Oil Prices Skyrocketing over $30 Alarms Shipping Companies

As oil prices soar, most shipping companies and relevant trading compa
nies have their nerves on edge.
OPEC's reduced oil produ-ction has caused oil prices to rise incessant
ly, and anticipations that oil hit 30 dollars a barrel this year have
proved to be all too correct.
Oil costs for Korean shipping companies are estimated to be 556 millio
n dollars in 1998 and 838 million dollars last year due to increased o
il prices. Shipping companies' authorities claimed that a one dollar i
ncrease in oil will cause vessel oil costs to rise 6 dollars per ton o
r about 47 million dollars annually.
These additional expenses will occupy 8.5 percent of all oil costs for
domestic shipping companies, 0.46 percent of the total offering price
, and 37 percent of the total net profit in a fiscal year. These figur
es indicate that high oil prices may seriously damage shipping lines'
abilities to turn a decent profit.
If oil price increases aren't charged through sea transport rates, the
y must be charged through BAF (Bunker Adjustment Factor) directly or i
ndirectly. Shipping lines considered countermeasures. One is for vesse
ls to operate at economic speeds and the other is for oil to be suppli
ed where prices are lower, considering cargo handling at each port and
vessel operating schedules.