Benefits Outweigh Drawbacks of Low Oil Prices in Shipping Industry



The past year has seen a steady fall in the prices of crude oil.  From a peak price of $115 a barrel in June 2014, current oil prices range at around $50 a barrel.

The benefits can be listed as under:

  • The fall in global oil prices have nearly halved the bunkering costs.  The bunkering cost of VLCCs used to be  $40,000 per day, is now merely $20,000 per day.
  • This has resulted in ships being able to ply longer distances at lesser cost, reaching newer markets. For example, tankers that used to go via Suez Canal to reach Europe in order to save time and cost, now prefer to take the circuitous route via Africa which allows them to stop at more ports.
  • Some countries including China are stockpiling oil to take advantage of the low prices.  They expect the market to recover in the future when they can sell at a huge profit.
  • More and more ship building orders are generated for large oil tankers than ever before.  This is benefiting the shipbuilding industry immensely. VLCCs are making a huge profit.  They charge as much as $90,000 a day which is far above the $10,000 a day that it actually costs the owner.  The rates during 2012-13 was a mere $25,000 a day.
  • Reduced oil prices also is proving to be beneficial to dry cargo sector, global manufacturers and other stakeholders as they are able to ship more cargo at less price.

Source: ReleaseWire


This site uses Akismet to reduce spam. Learn how your comment data is processed.