Ships and the Global Economy
By David Foster on Business
The ocean shipping industry is, and always has been, a major enabler of global trade. Air freight is very important, as are communications technologies such as the Internet…however, there exists a vast array of products and commodities for which the only economically-viable means of transportation is the ship. Hence, anything that affects the ocean shipping industry has the potential to influence the shape of the global economy.
The International Martime Organization has approved new rules which will ban ships from using their traditional fuel (very heavy oil, known as bunker fuel) in most parts of the world. The rules are stated in terms of sulphur oxide targets, which will phase in over time. Specially-treated bunker fuel may meet the initial targets in some areas, but only distillates are likely to meet the long-term targets. This implies an eventual potential fuel cost increase for shipping operators of fifty per cent. More at the WSJ.
Increased shipping costs will, at the margin, encourage domestic and regional production of goods at the expense of imports. The strength of this effect will of course depend on the nature of the particular products–shipping costs at a percent of overall value are much higher for washing machines, for example, than for flat-screen TVs.
The new regulations are probably good news for this company. skysails.info But even if their technology is very successful, overall costs per ocean freight ton-mile will still likely be going up as a result of the new regulations.
A commenter at the WSJ link asks some interesting questions:
What is difficult to discover is just how many people will be adversely affected by increased shipping costs. How will it affect sub-Saharan economies? Will it cause more problems for the shortest lived poorest people on the planet? will it reduce their life expectancy still further? There are reports that indicate the importance of low shipping costs to these economies but unfortunately no one seems to have measured the cost in lives of the current high fuel costs nor what it will be when the new measures kick in. |
