The Economics of Jones Act Product Distribution

SNAME Annual Meeting, Houston, 2005

The decline in the Jones Act product carrier fleet is a matter of concern.  Why is it that, when Americans are consuming ever-increasing quantities of refined products, the demand for ships to move products from refining centers to the market appears to be declining?  Can this trend be reversed?


(1)   Demand and Supply: What are the historical geographic patterns of production and consumption of refined products?  What are the projected future trends?  How have refined products been distributed in the past?  How extensive is the use of pipelines, rail, inland water, etc?  How have the methods used changed over the years?  What other techniques are used that reduce the need for coastal transportation, such as product swaps, imports?  What drives these trends?  What are the forecasts?

(2)   Technology: What technological changes have we seen in this industry in recent years and what might we expect in the years ahead?  How can technology make shipping more attractive?  Larger and/or faster ships and/or ATBs?  Improved cargo-handling technology?  Other? 

(3)   The Future: What would need to be done to bring about an increase in demand for shipping as a means of distribution of refined products?  Lower capital costs?  Lower operating costs?  Lower cost per barrel delivered?  Is the ATB really more efficient than the self-propelled tanker?  What could or should the industry be doing?

Workshop: The Economics of Domestic Short Sea Shipping

With the Transportation Research Board/Marine Board, Washington, September 28, 2004

What is “short sea shipping” in the United States?  For purposes of this Workshop, we defined it to mean:


Freight service operations carrying either containerized or trailerized cargoes via the coastal waters, lakes, and river systems of North and Central America, having at least one port of call in the United States, and in particular those services where the shipper has a true “intermodal choice” to make between moving units by water and using one or more land alternatives (highway and/or rail) or, in certain cases, air transportation.


The workshop asked:  Are short sea shipping services economically viable in the United States?  What factors characterize market structure and demand?  What factors drive shippers or carriers to select a waterborne alternative for the domestic movement of freight?   How are domestic shipping services best structured to serve the diverse needs of customers operating in different market segments?  How may operations best be financed?  What regulatory constraints do these services face and what is the best way for them to manage and operate within these constraints?  What factors drive the shipping service’s selection of service parameters and equipment?  What structural changes might help to facilitate the development of short sea shipping in this country?


We addressed these and other questions by establishing an interactive dialogue between presenters and participants.  A discussion of the principal areas of interest was followed by the introduction of several case studies involving established domestic services.

Ferry Schmooze

In conjunction with the San Francisco Water Transit Authority, October 21, 2003

Following the SNAME Annual Meeting and WMTC in San Francisco, the Maritime Economics panel worked with the San Francisco Water Transit Authority to host the Ferry Schmooze, a round-table workshop conference designed as an opportunity to bring together divergent perspectives on ferry design and operations in an informal environment.  The schmooze featured both presentations and open discussions.

The Future of the Pacific Liner Trades and Implications for Ship Design and Acquisition

SNAME Annual Meeting and World Maritime Technology Conference, San Francisco, October 2003

The trans-Pacific liner trades have been the largest and fastest growing sector of global commerce for the past decade.  In the years to come, these trades are expected to become an even more important part of both the international logistics network and the American economy.  This session examined the economics of the Pacific liner trades and explored the implications for future demand and supply of vessels to serve those trades.  It also attempted to foresee the effects on the designs of those vessels, including vessels for U.S.-flag service.

Workshop: Legal and Economic Issues of High Speed Marine Transport

In conjunction with the Transportation Law Section of the Federal Bar Association, Washington, July 11, 2002
The workshop explored issues affecting the development of high speed marine transport in the United States.  The premise for developing the workshop was that, high speed marine vehicles enjoy wide market penetration in other areas of the world, yet are relatively rare in the United States.  Through an examination of three issue areas: (1) contracts and financing, (2) modal choice and intermodalism, and (3) operational and environmental factors, workshop participants explored the opportunities and impediments to the penetration of domestic high speed services.

Assessing Economics of New Technology in Potential Emerging Markets

SNAME Annual Meeting, Orlando, 2001

A business, acting rationally, will implement a new technology or expand to serve a potential emerging market only if it makes commercial business sense.  The business must make probing inquiries into the operation of the relevant market, the likely effect on that market of introducing a new technology or a new service, and the costs of acquiring and operating the new technology or service.  Economics can assist in virtually every stage of this process, helping to guide the business in deciding whether the planned venture will be profitable, and providing tools to assist the business in selecting the optimal mix of vessels and services to offer to the market.  This session illustrated some of the ways in which maritime economics relates to new technologies in potential emerging markets.  That is, the session showed how the analysis of market demand is vital to economic decision making, presented some of the tools that can be used to perform economic analysis, and illustrated how exogenous factors can affect the success of the new technology in a profound way.  Presentations and interactive discussions explored the techniques used in analyzing a variety of potential markets and touched upon some of the shortcomings of traditional analyses in capturing the dynamics associated with introducing new technologies to serve emerging markets.

Liner Shipping, What's Next?

In conjunction with the International Association of Maritime Economists, Halifax, September 14, 1999

Papers were presented in the following thematic areas:

  • Post-Panamax Shipping and the Hub and Spoke Network
  • New Cargo-Handling Technologies and Facilities Requirements
  • New Perspectives on the Regulation of Liner Shipping
  • Mergers and Alliances: Structuring for Successful Containership Operations

Navieras Case Study

Developed by members of Panel O-36 for use in business school curricula, 1998

This case study concerns the sale of Navieras, or the Puerto Rico Maritime Shipping Authority, which had been created in 1974 when the Commonwealth of Puerto Rico acquired assets from Sea-Land Services, Inc., Seatrain Lines, Inc., and Transamerica Trailer Transport, Inc. including: ships, terminals, rolling stock, and other equipment.  Owing to the large accumulated deficit associated with the operation, the government of Puerto Rico sought to privatize Navieras in 1993.  The case study works through subsequent stages in the divestiture while teaching fundamental fnancial and economic lessons.  Please see the panel chair for further information.

Workshop: The Economics of Fast Cargo Ships

In conjunction with the International Association of Maritime Economists, Washington, June 12, 1997

This workshop addressed the economics associated with emerging technology for fast cargo ships.  A number of technological advances were proposed for insertion into the liner industry through proposals to establish high speed services on the East-West trades.  A number of the proposals glossed over market dynamics and issues vital to economic viability.  After reviewing ship technology in the context of the total origin-to-destination transportation system, the workshop explored market structure and demand, including the interrelation between the markets for international movement by sea and air and the potential for producing “value added” for a certain set of customers. The workshop also discussed the economic viability of such a service in terms of: (1) necessary investments in ships, infrastructure and peripherals; (2) cargo collection and distribution; (3) capital and operating costs; and (4) assessment of risk.

Conference: U.S. Intermodalism for the 21st Century

In conjunction with the Transportation Section of the Federal Bar Association, Washington, April 25, 1996

The conference addressed a series of diverse topics: Containership Utilization; Port Operations Efficiency; the Movement of Cargo; the Use of GPS; The Application of CERCLA to Ocean Shipping; and a final open forum where any topic pertinent to the subject of the conference was open to discussion.

Workshop on Strategic Sealift, Convertibility and Economics

In conjunction with SNAME's Cargo Handling and Sealift Panels, Washington, October 25, 1994

The workshop focused on the prospects for using commercial ships operating in commercial trade, perhaps with quick modifications, to carry military sealift cargoes.  The emphasis was on examining the military utility of ships that would be well-suited to their commercial uses and probably less suited – but at least adequate – for military applications.  By contrast, some earlier efforts began with the military requirements and then tried to define the characteristics of a “commercial” ship that would meet them.  These efforts invariably resulted in a set of ship characteristics having a superficial plausibility but lacking genuine suitability for commercial operation on real trade routes.  To avoid the pitfalls of earlier efforts, the workshop was structured to examine commercial requirements, military requirements, and the linkage between these two sets of requirements. With the competing sets of requirements firmly established, the workshop then probed issues of economic and operational viability.

Workshop: The Economics of Fast Ferries

Washington, January 27, 1994

The workshop examined the markets for ferries and the potential for using high speed vessels in domestic ferry applications. Through a discussion of the practical economics associated with ferry systems and the benefits and limits of new technologies, participants discussed the circumstances under which these new technologies could be made commercially viable in the United States.