center for Strategic and International Studies focused on maritime governance. “I was focused on the question “What is seapower – and how do Navies and Coast Guards both fit in that equation alongside merchant fleets?” So much of what we do looks similar.

I looked closely at the difference of preserving national sovereignty and maritime governance. Sovereignty is a question of territorial claims and denying anyone permission to infringe on that claim. And this is a valid national interest requiring seapower. But alongside that the other national interests

defined by Geoff Till in his book ‘Seapower: A Guide for the 21st Century’ revolve around human activity in the maritime. In my view, all the things you have to do to enable human activity at sea should be called maritime governance. Maritime governance is the foundation, the level playing field and rules of the game necessary for travel, commerce, and all other good things in the maritime.”

While at the school, Captain Penoyer screened for sector command, and was offered Houston; “It was the shortest conversation I’ve ever had with a detailer and I’ve been happy as a clam ever since.” Taking command of Sector Houston-Galveston in June 2013, he is engaged in numerous missions as the senior regional Coast Guard officer including the Sector’s move from its Clinton Drive facility to Ellington Field.

Captain Penoyer is married to Mrs. Hildi Baker, and the couple has two daughters. His eldest daughter Scotia is a sophomore at the University of Wisconsin studying genetics and his younger daughter Teslin is a sophomore

at Clear Lake High School. “Right now, almost all of my free time is absorbed in exploring. There’s so much to see in Houston, and Texas is this giant playground for me– we live five blocks from a nature preserve, you can eat your way across the State, we drove out to the hill country…”

Captain Penoyer may only be six months into his tenure as Captain of the Port, but his background and enthusiasm shine through as he looks to leave a positive mark on the region. ò

Greater Houston Port Bureau | 15

Foreign Trade Through the Ports of Texas Waterborne foreign trade is down through July 2013 Christine Schlenker, GHPB Based on Greater Houston Port Bureau analysis of foreign trade data from the U.S. Bureau, foreign trade is down across much of Texas marine ports for January through July. However, most of the Texas ports have improved their trade balances by increasing exports and decreasing imports. Marine imports and exports for the U.S. as a whole are slightly down. Check out the following charts to see how your port fared over the first seven months of 2013.

Top 10 Trading Partners with the Port of Houston

4

Tra Netherlands 8Total Trade: $3,211,028,360

Trade Balance: $1,549,792,988

Mexico 1 Total Trade: $11,561,599,778

Trade Balance: -$2,273,996,938 Venezuela 6 Total Trade: $3,265,872,451

Trade Balance: $3,040,814,295

Columbia 3 Total Trade: $4,315,850,009 Trade Balance: $582,213,639

Saudia Ar 7 Total Trade

Trade Balance

Brazil 2 Total Trade: $6,259,310,202

Trade Balance: $2,877,516,594

16 | October 2013

www.txgulf.org

Rank

TOP 10

U.S. Trading

Partners

Country

World Total 1 China 2 Japan 3 Germany 4 South Korea 5 Mexico 6 Saudi Arabia 7 Brazil 8 Venezuela 9 United Kingdom 10 India

2013 YTD Total YTD 2013 Trade YTD Trade %Δ Balance %Δ $1,001,925,969,059 -3.4% -$330,181,752,693 -7.5% $202,067,870,973 1.1% -$121,050,748,499 4.5% $79,797,589,589 -6.2% -$42,080,167,795 -6.1% $49,960,780,375 3.0% -$28,614,031,975 17.6% $39,033,881,097 -0.9% -$13,642,985,661 8.2% $38,689,218,947 -9.0% -$8,164,506,207 -29.8% $36,385,276,403 -15.1% -$20,163,666,083 -27.3% $28,527,415,557 -11.0% $2,404,551,831 -180.8% $25,698,126,425 -12.5% -$12,094,544,977 -17.2% $24,069,046,909 -4.9% -$6,314,886,899 10.8% $21,031,740,803 -4.2% -$10,559,835,771 4.9%

4TotalGermany Trade: $4,043,414,322

ade Balance: -$2,482,054,316

rabia e: $3,257,714,469 e: -$714,319,763

China 5 Total Trade: $3,753,928,332 Trade Balance: -$910,602,262

South Korea 10Total Trade: $2,771,517,120 Trade Balance: -$664,541,754

India India 9 Total TotalTrade: Trade:$2,941,828,016

TradeBalance: Balance:-$1,288,754,688 Trade

2 4

Greater Houston Port Bureau | 17

Imports

Imports to Texas Ports Port All US Marine Ports

Brownsville Corpus Christi Freeport Galveston Houston Port Lavaca Sabine Texas City

July 2013 YTD Value

%Δ YTD Value

$666,053,860,876

-4.4%

$259,136,075 $8,788,081,001 $3,101,854,290 $2,889,874,208 $44,332,442,922 $323,564,625 $21,085,585,874 $5,871,323,527

-44.2% -16.6% -44.9% -11.1% -14.4% 35.8% -1.0% -43.6%

July 2013 YTD Metric Tons

%Δ YTD Metric Tons

551,660 14,313,353 4,999,005 2,494,091 41,729,593 2,875,224 29,400,788 8,038,786

-19.4% -9.3% -37.3% -3.8% -10.1% -1.0% 6.5% -41.4%

396,324,321

-6.9%

Top 7 Importing Ports by Tonnage The key driver for Houston imports is the 25.6% year-to-date decline in crude oil imports.

Not surprisingly, tanker arrivals into the Port of Houston declined by 13.3% over the same period. The slide in imports combined with flat export performance has pushed Houston’s trade surplus from $1.3B to $8.6B - the US as a whole is at a trade deficit of $330B.

All Other Ports 57% Corpus Christi 4%

New Orleans 4%

Los Angeles 7%

Houston’s Top Imported Commodities

1

2

3

4

5

6

7

8

9

10

Crude oil

Refined products

Motor vehicles for transporting people

Tubes and pipes of iron and steel

Cyclical hydrocarbons

Vegetable saps, extracts, etc.

Acyclic hydrocarbons

Taps, cocks, valves for pipes or tanks

Imports of returned exports 18 | October 2013

July 2013 YTD Value

%Δ YTD Value

$16,131,407,379

-25.6%

$1,993,749,653

July 2013 %Δ YTD YTD Metric Metric Tons Tons 21,744,334

-22.1%

-28.8%

1,107,424

-20.9%

$1,133,034,239

-23.9%

1,242,131

-11.2%

$1,031,455,346

-53.7%

137,281

-29.4%

$442,185,181

17.5%

49,704

26.3%

$5,129,792,930

Seamless tubes & pipes

Houston 10%

Newark 7%

Morgan City, LA 5% Port Arthur 6%

Rank Commodity

1st

$1,459,224,422

$1,046,301,630 $502,154,587

$379,709,247

www.txgulf.org

13.2%

-15.2%

6,274,781 78,707

65.3%

1,211,666

-1.4%

1,187,030

32.5%

33,234

20.3%

-25.7% 92.3% -5.1%

-20.8%

Exports

Exports from Texas Ports July 2013 YTD Value

%Δ YTD Value

$335,872,108,183 $103,764,533 $5,900,819,352 $724,687,227 $1,473,269,560 $52,948,560,457 $494,635,411 $7,491,349,706

-1.2% 313.8% 1.4% -10.6% -28.5% -0.3% -21.6% 25.6%

Port All US Marine Ports Brownsville Corpus Christi Freeport Galveston Houston Port Lavaca Sabine

Texas City

$4,880,356,020

30.9%

%Δ YTD Metric Tons

5,839,028

33.2%

320,148,016 158,916 8,183,029 931,053 1,088,990 42,438,983 729,163 13,196,152

All Other Ports 48%

Long Beach 5% Norfolk 11%

New Orleans 11%

1st

Houston 13%

Refined petroleum products, chemicals, and LPGs are boosting the exports of several Texas ports. While Houston tanker traffic is down, chemical tanker and LPG carriers are up 6.6% and 21.3%, respectively, through July 2013 year-to-date.

Houston’s Top Exported Commodities Commodity

July 2013 YTD Value

%Δ YTD Value

1

Refined Products

$15,038,394,856

-7.3%

3

Cyclical hydrocarbons

Rank

2

4 5

6

7 8

9

10

-4.1% 503.5% 10.6% -4.5% -54.6% 4.9% 9.3% 36.3%

Top 7 Exporting Ports by Tonnage

Los Angeles 3% Baltimore 4%

Gramercy, LA 5%

July 2013 YTD Metric Tons

Petroleum Gases

Parts for heavy machinery Polyethylene

Ethers, ether-alcohol, etc.

Motor vehicles for transp. goods PVC

Wheat

Liquid pumps and pump parts

$2,053,194,520

32.7%

$2,035,871,243

-6.9%

$2,049,001,399

15.9%

July 2013 YTD Metric Tons

%Δ YTD Metric Tons

4,224,175

63.4%

151,296

-8.2%

16,448,668

1,498,344

-8.1%

17.7%

$1,919,873,534

25.3%

1,226,277

26.3%

$882,878,054

-14.0%

42,624

-15.0%

$794,192,386

96.5%

2,445,981

83.4%

$1,404,270,623

$863,030,985

$777,261,807

0.1% 8.7%

53.2%

1,156,326 918,170 39,640

1.7% 7.4%

49.7%

Sources: Import/Export Data by U.S. Census Bureau; Vessel Traffic Data by GHPB; Analysis and Data Visualization by GHPB

Greater Houston Port Bureau | 19

Brownwater University Collaboration between industry and Coast Guard

T

he highly coveted Brownwater University program was held in Houston from September 10-12, 2013. The 3-day event was split between the Houston Pilots Association Conference Center and the Seamen’s Church Institute Houston Center. Brownwater U is a cooperative effort between the U.S. Coast Guard and the Inland Barge Industry to provide: • An overview of the inland barge industry, and

• An overview of Coast Guard functions and activities related to the inland barge industry.

In his opening remarks, CAPT Brian Penoyer remarked, “The cooperative synergy that is fostered in an event such as Brownwater U is instrumental in enhancing safety, security, and maritime efficiency throughout the port region.”

Topics at the most recent Brownwater University included: • Waterway Overview • Business of Towing

• Stakeholder Partnerships • Equipment and Personnel • Operations

• Navigation Safety

• Towing Vessel Inspection • Ship and Barge Interaction • Western Rivers

Presentation Highlights Every day the Houston-Galveston Coast Guard sector oversees 350 total tow movements, sees 96 vessel arrivals, inspects 20 vessels, and saves an average of 3 lives! Prior to 1970 the Coast Guard had no presence in the operations of U.S. ports. This changed drastically after the Exxon Valdez oil spill of 1970 and again after the 1993 Sunset Ltd. passenger train crash over a waterway in Mobile, Alabama. Now the Coast Guard oversees the safety and requirements of all piloting in U.S. ports.

The cooperative synergy that is fostered in an event such as Brownwater U is instrumental in enhancing safety, security, and maritime efficiency throughout the port region.

-CAPT Brian Penoyer tons of cargo with an estimated value of about $45 billion. The only waterways in the U.S. that account for more waterborne cargo are the Mississippi and Ohio Rivers. By moving cargo on waterways, as opposed to on the ground, the U.S. saves on fuel consumption, reduces greenhouse gas emissions, and eases traffic congestion resulting in fewer accidents on highways and railroads.

It takes 70 trucks or 16 rail cars to move the same amount of dry cargo (1,750 short tons) as one barge, and 144 trucks or 46 rail cars to move the same amount of liquid cargo (27,500 barrels) as one barge. This means that for every gallon of fuel barges can move one ton of cargo 616 miles; a railcar moves one ton 478 miles and a truck only 150 miles per gallon. This relates to a substantial improvement in air quality. On top of the fuel and environmental advantages, safety is also greatly improved by using waterway transportation.

For each injury involving barge transportation, there are 95.3 injuries related to rail and 1,609.6 truck-related injuries.

The transportation industry contributes 10.2% of the U.S.’s $15.6 trillion GDP, and 11% of transportation in the U.S. occurs on waterways. To move all this cargo, there are

The Gulf Intracoastal Waterway (GIWW) is one of the many waterways that run through the U.S. and runs from Brownsville, Texas all the way to St. Marks, Florida. In 2011 the GIWW accounted for 112 million 20 | October 2013

www.txgulf.org

© NATIONAL WATERWAYS FOUNDATION

Matt Logan, GHPB

four types of towboats: linehaul, harbor, canal, and locking; and three types of barges: open hopper, covered hopper, and tanker. These ships navigate the U.S.’s inland waterways through a system of locks that raise and lower them.

However, 117 of the 240 locks are over 50 years old and in desperate need of repair.

The Coast Guard has a Partnership through People initiative to increase safety, operations, and crisis management. Some of our local Coast Guard’s partnerships include: • American Waterways Operators – over 350 member companies

• Gulf Intracoastal Canal Association – ensures the Gulf Intracoastal Waterway is maintained and provides the most economical and environmentally sound water transportation in our nation.

• Lone Star Harbor Safety Committee – Oversees local committees that address safety, security, mobility and environmental protection of a port or waterway.

• Towing Safety Advisory Committee - Federally appointed committee of 18 members with knowledge and expertise in various sectors of the industry.

Did You Know?

• A lower Mississippi Linehaul tow from end to end stretches taller than the Willis Tower (formerly Sears Tower) in Chicago!

• There are 6 classes of Towboats: River Line Haul, River, Canal, Fleet, Day Boats, & Tender Boats and are stated by horsepower, which gives the tow size that can be pushed.

• Towboats operate 24/7 except in: fog, traffic, or extremely high winds with empty barges.

• Colors and the stack decal of towboats are unique and can be somewhat territorial!

• Wheelhouses (2nd deck and above) on most towboats go up and down to fit under bridges. All crew quarters are on the first deck.

• All towboats are designed with pushing knees on the bow to push barges instead of pull them.

• Tows range from 1 barge to 20 barges and are secured to the towboat by nonstretchable face wires.

Greater Houston Port Bureau | 21

22 | October 2013

Cu sh w

www.txgulf.org

Š FLOWTECH.SE

on

Bo er nS uc ti

Due to the Ports and Waterways Safety Act of 1972, the Houston-Galveston Vessel Traffic Service (VTS) was established in 1975. Its customers include the Pilots Associations, towing industry, shipping agents, Coast Guard, interagency/intergovernmental partners, Area Maritime Security Committee, local port authorities, marine exchanges, Harbor Safety

i on

the barge is unable to be seen due to the fact the pilot’s view is coming from a long distance behind the front of the barge.

St

Tows have numerous configurations that can consist of barges with different heights and widths.

Pilots must take into account weather conditions and water currents in order to prevent collisions with other barges or man-made objects and to prevent grounding.

Due to winds and water currents pilots sometimes drive at angles to take into account these environmental effects on the barge. Pilots will sometimes use the Pushing In technique where they push the barge to the bank and let severe weather pass. Another challenge pilots face is that of line of sight, where a certain distance in front of

Committee, and Port Coordination Team. The Coast Guard investigates all marine casualties to determine the cause and likelihood of re-occurrence.

To enhance safety on waterways, the American Waterway Operators (AWO) established the Responsible Carrier Program, which started out as voluntary in 1994 but became mandatory for all AWO members in 1998. Under this program companies must be audited by a third party on matters regarding operations, safety training, environmental policy, and many others. Congress also passed the Maritime Transportation Act of 2004, authorizing appropriations for the Coast Guard to begin inspecting towing vessels.

Ships make wakes on the water’s surface which are visible, but also create pressure fields under the water which are invisible to the human eye.

The bow (front) of a ship creates a cushion underwater pressure field that pushes things away. The stern (back) of a ship creates a suction underwater pressure field that pulls objects in. It is important that pilots plan in advance and maintain Maritime Solutions for Moving Forward proper distances when passing or overtaking other vessels.

DIRECTION

The Truman-Hobbs Act grants the U.S. Coast Guard the right to have bridges declared “unreasonable obstructions to navigation” on inland waterways. The Coast Guard is also responsible for any lock and dam issues on our inland river system.

The highlight of the seminar came on day 3 when all participants got to step inside a simulator to see and feel firsthand what it is like to navigate a barge in every type of condition. The simulator hit participants with scenarios of high wind and strong currents, as well as navigating around other ships and buoys. As can be imagined, the participants came away with a better respect for what ship pilots do every day!

PORTS MARINE HEAVY INDUSTRIAL COASTAL PERMITTING

Scott Dobry

At the end of the 3-day Brownwater University all participants received certificates in maritime operations and safety. ò

www.hdrinc.com

Greater Houston Port Bureau | 23

The Future of Gasoline Consumption And how the Gulf Coast refining industry will thrive

© JHARBOUR.COM

Dave Cooley, GHPB

U

.S. Gasoline consumption is on a downward trend! American’s may still love their automobile and may still wish to see the USA in their Chevrolet – but as far as gasoline consumption is concerned, it doesn’t matter! Gasoline consumption, which peaked at 9.6 million barrels a day during July 2007, is on a downward trend. The peak in motor gasoline consumption at 9.6 million barrels a day during July 2007 occurred just as the U.S. Economy began to sink into what would be known as the Great Recession of 2007-2009 and that downward trend still continues. Today’s level of gasoline consumption is around 8.8 million barrels a day; a decline of over 800 MBD during the last six (6) years.

Dissecting gasoline consumption into its component parts provides insight into the basic forces that drive consumption. From the early 1990s through today, several key drivers - vehicle miles driven and vehicle fuel consumption - have held relatively steady at around 12,000 vehicle miles driven with each vehicle consuming approximately 600 gallons of gasoline each year. When combining these two statistics, the result is miles per gallon (MPG), which also held relatively steady over the same period at about 20 MPG, 24 | October 2013

While the sight increase in fuel efficiency (MPG) is definitely a beneficial sign, these drivers of gasoline consumption have held at generally stable levels for more than 20 years. These results do not explain a decline in motor gasoline consumption of 800 MBD that occurred over the last several years.

Another driver of gasoline consumption is the population of gasoline fueled motor vehicles. During the last four years, the population of gasoline fueled motor vehicles has declined by about 5 million vehicles: from 248 million vehicles in 2008 to 243 million vehicles in 2012.

Finished Motor Gasoline Consumption ('000 Barrels Daily)

12,000

10,000

8,000

6,000

4,000

2,000

0 Jan-1945 Jan-1948 Jan-1951 Jan-1954 Jan-1957 Jan-1960 Jan-1963 Jan-1966 Jan-1969 Jan-1972 Jan-1975 Jan-1978 Jan-1981 Jan-1984 Jan-1987 Jan-1990 Jan-1993 Jan-1996 Jan-1999 Jan-2002 Jan-2005 Jan-2008 Jan-2011

Will the decline reverse itself as the economy improves or is this decline a harbinger of a fundamental change in the consumption of gasoline? What does this portend for the future, not only in terms of gasoline consumption, but also for refining operations and international trade?

albeit showing a slight rise to just over 22 MPG during the last few years.

www.txgulf.org

Miles Driven

fleet of motor vehicles. While there are multiple moving parts to this analysis, this projection is based on the key assumptions that the number of vehicle miles driven remains between 12,250 miles and 13,000 miles and that new vehicle sales range between 12 million and 14 million units annually with an associated scrappage rate of 85%. This result is an opportunity matrix that suggests a reduction in annual gasoline consumption could be on the order of about 200 MBD in the model year 2025.

When looking forward, the new Corporate Average Fuel Economy (CAFE) Standards that were finalized on August 28, 2012 will also have a significant effect on the quantity of future gasoline consumption. These recently agreed Standards will raise the target to 55.3 MPG for automobiles and 39.3 MPG for light trucks manufactured during the model year 2025. The composite average, based on “footprint”, is 48.7 MPG in 2025.

Looking forward and assuming an average “on-theroad” fleet fuel efficiency of 28 MPG in the year 2025, annual vehicle miles driven remaining constant at about 12,000 miles, and the motor vehicle population at 265 million units, the level at which gasoline consumption could possibly stabilize is estimated at 7.4 million barrels daily, or about 1.4 million barrels a day below current consumption of 8.8 million barrels daily.

Corporate Average Fuel Economy (CAFE) Standards (MPG)

60

50

PASSENGER CARS 40

30

LIGHT TRUCKS

20

10

2022

2018

2014

2010

2006

2002

1998

1994

1990

1986

1982

0

1978

Gallons

2010

2008

2006

2004

2002

2000

Gallons Gas Consumed

During this period, more vehicles were scrapped than were replaced by new vehicles purchased. This resulted in a net improvement in overall fuel efficiency as the MPG of the new vehicles purchased was higher than the MPG of the vehicles scrapped. This beneficial change in the composition of the gasoline fueled “on-the-road” motor vehicle fleet definitely explains the decline in gasoline consumption of 800 MBD.

While fuel efficiency had not been a significant contributor to reducing motor gasoline consumption during the past 20 years, the current CAFE agreement will change that outcome. Assuming the automobile industry achieves a current model-year fuel efficiency of 43 MPG in 2025, which approaches the target for the Standard, the reduction in gasoline consumption is estimated to be between 155 MBD to 228 MBD when compared to today’s average fuel efficiency of 21.7 MPG for the current “on-the-road”

1998

500

1996

9,000

1994

550

1992

9,500

1990

600

1988

10,000

1986

650

1984

10,500

1982

700

1980

11,000

1978

750

1976

11,500

1974

800

1972

12,000

1970

850

1968

12,500

1966

Miles

Fuel Efficiency of Gas Vehicles Miles Driven vs. Gallons of Gas Consumed

Greater Houston Port Bureau | 25

Potential Reduction in Gasoline Consumption by increasing avg. MPG from 21 to 43 Net New Vehicles Vehicle Miles MBD Decrease on the Road* Driven 10,200,000

11,900,000

12,250 12,500 12,750 13,000 12,250 12,500 12,750 13,000

-184,361 -188,123 -191,886 -195,648 -215,088 -219,477 -223,867 -228,256

*Assuming 85% scrappage rate of old vehicles

What does this projection of motor gasoline consumption infer for both refinery operations and international trade? Again, facing multiple moving parts, the possible effects of a decline in motor gasoline consumption could result in some refineries in the U.S. closing as being uneconomic, while others will optimize operations and capture opportunities in the export market.

The world population will continue to grow and countries will continue to develop. From a demographic viewpoint, this will result in an increase in gasoline consumption, particularly in the developing countries.

As world growth evolves, surplus refining capacity in the developed world could potentially be available to supply fuels to the transportation sector in the developing countries. Establishing such a relationship could be more economically beneficial for the developing countries as opposed to spending capital for either constructing or expanding indigenous refinery capacity. The U.S. in general and the Gulf Coast in particular are very well situated to supply various grades of motor gasoline to the countries located throughout the Americas and the Caribbean.

Currently, U.S. refineries are operating at 91.5 percent of capacity, which is a very high rate. This is rate is primarily based on not only supplying internal demand, but also capturing profitable export opportunities.

The discount available to domestic crude oil that remains stranded in the Midwest is also a driver for this high refinery operating rate. Refiners who can logistically access and process these crude oils achieve a very unique

BARGING AHEAD ever so politely.

B

Buffalo Marine Service, Inc. 26 | October 2013

www.txgulf.org

www.BuffaloMarine.com

Jan-81 Feb-82 Mar-83 Apr-84 May-85 Jun-86 Jul-87 Aug-88 Sep-89 Oct-90 Nov-91 Dec-92 Jan-94 Feb-95 Mar-96 Apr-97 May-98 Jun-99 Jul-00 Aug-01 Sep-02 Oct-03 Nov-04 Dec-05 Jan-07 Feb-08 Mar-09 Apr-10 May-11 Jun-12

profit opportunity. In addition, the export price is also If exports of oil are up over the last few years, attractive vis-à-vis the domestic price, which also prothe Gulf Coast in general and the Houston Port must be motes export opportunities. As long as the market offers in the thick of it. The answer is YES! Refined product the incentive to produce supplies of refined petroleum exports in the Gulf Coast region have risen from about products in excess of internal demand, refinery operations 750 MBD to around 2,000 MBD over the last seven (7) will continue to capture every opportunity and the level of refinery operaU.S. Exports of Refined Petroleum Products tions will remain relatively high.

Gulf Coast vs. U.S. ('000 Barrels Daily) Exports of refined petroleum 100% products, while currently not aggres90% sively growing, are indeed remaining 80% constant at around 2.5 million barrels 70% a day during the last several years.

60% 50% While the key product of the export 40% stream remains distillate fuels – diesel 30% fuel and heating oil – the increase in 20% the volume of gasoline exports is not 10% unnoticed. Exports of motor gasoline 0% have averaged over 415 MBD during the last 12 months, which is essentially triple that of the previous five Finished Motor Gasoline Distillates Residual Fuel Oil Petroleum Coke Other Products years.

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Greater Houston Port Bureau | 27

years and this represents between 75% and 80% of total U.S. exports of refined petroleum products.

It doesn’t matter the nature of the particular product; the export of all refined petroleum products are now concentrated as emanating from the U.S. Gulf Coast. In fact, finished motor gasoline has been the predominant Gulf Coast export product for over 40 years. Currently, the Gulf Coast accounts for 89% or 370 MBD of finished

motor gasoline exports when averaged over the previous 12 months.

In terms of Houston and the regional port complex, based on an allocation of refining capacity, the HoustonGalveston-Texas City area is currently estimated to be exporting about 85 MBD of gasoline each calendar month.

Assuming 30,000 SDWT product tankers, this equates to 246,000 barrels or about 10 cargos each month, or one every 3 days.

ALLOCATION OF 2012 FINISHED MOTOR GASOLINE EXPORTS THE GULF TO HOUSTON-GALVESTON-TEXAS CITY MBCD

HOUSTON-GALVESTON-TEXAS CITY EXPORTS

MB/Mo.

Gulf Coast Refining Capacity

9,102

Houston-Galveston-Texas City Refining Capacity

2,100

Houston-Galveston-Texas City %

0.23072

Gulf Coast Finished Motor Gasoline Exports

370

Implied Houston-Galveston-Texas City Exports

85

2,561

Cargo (30,000 MT)

246

Cargos each month

10

28 | October 2013

www.txgulf.org

If U.S. motor gasoline consumption declines over the next 10 years as forecast, from 8.8 million barrels a day to 7.4 million barrels a day, exports could rise by a like amount. Assuming a ratable decline in gasoline consumption, a corresponding ratable rise in motor gasoline exports, and following a similar allocation process, the Houston-Galveston-Texas City area could expect an additional annual increase of 35 cargos each year or 3 cargos each month. At the end of 10 years, Houston would be exporting about 36 cargos a month of motor gasoline

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(about 325 MBD), an increase of 26 cargos a month over the 10 years. Domestic motor gasoline consumption, while always potentially responsive to any improvement in economic conditions is, however, facing a significant challenge. Recovery from the Great Recession has been sluggish and growth in future GDP is expected to remain around 2%, which is less than the recent historic growth rate of between 3-5%. Under this scenario, it is difficult to appreciate how improved economic conditions would increase motor gasoline consumption.

Furthermore, should the economy rise above the 2% growth rate, personal incomes could also rise and the incentive could then be vehicle replacement as opposed to vehicle retention, especially when considering the relative fuel inefficiency of continuing to drive an older vehicle.

If the economy should experience a higher growth rate and new vehicle purchases should also consistently increase, then the new vehicles would have significantly improved fuel economy based on the recently agreed CAFE Standards when compared to the vehicles relinquished (and possibly scrapped). This would result in an increase in the MPG rate for the “on-the-road” ALLOCATION OF 2025 FINISHED MOTOR GASOLINE EXPORTS motor vehicle fleet and therefore would also not THE GULF TO HOUSTON-GALVESTON-TEXAS CITY be a significant contributor to a net increase in HOUSTON-GALVESTON-TEXAS CITY EXPORTS MBCD MB/Mo. motor gasoline consumption.

Gulf Coast Refining Capacity

9,102

Houston-Galveston-Texas City Refining Capacity

2,100

Houston-Galveston-Texas City %

0.23072

Gulf Coast Finished Motor Gasoline Exports

1,037

Implied Houston-Galveston-Texas City Exports

239

7,178

Cargo (30,000 MT)

246

Cargos each month

29

30 | October 2013

www.txgulf.org

As a result, the consumption of motor gasoline in the U.S. is anticipated to be on a downtrend for a number of years, initially driven by a reduction in the motor vehicle population, and sustained over the next 10 years by engineering solutions that offer greater fuel efficiency.

With regard to the refining industry, as long as the economics of refining incremental gasoline at a level above internal domestic demand remains profitable, the U.S. will be an active participant in the export market for gasoline by seeking additional outlets to maximize the output of the currently available refining capability.

As countries located throughout the Americas and the Caribbean continue to grow and expand, expectations are that the market for refined petroleum products will to continue to attract supplies from the U.S. Since the U.S.

will have the capacity to meet this increasing demand, it will be a secure and reliable supplier to this market.

The downtrend in motor gasoline consumption is a harbinger of change, but the ingenuity of the American economy is alive and will both seek and capture new markets to maximize the profitability of the enterprise. So it doesn’t matter whether it real or Memorex. ò

Greater Houston Port Bureau | 31

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