Slippery Slope for Oil, Part 2

Vitaliy Katsenelson  Apr 08, 2009 2:15 pm

Slippery Slope for Oil, Part 2
 
Demand, prices still declining.
 

 
Editor's Note: This is part 2 of a 2-part article. Part 1 can be found here.

It's amazing what companies will do to cut costs during a recession. We know that demand for oil will decline during a global economic slowdown. Basically, global consumption of goods decline, fewer goods are manufactured, and fewer ships are needed to cross the Atlantic. Simply, fewer petrochemicals are used.

Today's article in the Wall Street Journal discusses how Maersk -- a large shipping company -- is trying to save $1 billion a year.

"Eugen Maersk has left Rotterdam, the Netherlands, on the tail end of a journey from Shanghai. But the giant freighter is cruising at 10 knots, well shy of her 26-knot top speed… At about half speed, fuel consumption drops to 100-150 tons of fuel a day from 350 tons, saving as much as $5,000 an hour.”

I'm sure this strategy was unthinkable only a year ago; consumers wanted goods, and they wanted them now. But now that inventories are piling up, car companies are probably finding it cheaper and safer to store cars on slow-moving ships than in ports or parking lots.

This is just one (though very large) company trying to survive in a very tough environment. Imagine what other companies worldwide are doing to survive. The point: Oil consumption may drop a lot more than we expect.
19 of 25 (76%) found this helpful
Rate this article:  (25 Votes)
Comments (7) See All Comments »
04-08-2009, 5:08 pm
The savings are minimal? To quote, we are talking about $5000 an hour, not a day, so 24 times 5000 is $120 000 a day! So you are saying that it costs about that much in labor and food extra because the trip is 2x longer? I'm not a freighter
Read More
04-08-2009, 6:32 pm
of course while the shipper gets a much better ROI

the shipee pays for double the time - even at 15% of last years rate this adds up
Read More
04-08-2009, 11:30 pm
Half as much fuel per hour, twice as many hours. (roughly)
Read More
04-09-2009, 6:08 pm
If it is running half the speed and takes twice as long, does it put out more pollutants and thus get hit with a much bigger carbon tax? Just wondering.
Read More
04-14-2009, 11:30 am
the fuel savings amount to $120k/day & $36million/yr. [for a 300 day year [=> loading/ unload, maint., etc.]. that contrasts with the fact that your availability [hence total revenue] is potentially about halved, your depreciation, crew expen
Read More
discuss this article and more on the mv exchange
No positions in stocks mentioned.

Get real-time options trading ideas from Steve Smith, veteran options trader and newsletter author, plus let him show you the way to cut risk and boost your returns through the strategic use of options.  Click here for a free 14 day trial to OptionSmith by Steve Smith.



The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2009 Minyanville Media, Inc. All Rights Reserved.

Ticker Talk
Popular Tickers:
SPX »AMZN »F »
Select
  •  
Talk Now
Share this Talk on your site:
Send us your feedback

Our Professors

rss article alert