Higher fuel prices cause ship owners to build more energy efficient vessels, new statistical analysis from independent research consultancy CE Delft shows.
Writing in “Impact of fuel prices on energy efficiency of maritime ships,” CE Delft gives the example that, where all other factors are kept equal, a one percent increase in fuel prices leads to a 0.26% increase in technical energy efficiency of newbuild ships six years later.
But that varies by ship type.
Tankers are less sensitive to fuel price changes than box ships, the consultant explains, while the price effect is close to zero for bulkers. Meanwhile, shop owners tend to consider the long-term historic trends in fuel prices – up to 20 years worth of back-data – which implies that regulatory policies targeting fuel prices “may take considerable time time effectively influence the technical efficiency of (newly built) maritime ships”.
In an interesting note, the researchers indicated that the relationship between fuel prices and energy efficiency of newbuild ships between 1990 and 2015 was stronger than after 2015. They noted that there were policies targeting the energy efficiency of ships then compared to now or in the near future.
“This suggests that the relationship between fuel and EIV is in fact affected by the implementation of other policies, like the EEDI or the EU MRV,” the researchers comment.
Impact of fuel prices on operation energy efficiency
There was an interesting twist in how higher fuel prices affect the sailing speed of ships.
Seawater, when compared to air, is very viscous and resistant to objects (like the hulls of ships) moving through it. Pushing through seawater requires lots of energy and power. Pushing faster through seawater requires even more energy and power a considerably greater volume of fuel burned. A ship increasing in speed from, say, 1 knot of speed to 2 knots will require remarkably less fuel than the same ship increasing speed from, say, 20 knots to 21 knots, even though, in both cases, the increase in speed is only one knot.
“This relationship, between fuel consumption versus vessel speed, is typically an exponential one. As a rule of thumb assuming that engine power follows the cube of speed, a displacement ship with 10% speed reduction reduces the power need (resistance) and coherent fuel consumption by 27%,” the IMO-GLOMEEP “Speed management,” page explains.
So, logically, if fuel prices are higher, and if going faster results in a very large increase in fuel consumed, then higher fuel prices would strongly incentivise ships to sail slower, right?
Wrong.
“On the contrary, we found a small positive relationship between fuel prices and sailing speed, which would imply that higher fuel prices lead to higher sailing speeds,” CE Delft reports.
However, the fit of the various, er, variables, was very poor, the consultants explained. They added it was likely that relevant variables, such as weather condition or contractual matters, were missing from the analysis.
High charter rates induce greater efficiency
CE Delft’s analysis also found that high charter rates have a negative effect on technical energy efficiency (as the consultants explain, this actually means that the energy efficiency actually “becomes better”), which suggests that better economic circumstances accommodate investments in more efficient, new, ships.
Again, this is different for different ship types.
The energy efficiency of tankers is more sensitive, about four times more, to charter rates than box ships while the technical energy efficiency of dry bulkers is less sensitive to charter rates when compared to container ships.
Policy implications
CE Delft argues that its findings do not provide significant evidence that policies which indirectly increase the cost of fuel will have a short-term effect on energy efficiency and carbon dioxide emissions. However, CE Delft is quick to point out that: “The lack of evidence found does not mean that there could not be such an effect”. That’s basically the old aphorism that absence of evidence is not evidence of absence.
That said, higher fuel prices will lead to improved technical efficiency in the long term as it induces the ordering of more energy efficient new-build ships.
