Friday, April 22, 2016

Cheap oil is taking shipping routes back to the 1800s

From @bbcfuture_official -- The plummeting price of oil on international markets has had many effects – one of which is that it may be cheaper for ships to travel right around Africa than go through the Suez Canal.

The Suez Canal was one of the most significant engineering projects of the 19th Century. It was a gargantuan task that took nearly 20 years to build and an estimated 1.5 million workers took part – with many thousands dying in the process. But when it finally opened in 1869, ships could travel from the Red Sea – between Africa and Asia – to the Mediterranean, cutting weeks off a journey. It was a revolution for trade.

Ever since, passage through the canal has been considered more or less vital to global business. Shipping firms pay what amounts to several billion dollars every year to the Suez Canal Authority, an Egyptian state-owned entity, for the privilege of travelling via the canal.

To take an example, it cuts a modern journey from Singapore to Rotterdam in the Netherlands by nearly 3,500 nautical miles (6,480km) – saving vessel owners lots of time and lots of money.

However, more and more some ships are deciding not to take the Suez route. Instead, they are travelling around the Cape of Good Hope, right at the southern tip of Africa. Over 100 ships did this between late October 2015 and the end of the year. “I’ve been covering shipping for the last eight years,” says Michelle Wiese Bockmann, from oil industry analysis firm OPIS Tanker Tracker. “It is very rare to see this volume going round the Cape.” Right now, she’s keeping tabs on half a dozen diesel and jet fuel-carrying ships on this very route.

One of the big factors here, explains Bockmann, is the low price of oil. This means that “bunker fuel” – the thick, heavy fuel the ships themselves run on – is currently very cheap. Indeed, Singapore prices for such fuel have fallen from around $400 (£286) per metric ton in May 2015 to around $150 (£107) today.

As a result, sea journeys aren’t as costly as they have been in recent years. But is there any sense in taking longer than you need to?

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