Tanker cost elasticities revisited

Abstract

This paper re-examines the literature on ship economies of scale, and presents the results of re-estimating a model of tanker costs for 2007. The results are interesting for two reasons. First, they are remarkably similar to those estimated for tankers in the 1960s and 1970s, despite the transformations in the tanker market since that time. Second, the results imply that tanker size is not driven by scale economies, but by factors that relate to demand and other considerations. This paper concludes by noting some limitations in the approach used in the study.

Acknowledgements

This paper has been derived by Dr Glen from the MSc dissertation presented at London Metropolitan University by Mr. S. Reid. The authors acknowledge the contribution made to the research by Mr. S. Christy and his colleagues at Gibsons. They provided much of the data, and a fruitful discussion over the modelling of operating and voyage costs. The authors also acknowledge the helpful comments from the two academic referees who have helped to improve the clarity of this paper.