Research On Fuel Risk Controlling Strategies Of International Tanker Enterprises

Influenced by the international economic and political situation, the international oil market has always undergone sharp fluctuations. Since bunker fuel accounts roughly 40 percent of tanker shipping enterprises' cost, the fluctuations in fuel price pose high risk for those companies. In response to this issue, tanker shipping enterprises generally adopt measures including fuel hedging and forward supply contracts to reduce fuel cost and mitigate the pressure induced by fuel price volatility. However, it is still difficult to effectively control fuel risk in realistic operations.Enlightened by the charging of Bunker Adjustment Factor (BAF), this thesis aims to establish a freight model based on oil & freight linkage mechanism. Several methods such as Vector Autoregressive model (VAR) , Variance Decomposition and VaR-GARCH model are introduced to build the objective model and testify its feasibility, which is expected to lower fuel risk for tanker shipping enterprises in practical level.With the aim of designing the optimal model, firstly, this thesis uses VAR method to clarify the relationship between fuel price and tanker freight. Secondly, Variance Decomposition method is applied in the quantitative analysis regarding the influence on tanker freight brought about by fuel price fluctuation. Furthermore, the linkage freight formula is constructed and it includes three parts: the index freight that represents the market freight level, the fluctuation of fuel oil and the freight fluctuation caused by oil price volatility. Then, by means of comparing the linkage freight and index freight, it got the VaR-GARCH model to measure the risk. Finally, the result shows that the risk of using linkage freight is lower than index freight under a certain probability level.The freight model based on oil & freight linkage mechanism would reduce fuel risk for oil tanker shipping enterprises, which is not only a new approach for them to charge reasonable freight, but also can be served as a beneficial tool for decision-makers in international tanker shipping market.