The Journey of Crude Oil: From Arab Gulf Countries to the USA

Crude oil transportation from Arab Gulf countries to the USA is a complex and fascinating process, involving various modes of transport, international trade agreements, and global market dynamics. This article delves into the details of crude oil distribution, discussing methods such as sea transport, pipelines, and rail.

Overview of Crude Oil Grades

The world's crude oil is sold on global commodities exchanges, and the grades of crude oil that buyers can purchase include:

Light/sweet Light/sour Medium/sweet Medium/sour Heavy/sweet Heavy/sour

When buyers purchase crude oil, they do not specify an originating location. Instead, they only buy by grade, and the exchanges provide the details about where and when to pick up the volume of the grade required.

Transport Methods and Distance Optimization

Most crude oil is transported by sea, but some is also transported by rail or pipeline. Exchanges aim to minimize the distance tankers travel, sourcing oils from the nearest sources whenever possible. For example, while Middle Eastern crude oil might be transported to the USA, it is usually sourced from closer locations before being shipped.

Figure 1: U.S. Imports from Saudi Arabia of Crude Oil (Thousand Barrels per Day)

This graph illustrates the significant trend in U.S. crude oil imports from Saudi Arabia since 1970. These imports have fluctuated, reflecting various global economic and political factors.

Key Oil Terminals and Tanker Sizing

The world's oil terminals play a crucial role in the distribution chain. The Jask Oil Terminal in Iran is one such important location. The global oil terminals can be found in various strategic positions, as depicted in Figure 2: The hottest terminal locations of 2020 - Insights Global.

Oil tankers come in various sizes, from general purpose to ultra-large crude carriers (ULCC). Table 1 provides a range of sizes, with Very Large Crude Carriers (VLCC) being the primary mode of transport for oil from the Middle East to the USA.

Table 1: Oil Tanker Sizes

Size Deadweight Tonnage (DWT) Barrel Capacity General Purpose 50,000-100,000 DWT 300,000-600,000 barrels Crude Oil Carry 100,000-200,000 DWT 600,000-1,200,000 barrels Large Crude Carriers (LCC) 200,000-300,000 DWT 1,200,000-1,800,000 barrels Ultra Large Crude Carrier (ULCC) 300,000 DWT 2,000,000 barrels

Currently, most ships transporting oil from Saudi Arabia to the USA are VLCCs, with a deadweight tonnage of around 300,000 and carrying approximately 2,000,000 barrels of crude oil. About 2 ships per week leave from Saudi Arabia for the USA.

Strait of Hormuz Shipping Route

The Strait of Hormuz is a critical chokepoint for oil shipping. Most oil from the Arab Gulf to the USA passes through this strait, highlighting its strategic importance. The passage through the Strait is subject to various geopolitical considerations, which can impact the logistics and safety of crude oil transportation.

Figure 3: Oil tanker sizes range from general purpose to ultra-large crude carriers on AFRA scale

The AFRA scale, which stands for Algeciras to Formentera Rate Assessment, is an important reference for the rates of crude oil transportation. The scale categorizes oil tankers based on their size, with each category having its specific rate.

Conclusion

The transportation of crude oil from Arab Gulf countries to the USA is a multi-faceted process involving global commodities exchanges, various transport methods, and strategic terminal locations. Understanding these aspects is crucial for comprehending the dynamics of the global oil market and the importance of the Strait of Hormuz as a crucial shipping route.