HE WHO OWNS OIL -
DOMINATES TUNA !?
(By Henk Brus, December 24, 2005,
henkbrus@atuna.com)
With world oil prices just below Usd 60 a barrel, prices for diesel for the tuna
industry have also climbed to historical high levels.
Everywhere around the world fishermen are struggling to deal with this dramatic
increase in the operational charges of their boats. In fact, tuna boatowners in
the EU and other tuna fishing countries have been begging for government support
and subsidies to offset their high fuel cost.
Until recently fuel cost has been the second largest operational cost for many
tuna purse seiners, but with the increase in world oil prices fuel is becoming
the main operational cost factor in running tuna boats of more than 1000 M/T.
This would not be such a problem if tuna boat operators could reflect these
higher fuel prices in the price of their skipjack and yellowfin. From 1995 till
1999 we could still see some relation between the movement of fuel prices and
the price of a metric ton of skipjack tuna CFR Bangkok. But since the crisis
year 2000, when raw material prices plunged to levels around Usd 400, there has
no longer been any relation between the movement fuel prices and the price of
frozen tuna for canning purposes.
With prices of whole round skipjack of 1.8kg up being around Usd 730 CFR Bangkok
per M/T, and diesel prices anywhere between Usd 0.45 and Usd 0.60 per liter,
tuna fisherman are feeling the squeeze, but fail to get prices to a level which
reflects these higher energy prices.
The latest high tech superseiners, with a tonnage of 2000 M/T and more, are
enthusiastically advertised as using only 325,000 liters of diesel to catch 1.3
million kgs of tuna on an average trip of 28 days (which includes the unloading
time). Today, this would mean that these boats spend about Usd 178,750 worth of
diesel at a liter price Usd 0.55 on a very successful trip in the Western
Pacific. That would mean Usd 137 of fuel per M/T of skipjack. If we consider it
costs about Usd 135 per M/T to transport tuna from the Pacific fish port to the
canneries in Bangkok, fishermen with high tech superseiners get less than Usd
600 FOB fishing ground. In this high tech/good catch – scenario, the diesel cost
share is “only” about 25%. Not to forget that such a superseiner is only one
year old – and has cost around Usd 20 million dollar of initial investment to
get such excellent fuel efficiency!
Today’s reality however is that the majority of tuna purse seiners are between
25 and 10 years old, can only carry 500 to 1500 M/T of tuna, and do not have the
same modern fuel efficient engines. With tuna stocks on the decline and trips
taking often 50 days or more to get the boat full, fuel costs are starting to
change the landscape of the tuna business rapidly. Many boat owners are now
looking at a cost of about Usd 300 for diesel for each M/T of skipjack tuna.
That means that 50% or more is being spent on fossil fuels!
Filling up the tank of a 1600 M/t tuna boats might cost close to Usd 625,000.
This requires enormous financial resources and only increases the risks in this
business. This drives us to the conclusion in today’s business: Whoever Owns Oil
– Dominates Tuna Fishing.
This might also explain why US boatowners (including the world’s largest tuna
trader) operating in the WP have been selling their entire tuna purse seiner
fleet (of more than 14 large vessels) to Venezuela, and other oil producing
countries like Mexico. It might also explain why Iran is now actively on the
look-out for good second hand tuna vessels. These countries have large oil
resources, a local tuna canning industry, and a rapidly growing low-income
population. With their limited agricultural resources they are in need of
healthy, low-cost and high-protein food.
Turning fossil fuels like oil into proteins such as tuna might just be a very
smart idea. It’s like eating your own fossil fuels! Each ton of diesel probably
results in about 1.8 M/T of tuna, and there is only a minimum of energy needed
to deliver it to the canning plant. Tuna vessels fuel up next to the oil well,
and return back filled with tuna for the cannery next door! From there it goes
straight to the supermarket and the consumer. How much more efficient can it
get?
Just compare that with agriculture. First we need scarce land, then we need
fertilizers – field machinery- transportation – irrigation – etc, etc.
Statistics show that it takes about an astonishing 1600 liters of fossil fuel
just to feed one American. If America feeds their people more canned tuna, this
will not only make their population healthier, but will also provide them with
the much needed protein at a much lesser energy expenditure.
If we believe the analysts of Goldman –the 2nd biggest US securities
firm- oil could cost around Usd 60 a barrel for the coming 3 to 5 years. A
recent research report by the New York-based analyst Murti forecasts that oil
will even be between Usd 50 and a staggering Usd 105 until 2009. Whatever the
future might bring us in diesel fuel prices, by expanding further into tuna
fishing; these oil producing countries are making a very wise strategic move.
They are putting their oil where their mouth is!
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