Crude oil prices have been highly volatile this. From its $146 peak in July, the black goo is down at $87 a barrel.

It’s a scary time to be a direct investor in oil. But Byron King says is one way of sidestepping the wild price swings: investing in tanker ships.

“As long as people continue to use oil,” says Bryon, “there will be some consistency to the tanker business.”

There is a relatively tight market for charters. And many good reasons why there won’t be a capacity glut in coming years.

  This from Rude Awakening:

About 62% of the world’s oil — over 2 billion barrels per year — is transported via tanker ships.

As the accompanying map shows, the tanker routes of the world are pretty much where you would expect. Most of the exported oil moves out of the Middle East and West Africa toward North America, Europe and Asia. The rest of the world’s oil moves by pipeline, mostly through Eurasia and Russia.

Here’s the general process. Large tankers load up with crude oil. Then the ships sail across the sea to their destinations. They discharge the cargo. The tankers take on ballast and begin the voyage back to pick up another load. This is the life of a tanker ship.

Let’s go into a bit more detail.

The cost to hire a tanker is called the charter rate. This rate varies according to the size and the characteristic of each tanker and the general availability of ships. That is, in a tight market, shipowners can command higher charter rates.

There are about 4,000 tankers available for hire in the international market. Of course, there are many different sizes and types of tankers. Panamax vessels are suited for transiting through the relatively narrow locks of the Panama Canal. Suezmax tankers are optimized to transit the Suez Canal.

Still other tankers — large vessels called “very large crude carriers” (VLCCs) — are more suitable for long hauls over open water. VLCCs are used mainly to ship oil from the Middle East in large volumes, more than 2 million barrels a ship.

This description barely scratches the surface. But you can see that the tanker industry is complex. Yet as long as people continue to use oil — a safe bet — there will be some consistency to the tanker business. Load. Sail. Unload. Turn around. Sail back. Do it again.

Are there any risks involved in investing in the tanker business? Sure.

Remember the Exxon Valdez in 1989? Exxon’s big ship hit a rock south of Valdez, Alaska, and spilled 11 million gallons of oil. What a mess, right? Exxon was litigating the punitive damages in the U.S. Supreme Court as recently as this past spring, 19 years after the fact.

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