The Effect Of Oil Price On The Tonnage Transited Through The Panama Canal

Through time world economy has to face all kinds of shocks which usually are reflected by the business cycle.The world economy are getting more interdependent than ever,slight changes in economic policies,commodities prices or consumer trend can have consequences that worth to explore.Nowadays,fuel oil represents the most important input for all kind of transportation.This paper studies the effect of international oil price on the total amount of tonnage that pass through the Panama Canal every year.In the case of sea shipping,depending on the type of vessel,fuel oil accounts around two thirds of a journey total cost,letting us see that rise or fall in oil price can reduce or increase vessel trips and by default the amount of tonnage.Panama is a service economy which based its growth on the Canal,which is in function of its customers who want to save time and money by passing through.Any rise in oil price,will affect directly international transportation costs of merchandise which in theory may reduce the tonnage that use the Canal,what makes us consider that oil price depending on the change,play a role as a positive or negative catalyst for the economy of Panama.The global uncertainty about the price of a fossil input that has been exploded in an industrial way since 19 century and who now faces depletion on its reserves what push its price up affecting the worldwide production of goods and services.This exogenous dependency clearly makes the economic growth of Panama to be vulnerable to changes in international oil price,pushing the country to take steps forward in order to fits the reality and improve the services offered,specifically the Canal services which recently among other market reasons,has made a huge investment(expansion)that would make possible the transit of bigger vessel broadening the market segments that could be covered.