Shipping fuel cost soars 87% on high oil prices

Rising oil prices globally have increased shipping companies' fuel cost by about 87 per cent from a year ago, Malaysia's Business Times reported, quoting Malaysia Shipowners' Association (Masa).

High oil prices have increased marine bunker fuel cost by US$250 a tonne since January this year, surpassing the US$700 a tonne mark.

'When fuel cost represents as much as 50-60 per cent of total ship operating cost, such an increase cannot be taken lightly,' Masa offshore representative Zahar Mohd Hashim Zainuddin said during his presentation at a day-long seminar organised by the Maritime Institute of Malaysia (Mima).

The seminar on 'Rising oil price and its impact on the shipping industry: Staying afloat in a sea of challenge' was held here on Wednesday.

It is estimated that ships consume two billion barrels, or seven billion tonnes, of oil a year.

'If the oil price goes to the US$200-per-barrel level, the transport cost to ship a standard 20-foot container from Shanghai in China to the US, for example, could go up to US$15,000,' said Mr Zahar, who is also MISC Bhd's vice-president of offshore business.

In 2000, when oil was at US$20 a barrel, transport for a similar shipment cost US$3,000.

Mr Zahar said the oil price increase has been so rapid that even the bunker adjustment factor adopted by shipping companies has not helped ease their burden.

'There needs to be a more dynamic formulation to address the issue,' he said, proposing that some kind of critical bunker factor be taken into consideration.

Source: http://www.businesstimes.com.sg