Energy and Shipping- Price Gouging, Greenwashing, and Mis-Leading Data

In various articles, I’ve railed against attitudes in the media (of the “mainstream” variety, not shipping outlets) numerous times for their mis-information, non-information, or just plain bad information about matters well known to me- which are shipping and commodities markets. Part of the “pain” is self-inflicted, though some groups in the maritime scene are more prone to provide their points of view to the mainstream observers trying to peer in, many are not. Nevertheless, I do want to point to a surprisingly sensible article from the New York Times (which has railed against liner carriers courtesy of a steady flow of propaganda from the cargo side). The article that I like is energy-focused,  written by Peter Coy- the President of the New York Financial Writers Association (NYFWA), of which I am a long-time member. In his article (he writes a weekly column on the practical side of economics) he talked about issues surrounding the high price of gasoline and diesel fuel (both transported extensively on MR size tankers across the oceans, and barges up and down the coast), and related matters, in an “Opinion” piece titled, “Big Oil is booming. But it’s not price gouging.” In the piece, he points out that: “President Biden, frustrated by high inflation, is threatening oil producers and refiners with federal investigations over their pricing practices.”

In a conclusion that anyone who passed Economics 101 would nod their heads in agreement, Mr. Coy writes: “… forcing refiners to accept lower prices for their products would only create shortages. The demand for gasoline, diesel, jet fuel and other refined products at the artificially low price would be greater than the supply, a recipe for chaos.” Tell that to folks in Washington, D.C. where other factions, through the proxy of the Federal Maritime Commission (FMC), are going after liner carriers- we’ll save that for another article.

Speaking of Washington, D.C., the Securities and Exchange Commission (SEC) has been in the news again, roughly two months after its promulgation of draft rules (the 500-pager) on environmental disclosures (the “E” part of ESG). This time, the topic is “greenwashing” by investment funds- where the funds’ names imply investments in the good guys; some objectivity would be put around titles- something like 80% of holdings would need to be in assets that are legitimately tied to ESG. We’ll leave it to the boffins to figure out the precise measures. Other regs that the SEC is looking at would have funds disclose the carbon emissions of their portfolios’ investments- presumably tied together with the late March proposals on companies’ reporting on their carbon footprints.

An SEC press release on the new proposals can be found here. The Commission’s objectives are encapsulated in part of their announcement, where they say: ““ESG encompasses a wide variety of investments and strategies. I think investors should be able to drill down to see what’s under the hood of these strategies. This gets to the heart of the SEC’s mission to protect investors, allowing them to allocate their capital efficiently and meet their needs.”

SEC proposals are subject to comments, and of course to politics; energy companies are always in the cross-hairs, and by virtue of supply chain locus (I didn’t say, but was thinking about “…guilt by association…”, maritime companies moving energy products are not far removed. Outsiders looking “…under the hood…” (okay, readers, I know…that’s an automotive allusion) is something that maritime companies need to get prepared for. In putting together one recent article, I got the impression that “dozens” of vendors would be looking at CII ratings of individual vessels- with actual or derived results becoming widely available. And then, for a different article, I found that freely available data from CDP Global (it claims to be the biggest and the best of such data providers, which I can’t really verify), one provider of corporate ESG ratings (using algorithms, though I am not sure), includes shipping companies.

A few maritime entities scored “B’s”; at least two (both from the Japanese marketplace) came in with a “A” rating. The good news- sort of, is that companies scoring an “F” in the climate category, and there are some well-known names, are not automatically bad actors/ polluters. Rather, in the wild wild wild world of providing data, the maritime companies’ format of providing data did not match CDP Global’s template. The words “mis-leading” and “mis-information” are not far from the tip of my tongue.