The effect of oil price on containership speed and fleet size

D Ronen ()
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D Ronen: College of Business Administration, University of Missouri– St Louis

Journal of the Operational Research Society, 2011, vol. 62, issue 1, 211-216

Abstract: Abstract The changing prices of bunker fuel open the door for substantial cost savings by adjusting the sailing speed of ships. A large ship may be burning up to 100 000 USD of bunker fuel per day, which may constitute more than 75% of its operating costs. Reducing the cruising speed by 20% reduces daily bunker consumption by 50%. However, in order to maintain liner service frequency and capacity, reducing the cruising speed may require additional ships to operate a route. We construct a cost model that we use to analyse the trade-off between speed reduction and adding vessels to a container line route, and devise a simple procedure to identify the sailing speed and number of vessels that minimize the annual operating cost of the route. Using published data, we demonstrate the potential for large-cost savings when one operates close to the minimal-cost speed. The presented methodology and procedure are applicable for any bunker fuel price.

Keywords: sea transport; liner shipping; oil price; optimal speed; containership fleet size (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (85)

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DOI: 10.1057/jors.2009.169

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