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The Production And Distribution Of Oil Products

2273 words - 9 pages

Ports can be considered clusters of economic activity (Tongzon, 2002). One of the facilities that is often found in ports is the production and distribution of oil products. The oil products that I will be taking into consideration in this assessment are: gasoline, diesel fuel, jet fuel, kerosene, liquefied petroleum gas, and fuel oils. This list represents refined oil products, not crude oil. The factors that are going to be presented in the methodology of this assessment are: quality innovation system, hinterland infrastructure, services to to hinterland markets, safety and security in port, intra-competition in port and efficiency. I have selected these factors because I think that they represent the selection points that an oil company would consider when considering a port. After the description of the factors in the methodology, the results will present the evaluation of the port of Rotterdam with regard to these factors.

Methodology

The first port selection criteria that I will be discussing is related to the quality innovation system of ports. Innovation represents a gateway for a competitive edge in many industries, including ports. In the paper entitled Governance in Seaport Clusters of de Langen (2004), it states that leader firms can influence the performance of the cluster of firms they belong to. Innovation in the field of oil products has rewarded the ones that have participated in the process more than the ones that have not (Enos, 1962). A way in which ports can help companies innovate is by attracting the resources that the refineries need. These might be: human resources, certain substances or manufacturers that have the possibility to invest in innovation. In my opinion ports could increase throughput by attracting refineries and giving them the possibility to innovate.

The next relevant location factor is hinterland infrastructure. Due to the fact that ports serve hinterlands, good quality rail, inland waterways, roads and pipelines are needed in order for a port to remain competitive (De Langen et al, 2004). Hinterland infrastructure can create a collective action problem. Firms can benefit from hinterland infrastructure, but due to the large investments needed to create or improve existing infrastructure, individual firms cannot devote enough resources to make this possible by themselves (Olson, 1971). De Langen (2004) describes five variables that influence the quality of hinterland access regimes, these are: the presence of an infrastructure for collective action, the role of public organisations in a regime, the ‘voice’ of firms, a ‘sense of community’ and the involvement of leader firms.

In the case of oil products, a better pipeline system could reduce the cost of transportation in the long run. Lately port authorities have taken the task of improving hinterland infrastructure since it is creating delays. Some suggestion for improvement are setting rules for access to the infrastructure,...

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