By James Catlin
- Over the past two years bunker costs for maritime trade have been falling.
- Much of this can be attributed to the falling price of crude which has a direct impact on bunker prices.
- OPEC has initiated cuts which should increase the price of crude in the short term thus raising bunker prices for vessels, and the timing couldn’t be worse.
Bunker fuel or bunker oil is a generic term given to any type of fuel oil used aboard commercial ships. The cost of bunker fuel has a direct correlation to crude oil prices.
Bunker prices in 2016 were down approximately 50% from 2014 levels. This was a direct result of falling crude prices.
The drop in crude prices and consequently bunker prices provided much needed relief for the shipping segment over the past couple years.
Depending on the type of vessel, bunker costs compose anywhere from 40% to 70% of total ‘on the water’ operating expenses.
So while charter and spot rates have been falling across all segments (dry bulk, containers, tankers, LNG and LPG) over the past one to three years, lower bunkering costs have provided a respite.
However, since the start of the year, bunker prices have been rising in tandem with crude.
Note: This article was originally published December 16th on Value Investor’s Edge, a Seeking Alpha subscription service.
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