The company that gave these figures stated that, "As soon as postWorld War II tanker building programs created a surplus of tonnage, freight rates dropped to the point where T2-type and less efficient tankers could not operate profitably ..... except during periods of high seasonal demand, or demand created by a Korean type situation and military requirements." Both the seasonal variation and the influence of the Korean War on the 1951 and 1952 rates are evident in the above tabulation.

The third independent company gave no figures, but stated that (individual) revenues in the postwar period have decreased because of exceSS tonnage in relation to demand. This company gave as the cause of the excess tonnage: (1) postwar building) (ii) foreign competition in offshore trades; (111) U. 3. ships formerly in foreign trade returned to domestic trade; (iv) increased imports of oil from the Near East, reducing domestic coastwise traffic, (v) pipeline competition; and (vi) MSTS competition.

b. Changes in Types and/or Volume of Cargoes

The replies to this question varied widely. Some of the respondents reported virtually no change in types, others that there has been a substantial increase in the number of types of lean products or so-called specialties carried. There was general agreement among the oil companies that postwar volume has increased substantially, and one of the independent companies said that the volume available to U. §. tankers had declined due to Increased imports. Another independent company indicated that tanker traffic volume on the Pacific Coast had declined because of the use of pipelines to northwest ports from new inland fields.

e. Changes in Basic Routes Served

The general consensus of replies was that there had been no changes in basie domestic routes, but there were two comments on the loss of foreign trade routes previously served.

d. Changes in Operating Oeste

The respondents agreed that operating casts have increased substantially since World War II, but the figures varied, partly because of different base years. The range of variation on overall operating costs is shown by the following summary of replies:

One of the independent owners gave the following tabulation of average wage costs per day including overtime and fringe benefits for T2 or equivalent ships of U. S. and British registry:

In connection with these figures, it was stated that the average percent of wage increase in all U. S. manufacturing industries between 1939 and 1955 was 210 percent, as compared to the 380 percent increase shown here in the tanker payroll.

Another independent owner gave the following representative daily operating costs of a T2 tanker under the U. S. flag:

The comments on this question reflected the general opinion expressed elsewhere, that it is economically impossible for U. S. flag ships to compete in the offshore trades, and that the lower foreign costs make it attractive or necessary for U. S. citizens to build and operate under foreign flags if they want to participate in foreign trades.

f. Carriage of Government Financed Cargoes

Eight of the fourteen respondents either expressed no opinion on this question, or stated that carriage of government financed cargoes had no influence on their operations. Four others apparently considered government financed cargoes to be military cargoes carried by MSTS, and related their answers here to the next question (1.g) on MSTS operations and chartering. Only two referred directly to foreign aid cargoes, one stating that "50/50 has helped," and the other that, "There is little doubt but that the carriage of government financed cargoes has helped provide and increased utilization of American-flag ships. How long this will continue is, of course, problematical."

g. Operations and Chartering of Tankers by MSTS

One oil company did not answer this question, and three others stated that MSTS operations had no material influence on their operations. All the rest, including the three independent owners, told essentially the same story. Under the Voluntary Tanker Plan they provided MSTS with ships for the Korean War lift at the established rate of USMC plus 25 percent for T2s. It was not contended that operations under the Pool were unprofitable, but open market rates at the time were plus 100 percent to plus 200 percent, and in some cases it was necessary for the owners to pay these prices in the open market to replace the tonnage contributed to the Pool. They contend that when the government needs decreased and open market rates fell below the Pool rate, MSTS discontinued requesting tonnage from the Pool and obtained their requirements on bids at rates below the Pool level, and often at less than cost. Rather than operate at a loss, from time to time the private owners have been forced to lay up substantial numbers of their ships. Moreover, they maintain that the rates would not have been at such low levels except for the continued operation of government-owned ships by MSTS in service that could have been provided by private companies. They conclude that the operation of from around 36 to 50 MSTS tankers (the June 1955 figure was 32) "adds to the over-tonnaged condition of the only markets open to U.S. flag tankers, and depresses rates."

h., i., 3, 4, and 8. Vessel Characteristics and Shoreside Accommodations

Five items in the questionnaire having to do with vessel characteristics and shoreside accommodations are overlapping to an extent requiring combined treatment in this summary. The following, briefly, are the main points brought out in reply to these questions:

The economy of operating large tankers is commonly recognized, but size is limited by port accommodations, especially water depth, and the requirements of the intended service.

In reply to question (8) on vessel characteristics most suitable for the domestic and offshore trades, four companies specified size of 30,000 to 32,000 deadweight tons for the domestic trade, against nine who believed that somewhat smaller ships of from 18,000 to 26,700 deadweight were more suitable. On foreign trade there were only three replies, one calling for 25-32,000 and the other two for 38,000 deadweight tons. One of the latter replies stated that for the company's purposes in carrying clean products, a 16,000 deadweight ton ship would be most suitable.

Speed was evidently a secondary consideration.

From 15 to 16 knots

was specified in all cases but three which called for speeds of 17-18 knots. These three, incidentally, were in the 25,000 deadweight ton class for the domestic trade. The speeds specified for the "big" supertankers of 30,000 deadweight tons and over were all in the 15-16 knot range.

With respect to shipboard piping and pumping equipment, the replies varied, but in a number of cases it was indicated that provision should be made for segregating from six to fourteen grades of diversified cargoes.

There was general agreement on the importance of efficient shoreside terminals, adequate storage capacity, larger and more pipelines, and better pumping systems, all of which contribute to rapid loading, unloading, fast turn-around, and increased carrying capacity over a given period of time.

Throughout the replies to the questions on vessel characteristics and shoreside facilities there were repeated comments on the need for greater water depths in harbors and channels to accommodate the larger, more efficient ships.

2. Cost or Freight Rate Per Barrel

Considerable data were submitted on the relative cost of carrying petroleum products coastwise by T2 tankers as compared to tankers of replacement types specified by the respondents. Because of variations in cargoes, length of haul, and possibly also the basis of calculation, there was little uniformity of pattern beyond the general principle that larger ships have lower per-barrel costs than T2s.

One company, for example, indicated that on a T2 cost index of 100, the comparable costs on replacement vessels of 20,000, 25,000 and 30,000 deadweight tons, respectively, would be 95, 84 and 75. Another reported an estimated index cost of 73 for a 26,700 deadweight ton ship--two points lower than the 30,000 ton vessel just mentioned; and a third company gave a cost of 91 on a 29,000 ton ship--five points higher than the 25,000 ton cost of 84 quoted above.

Where a respondent gave costs on more than one replacement ship, the larger ships had progressively lower costs, but in comparing costs on ships of the same or approximately equal tonnage estimated by different companies, there were substantial differences.

In one case it was estimated that transportation costs on replacement vessels would be about the same as on T2s, because the efficiency of the new ships would be offset by increased depreciation on higher acquisition costs. In another case, with no reason given, the costs on new ships were estimated at levels somewhat higher than T2 costs. In both instances the specified replacement ships were comparatively small, in the 17-20,000 deadweight ton

range.

No figures were given on comparable pipeline transportation costs, although this information was requested.

Only one comparison was given on railroad tankcar versus tanker costs. On the Houston to Marcus Hook run, the T2 cost of transporting crude oil is

given as 23¢ per barrel, and of 20¢ per barrel on a supertanker of 30,200 deadweight tons. Against this, the railroad tankcar rate is $6.01 per barrel almost 3,000 percent higher.

5, 6 and 7, Vessel Replacement

Item 5 asked four questions on:

(a) Tentative years of replacement without regard to government
acceleration incentives;

(b) Tentative years in which owners would be willing to replace
under public Law 574 (Trade-in-and-Build);

(c) Estimated trade-in value; and

(d) Estimated replacement costs.

The replies to these questions may be summed up as follows:

(a) Without regard to government incentives, such replacement as might be undertaken would occur generally on the 20-year maturity schedule, with some slight acceleration. This would replace most of the T2s and T3s in the years 1961 through 1965, some prewar types earlier, and a small amount of postwar construction as late as 1974.

(b) Only two of the oil companies indicated any positive interest in construction under Public Law 574. One is now building three ships under this legislation, and states that further construction depends on service performance after delivery, and on demand for vessels of this size. The other reported that replacement under Public Law 574 is contingent, in part, on the action taken on an application now before the Maritime Administration under this law.

A third oil company gave a tentative schedule on which construction of three ships representing approximately half of its present tonnage might be considered in the years 1956-58, if the owner were allowed to build what he considered the economical commercial speed.

One oil company stated that

A few replies were definitely negative. it is not interested in Public Law 574, and an independent owner expressed the belief that the law offers no incentive unless all other problems can be solved. The difference between trade-in value and replacement cost was considered so great that in the absence of clear-cut demand or other incentive, this company could not see how they could incur the added debt and increased debt charges. Another independent company considered Public Law 574 no incentive unless secured by long-term charter, in light of the over-tonnaged market.

All the other respondents were noncommittal, indicating that their replacement policy had not yet been established, that they have no present plans, or that their decision depends upon further investigation and consideration.

The answers to the questions on trade-in value and replacement costs can be summarized only in the broadest terms. A number of respondents said they could not give figures, and where figures were given, they usually had