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A Quantitative Model of the Oil Tanker Market in the Arabian Gulf

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  • Lutz Kilian
  • Nikos Nomikos
  • Xiaoqing Zhou

Abstract

Using a novel dataset, we develop a structural model of the Very Large Crude Carrier (VLCC) market between the Arabian Gulf and the Far East. We study how fluctuations in oil tanker rates, oil exports, shipowner profits, and bunker fuel prices are determined by shocks to the supply and demand for oil tankers, to the utilization of tankers, and to the cost of operating tankers, including bunker fuel costs. Our analysis shows that time charter rates are largely unresponsive to tanker cost shocks. In response to higher costs, voyage profits decline, as cost shocks are only partially passed on to round-trip voyage rates. Oil exports from the Arabian Gulf also decline, reflecting lower demand for VLCCs. Positive utilization shocks are associated with higher profits, a slight increase in time charter rates and lower fuel prices and oil export volumes. Tanker supply and tanker demand shocks have persistent effects on time charter rates, round-trip voyage rates, the volume of oil exports, fuel prices, and profits with the expected sign.

Suggested Citation

  • Lutz Kilian & Nikos Nomikos & Xiaoqing Zhou, 2023. "A Quantitative Model of the Oil Tanker Market in the Arabian Gulf," The Energy Journal, , vol. 44(5), pages 95-114, September.
    • Handle: RePEc:sae:enejou:v:44:y:2023:i:5:p:95-114
    DOI: 10.5547/01956574.44.4.lkil
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    References listed on IDEAS

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    1. Robin Greenwood & Samuel G. Hanson, 2015. "Waves in Ship Prices and Investment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(1), pages 55-109.
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    Cited by:

    1. David S. Jacks & Martin Stuermer, 2021. "Dry bulk shipping and the evolution of maritime transport costs, 1850–2020," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 61(2), pages 204-227, July.

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    More about this item

    Keywords

    Shipping; VLCC; Crude oil; Bunker fuel; Tanker; Voyage; Time charter; Profits; Exports; Passthrough;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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