The Short Term and Long Term Cost Reduction Strategies for International Shipping Industry by Changing Ship Speeds

Reducing fuel cost while improving transportation service is one of international shipping industry’s core tasks. The volatile fuel price raises the transportation and international trade costs. In this paper, the authors evaluate the potential of vessel speed and ship size increase as respectively short-term and long-term cost reduction strategies. The paper first applies fundamental equations relating power, speed, energy consumption, trade flows and cost. The authors estimate that short-term speed reduction measures can reduce fuel costs by more than $9 billion in total or around $0.18 million per voyage. The cost savings would be more evident to shipping firms if CO2 is designated a price either by a trade system or by a levy in the future. The gravity model is then used to investigate the relationships among ship size, speed, trade flows and transportation costs. The authors compute that in the long term, increased ship size can have similar effects in reducing average fuel cost and total transportation costs. The authors estimate that enlarging ship DWTs by 1% can reduce cost between 0.05% and 0.2%. Decreasing speed by 1% can reduce cost between 0.3% and 1.8%.

Language

  • English

Media Info

  • Media Type: DVD
  • Features: Figures; References; Tables;
  • Pagination: 22p
  • Monograph Title: TRB 89th Annual Meeting Compendium of Papers DVD

Subject/Index Terms

Filing Info

  • Accession Number: 01154420
  • Record Type: Publication
  • Report/Paper Numbers: 10-3808
  • Files: TRIS, TRB
  • Created Date: Jan 25 2010 11:56AM