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Impacts of Kra Canal and its toll structures on tanker traffic

Zhi Heng and Tsz Leung Yip

Maritime Policy & Management, 2018, vol. 45, issue 1, 125-139

Abstract: This article discusses the proposed Kra Canal and its impacts on the tanker market from an economic perspective. We forecast tanker size distributions and further analyze the impacts of toll structures on tanker traffic. The forecast for tanker size distributions is based on distance savings for tankers as potential users of the Kra Canal. The database covers 105 busiest oil transport routes through the Strait of Malacca for the three-year period 2013–2015. Forecasts for individual routes are achieved using an autoregressive model. Two toll polices, namely the willingness-to-pay policy and the differential-pricing policy, are analyzed in order to maximize the annual toll income of the Kra Canal. The findings for the proposed Kra Canal will attract large vessels from the Strait of Malacca. An interesting finding is that the Kra Canal becomes more profitable during an unfavorable tanker market situation when the time-charter rate is low and fuel price is high. The article concludes with a policy that satisfies the goals of canal operator and government.

Date: 2018
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Handle: RePEc:taf:marpmg:v:45:y:2018:i:1:p:125-139