The effect of oil price on containership speed and fleet size

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.