Trade Cases

Leibowitz: Ports Are Broken, Is Energy Next?

Written by Lewis Leibowitz

By Trade Attorney Lewis Leibowitz

I used to love a PBS show called Connections. The title is still around, and I recall an episode years ago that explored the Space Shuttle. Thousands of “connections” were necessary before the spacecraft became a reality: chemistries to make substances capable of withstanding re-entry temperatures, power systems for rockets, engineering and orbital mechanics – and that is hardly a complete list.

Lots of products we take for granted today are the result of similarly complex sets of connections – automobiles, computers, televisions, fracking, and electric vehicles come to mind.

And now we are seeing what happens when one little link in complex modern supply chains blows up.

ship containerWe look in disbelief at dozens of huge container ships parked in the Pacific Ocean outside the ports of Los Angeles and Long Beach, the largest seaport in the United States. This picture affects all of us. And Los Angeles/Long Beach is not alone. Ports all over the world are suffering from increasing delays in unloading vessels. The worst major port is indeed LA/LB in terms of delays in 2021 compared to the 2017-2019 average, the latest period of “normalcy.” Of 10 large ports around the world, all have longer turnarounds than 2017-2019 – except the port of Shanghai, according to published data. LA/LB is taking about twice as long now as it did in the base period, the worst in the world.

Figuring out why that is and what we can do about it brings me to the connections of modern life. I see it this way (and you may see it differently):

• The pandemic shut down the economy last year for months. The economic recovery has sharply increased demand. But the infrastructure needed to supply that demand has not returned to its pre-pandemic state.

• In the U.S., the labor force is losing participation, even as job openings are increasing. This is causing wage inflation. But workers are not yet lining up to go back to work.

• Major seaports are affected not only by events thousands of miles away but also by trends much closer to home.

The port congestion we are seeing now is an example. Orders for goods fill factories overseas and here in the U.S. Overseas factories are filling their orders by shipping across oceans. Those goods move in shipping containers. Many of the largest carriers hold 20,000 or more containers. When the ships arrive in U.S. ports, they must wait to unload in part because the facilities need upgrades after years of inadequate investment. The result: When the ships dock, they can take 2-3 days to unload. Other ships arrive, and there is no place to put them. When the containers are unloaded, trucks and drivers are needed to move the containers out of the ports. There is an acute shortage of skilled drivers, so the containers pile up in the ports. Soon, the containers fill up the available spaces at the ports, and the ships waiting to unload need to wait some more. We are now hearing that Christmas may be slow in arriving because the goods that should be under the tree will still be on ships in December.

That is only one aspect of the problem. There are two others that provide additional examples (and readers will no doubt have more in their own daily lives).

The first is fossil fuels. There is so much attention to climate change and the need to replace fossil fuels with renewable resources that we sometimes forget how much we still need fossil fuels: for transportation (especially air travel and ships), for electricity generation, and for manufacturing. The Washington Post points out an interesting “connection” in this regard. The U.S. is now one of the largest oil and gas producing countries in the world thanks to hydraulic fracturing (fracking). But political activists do not like fracking because they are more concerned about climate change and converting to renewable energy sources in the future than about meeting the needs of people today.

The Washington Post published an editorial illustrating the dangers of moving too fast. As we push to discourage the production of fossil fuels to speed the conversion to renewable resources, energy demand will shift to overseas producers. Saudi Arabia, for example, is investing hundreds of billions of dollars to add one million barrels per day to its capacity by 2030. The demand for fossil fuels will continue until we find superior energy generation materials. As U.S. production declines, if the activists have their way, the demand will be met by countries that have invested in new production – namely, Russia, Saudi Arabia, Iran and Venezuela. We think we are doing good in one area, but we are doing harm in others by inadvertently increasing the wealth of countries that do not have our interests at heart.

Another recent piece talks about electric vehicles, which are gaining in popularity around the world. The electricity for these cars must be generated at power plants, at least for the foreseeable future. That electricity must be transmitted across power lines to charging stations. To meet the growing demand for electricity to power vehicles, the power grid will need to be beefed up. (Current power lines can lose half their electricity due to line loss over long distances.) One recent study projected that $125 billion will be necessary to improve the power grid to service some 20 million new electric vehicles. The infrastructure bill, which is stuck in Congress right now, allocates $5 billion for this work.

Big-picture problems – such as converting to renewables and increasing adoption of electric vehicles – need to be addressed. But there might be less than optimal thinking among the power elites (pun intended) as to how these big-picture problems intersect with more immediate and practical ones. We need a sense of perspective about what is possible right now and what will have to wait until the future.

Right now, it looks like government policy either ignores immediate and practical problems – such as port congestion and potential energy shortages – or hopes that the private sector will solve them. International cooperation is essential for addressing global problems. But global institutions don’t make the connections between the issues we face and the tools we have at hand to address them.

Perhaps it’s time to recognize that, when it comes to climate change, we may need to spend more time adapting to the warming that is likely to come – because we won’t be able to prevent it.

Lewis Leibowitz

The Law Office of Lewis E. Leibowitz
1400 16th Street, NW, Suite 350
Washington, D.C. 20036
Phone: (202) 776-1142
Mobile: (202) 250-1551

Lewis Leibowitz, SMU Contributor

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