Oil prices and maritime freight rates: An empirical investigation

UNCTAD
April 2010

Oil is the major energy source powering the global economy, supplying 95% of all the energy used in world transport.

Maritime transport, which carries over 80% of the volume of global merchandise trade, relies heavily on oil for propulsion, and in view of the limitations imposed by existing technology and costs, it is not yet in a position to adopt effective energy substitutes.

With oil becoming increasingly scarce and more costly to produce, and with prices having already risen to close to $150 per barrel (pb) in July 2008, the question of how changes in oil prices affect shipping costs is of considerable interest.

For the trade of many developing countries, excessive international transport costs already pose a considerable obstacle.

To help improve understanding of oil prices as a determinant of transport costs, UNCTAD conducted an empirical analysis of the relationship between oil prices and maritime freight rates. While the analysis focused on container transport, it also covered some dry and wet bulk trades, namely, iron ore and crude oil.

The findings of the analysis, presented in a technical report entitled Oil Prices and Maritime Freight Rates: An Empirical Investigation, confirm that rising oil prices drive up maritime freight rates in all three trades examined, with estimated elasticities varying, depending on the market segment and the specification.

For container trade, the effect of oil prices on container freight rates is estimated to be larger in periods of sharply rising and more volatile oil prices, compared to periods of low and stable oil prices.

These results entail some potentially important implications for maritime transport and trade, if oil prices resume the spiralling trend observed in 2007 and 2008 and sustain high and possibly unprecedented levels.

In view of the heavy reliance of maritime transport on oil for propulsion, further analytical work on the effect of energy prices on maritime freight rates is urgently required, especially as rising fuel costs may lead to proportionately higher maritime transport costs for developing countries.

In this context, energy security and investments in alternative, greener energy and technology for cost-efficient and sustainable maritime transportation conducive to trade and development are of the essence.

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Transport costs and specialization

Chapter 6 of the World Development Report 2009 - Reshaping Economic Geography
World Bank
2008

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The Cost of Being Landlocked

Arvis, Jean Francois; Marteau, Jean-Francois; Raballand, Gael
World Bank
July 2010

This book proposes a new analytical framework to interpret and model the constraints faced by logistics chains in landlocked countries. The case of LLDCs has naturally received special attention for decades, including a specific set of development priorities based on the idea of dependence over the transit state. In this context, efforts to tackle the cost of being landlocked have been mainly directed to ensure or facilitate freedom of transit through regional/multilateral conventions, and to develop regional transport infrastructure. In contrast, analysis of service delivery constraints has been seriously neglected and could explain the disappointing implementation of regional transit agreements and massive investments in corridors for exports diversification in landlocked economies.

Based on extensive data collection in several regions of the world, this book argues that although landlocked developing countries do face high logistics costs, these do not result from poor road infrastructure –contrary to conventional wisdom-since transport prices mainly depend on trucking market structure and organization. In turn, high logistics costs depend on low logistics reliability and predictability, which are sensitive to rent-seeking and governance issues.

This volume proposes three types of measures with the largest potential gains in total logistics costs: (i) measures to increase supply chain predictability and to reduce hedging costs, (ii) measures to enhance best practices in governance, in order to phase out rent-seeking activities and therefore overhead logistics costs, (iii) reforms to increase efficiency in market structure.

Hence, in practical terms supply chain predictability and performance might be improved by pursuing the following initiatives: (i) enhancing initiation of transit at the gateway or port through a streamlined transit regime, preferably using IT and based on quality and risk assessment system; (ii) improving clearance at destination; (iii) boosting market competition, by dismantling anticompetitive practices and upgrading entry requirements based on compliance and quality standards; (iv) re-engineering of transit regimes.

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Paper anterior:
World Bank Policy Research Working Paper 4258
Junio 2007

Evolución y comparación de las tarifas en el sector de infraestructura de transporte de uso público 2009

OSITRAN
Diciembre 2009

El presente informe tiene un doble objetivo. En primer lugar, mostrar la evolución tarifaria para el uso de la infraestructura portuaria, carretera, aeroportuaria y ferroviaria, bajo la competencia del Organismo Regulador de Transporte (OSITRAN). En segundo lugar, comparar las tarifas en Perú con tarifas por servicios similares en otros países de la región.

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