Cost of Idle Oil Tankers

It is a common saying that “”a ship is safe at the harbor but that’s not what it is meant for”. This is true literally speaking even from the commercial standpoint. Ships are constructed to remain on the move and the cost of an idle ship could run in to the tens of thousands per day for a empty vessel. Today we will specifically talk about idle oil tankers even though this is generally applicable to all sorts of cargo The cost of idling is even higher for an oil tanker that is loaded with crude oil and sitting idle due to mechanical failure or technical difficulties

Loss Figures:

Shipping companies incur heavy losses in terms of the cost of idle oil tankers that average between US$25,000 to 30000 per day for empty idle oil tankers and the amount could raise rapidly if the vessel were to stop sailing for any mechanical or technical error when loaded with crude oil while on transit. To avoid this from happening ship manufacturers put in place backup systems that assist the vessel to remain on course, so as to deliver the cargo and receive quick repair or maintenance to damaged components.

These huge costs incurred are also responsible for the universal components commonly found on oil tanker and other cargo vessels. Having vessel parts that interchange or are easily available greatly reduces time spent on maintenance thus helping reduce stationary costs a vessel must incur when idle. This policy has been adopted by many commercial vessels where main engines and other major components are regulated so as to ensure easy availability around the world and at all times.

Back up Of Machinery

Back up of the most auxiliary machineries as well as generators and many other accessories found on board a vessel help make the vessel continue sailing even after one of the engines or generators has failed thus no or minimal loss of time is incurred during the voyage.

As mentioned above the cost of idle oil tankers loaded with cargo during a voltage could raise substantially, this is due to the following factors:

International market prices:

Cost of most commodities usually depends on the international market. This market is not fixed and prices fluctuate on a daily basis, which could lead to either to raising or lowering of prices during a voyage.

For this reason commodity buyers require to work on a tight time line which would minimize the time spent on voyage thus reducing the waiting period for the cargo to be delivered. In the same way the commodity could depreciate it could also appreciate making it more profitable for the owner of the cargo.

Perishable cargo:

This cargo is sensitive to spoilage and some require proper refrigeration facilities or controlled temperature atmospheres. They also carry more risk for the vessel since any mechanical failure could result in spoilage and total loss for the cargo owner.

In these cases the cargo owner ensures the cargo where by the insurer inspects the vessel to make sure that it is capable of the task. In case of any mechanical or technical failure the vessel owner must pay for the losses incurred to the damaged cargo.

Cost of Idle Oil tankers

oil tankers stranded in ice

The above points contribute the most towards the charges placed on a vessel idle at sea but other factors such as age of the vessel, shipping dangers and some more contribute both in favor of the vessel or cargo owner.

Who Pays?

The cost of idle oil tankers is not always paid by the vessel owner but in some cases the vessel insurer is expected to pick up the tab especially if an insured or guaranteed component fails in which case the insurer must pay the cost of delay of losses to both the cargo owner and vessel owners.

A Bit of History

Shipping trade has seen ups and downs like any other industry and there have been times when huge and expensive ships were lying idle for the lack of cargo. One such major period was in the late seventies (20th Century) when costly oil and gas tankers were just stranded on habours and were getting wasted.

1978 News Clipping

1978 News Clipping

The image above shows one such news clipping from the year 1978 of the Glasgow Herald, and it can be seen how the industry went through such a phase. Of course that has not been the only time but things have been tough on and off, but as they say, the show goes on.

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