Costs for transporting crude oil soar

Booming economic growth in China, a recovering US economy and tougher environmental laws on oil tankers have sent costs soaring for transporting crude oil, the lifeblood of world trade, analysts and brokers said.
Freight prices on some of the busiest global routes for supertankers have hit 30-year highs -- piling on further costs for oil consumers already hit by a crude price surge.

Since October last year freight costs have quadrupled on a typical journey from West Africa or the North Sea to the United States -- a fivefold increase from the tanker trade's dog days of 2002 when the September 11 attacks on the United States exacerbated the global economic downturn. Daily charter rates for a typical supertanker across the Atlantic now exceed $ 140,000 a day, up from about $ 20,000 in October.
China, the world's fastest growing economy, with a GDP growth at a whopping 9.9 % in the fourth quarter of 2003, has been the engine of the oil freight spike.

Rampant Chinese demand for raw materials such as iron ore and coal, has already sent prices rocketing for dry-bulk freight, a separate sector to "wet" trade in oil freight.
"A resurgence in the economic cycle of western economies is coming at the same time as a structural growth in China that is pulling in a record amount of oil. Both are having an impact on shipping markets," said Louisa Follis, an analyst with Simpson Spence and Young (SSY) shipping brokers in London.

Chinese crude oil imports in 2003 rose 30 % over the previous year, while refined products rose 40 %, said Follis. The growing Asian demand for oil has meant that supertankers have been more heavily employed on long-haul routes. And it has meant that US refiners are finding their import costs rising inexorably as they compete with China for vessels.
"In terms of the ton-mile ratio on journeys especially from West Africa and Europe, ships are being tied up for much longer voyages," Follis said.

Stricter environmental regulation of oil tankers following a stringof ecological disasters have reduced the number of tankers available and pushed up freight costs. Mounting congestion in the Turkish Straits has also tied up larger tankers bringing larger volumes of Russian crude to world markets.
The rate of big tankers coming on the market, with only up to 1.3 mm tons deadweight, or seven supertankers last year according to SSY figures has not been able to keep up with long-haul demand, with the inevitable impact on other Very Large Crude Carrier (VLCC), 260,000 ton, and Suezmax, 130,000 ton, routes from West Africa and the North Sea.

"There has been solid growth in the chartering of VLCCs by China and India since the peaks of 2000 and recently good demand for VLCC tonnage in the Atlantic basin," said Kevin Rose, a director with E.A. Gibson tanker brokers in London, who put some of the blistering price rise down to long-term changes in patterns of oil trade as well as temporary seasonal factors.
In addition, the recent massive returns available for the world's trillion dollar ship industry in hauling dry bulk goods and materials has seen the flight of combination freight carriers or OBOs as they are known, ships built to alternate between "wet" and "dry" trade, to the dry sector.