Of course, tanker owners are required to carry substantial levels of insurance coverage. Then again, the cleanup costs for a major spill could break anyone’s bank. Looking back at the Valdez oil spill, it was entirely an issue of human factors. The ship driver put the vessel in the wrong place. And a well-managed company can do a lot of things to screen out the human factor. Like not hiring alcoholic tanker captains.

Another large risk to the tanker business is a sustained decline in global oil consumption and transport. After all, oil powers the business model of the tanker industry. What does that mean in a world that (despite the daily fluctuations in oil prices) lives with the growing evidence of the Peak Oil thesis? Could we see a sustained decline in oil transport by tanker?

Over the long term — the next decade or so — the volumes of oil moving in international commerce will surely decline. Eventually, depletion will win out. There will just plain be fewer volumes of oil for sale and available for movement. Those cargoes of oil that do move across oceans may well have armed naval guards for protection because of the value of the oil onboard.

And in the short-to-medium term, as well, we might be seeing something like the beginnings of a global slowdown in oil consumption. There is an economic rebalancing going on in North America. Drivers are burning less gasoline. Energy usage even in Asia is measurably decelerating, though by no means declining.

At the same time, due to the banking meltdown and tight credit situation worldwide, it is now much more difficult and expensive than before for shipping companies to finance existing vessels or new construction. So the result is a looming capacity shortage for tankers.

Tanker demand is outstripping supply. This is driving shipping costs higher. Shipping capacity and freight prices are likely to remain at current levels until it becomes easier to obtain credit for buying new ships.

When all else fails, there are always certain old customs and traditions of the sea. In a recent edition of TankerWorld, one article described how some VLCC tanker owners have recently simply kept their vessels idle to put a squeeze on tonnage availability. A Singapore-based ship broker described how a major player in the shipping world has several of his supertankers “idling and ‘gone fishing’ off the West African coast.”

This sort of thing — holding ships off the market — is a common occurrence when rates are too low for comfort. So some owners — especially the bigger players — will sacrifice days of charter and just park their tankers out at sea, so as to cut supply.

In other words, there is a game of cat and mouse going on. A chartering agent holds the advantage of having a list of cargoes for loading. But the shipowner’s advantage is their list of available vessels. Owners are famously secretive about this, and it is often difficult to get an accurate list of all the available vessels at any one time.

So let’s look ahead. Almost two-thirds of the oil that moves in world commerce travels by tanker. It’s a good bet that a lot of oil will still move in the coming years. There is a relatively tight market for charters, with numerous economic reasons why we should not expect to see a capacity glut in the coming years.

Source: Sailing to Safety

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