Energy Information Administration
The Panama Canal is important to world energy markets because it is a major transit center for oil shipments and a potential choke point . Control of the Panama Canal will revert from the United States to Panama in 1999.
GENERAL BACKGROUND
The Panama Canal is a lock-type canal, extending approximately 50 miles from Panama City on the Pacific Ocean to Colon on the Caribbean Sea. The narrowest portion of the Canal is 500 feet wide,
permitting access only to tankers less than 100,000 dead weight tons (Panamax vessels). The Canal is
capable of accommodating 50 ships a day. Transit time from Alaska to the U.S. Gulf Coast via the
Canal is about 16 days, whereas a tanker would take 40 days to reach the Gulf Coast from Alaska if
rerouted around Cape Horn (the southern tip of South America).
PANAMA-U.S. TREATIES
In 1903, the Republic of Panama and the United States signed the Panama Canal Treaty, which allowed the United States to build and operate a canal connecting the Pacific Ocean with the Caribbean Sea through the Isthmus of Panama. The Treaty granted the United States the use, occupation, and control of a Canal Zone, approximately 10 miles wide, in which the United States would possess full sovereign rights. In return, the United States guaranteed the independence of Panama and agreed to pay the republic $10 million, as well as an annuity of $250,000, which each year increased at a rate far beyond that of inflation.On September 7, 1977, a new Panama Canal Treaty was signed by President Torrijos of Panama and President Carter of the United States. This treaty stated that the U.S. Panama Canal Commission would maintain operational control over all lands, waters, and military installations necessary to manage, operate, and defend the Canal until noon on December 31, 1999, when Panama assumes full responsibility for the Canal. This treaty also guarantees permanent neutrality of the Canal.
When the United States leaves the Canal Zone, it will take with it about $450 million in annual salaries now
paid to locals. In anticipation of this blow to the local economy, Panama's revamped Interoceanic Region Authority (ARI), led by Nicholas Ardito Barletta, envisions a consolidated economic center in the Canal Zone when control of assets reverts back to Panama. ARI plans privatization and development of port transshipment facilities, industrial parks, and tourism sites that would highlight the Canal and its ecology.
If transit were halted through the Canal, the Trans-Panama pipeline could have been used to re-route a
significant proportion of northbound oil to the Atlantic. This pipeline is located outside the Canal Zone
near the Costa Rican border, and runs from Puerto Armuelles on the Pacific to Chiriqui Grande on the
Caribbean. It had been used to ship Alaskan oil to Gulf Coast ports; however, the pipeline was closed in early 1996 following the decision to allow Alaskan oil to be exported outside the U.S. Plans are currently being made to reverse the flow of the pipeline to allow about 650,000 b/d of South American oil to flow southbound to Pacific destinations.
RECENT DEVELOPMENTS
In fiscal year 1996, approximately 670,000 barrels per day (b/d) of petroleum and petroleum products passed
through the Panama Canal, up from 550,000 b/d in fiscal year 1994 and 560,000 b/d in fiscal year 1995 (the fiscal year ends September 30). More oil (390,000 b/d) went south from the Atlantic to the Pacific, with oil products dominating southbound traffic. Conversely, crude oil accounted for the majority of northbound oil to the Atlantic, with much of this coming from the Alaskan North Slope. Oil trade accounted for 14-17% of total canal shipments (by tonnage) during fiscal years 1994-1996.
For more information on Panama, see these other sources on the EIA web site:
International Energy Annual 1995 - Annual international energy data through 1995
Latest EIA Detailed Annual Data (1994)
WORLD ENERGY Database for the International Energy Annual (requires Microsoft Access)
Links to other sites:
1997 CIA World Factbook - Panama
U.S. International Trade Administration, Country Commercial Guide - Panama
U.S. Department of Energy's Office of Fossil Energy's International section - Panama
Library of Congress' Country Study Handbook - Panama
The following link is provided solely as a service to our customers, and therefore should not be construed as advocating or reflecting any position of the Energy Information Administration (EIA) or the United States Government. In addition, EIA does not guarantee the content or accuracy of any information presented in linked sites.
Panama an offical looking site with a message from the President of Panama
If you liked this Country Analysis Brief or any of our many other Country Analysis Briefs, you can be automatically notified via e-mail of updates. Simply click here, put in your e-mail address, and check the box labeled "Country Analysis Briefs" on the list of products. You will then be notified within an hour of any updates to our Country Analysis Briefs.
Return to Country Analysis Briefs home page
File last modified: April 4, 1997
Contact:
Erik Kreil
ekreil@eia.doe.gov
Phone: (202)586-6573
Fax: (202)586-9753
URL: http://www.eia.doe.gov/emeu/cabs/panama.htm