Tuesday, May 31, 2005

shipping security

It has often been noted that internatioanal trade will become more costly as the price of shipping fuel increases. I believe another factor will also increase shipping costs: security. A loaded oil tanker is worth a huge amount of money these days. The largest tankers hold around 2 million barrels of oil, with an ultimate worth of a hundred million dollars. No doubt a supertanker full of oil is very closely watched by satellite based security systems. Exxon is not going to let a few thugs in speedboats steal their tankers. But terrorists might well hope to blow one up. And security does not come cheap.

And what about bulk carriers? A loaded bulk carrier with a cargo of 20,000 tons of soybeans is worth 5 million dollars for the cargo alone, with far lower security than a huge tanker. Bulk carriers are often registered under a flag of convenience, like Liberia, to a small company based in the Virgin Islands, with a crew from a different country, say Korea, and leased to an international shipping company, and insured somewhere else. Cargo manifests and ships registration papers can be forged. We might see another resurgence in high seas piracy, like we did around 2000-2001.

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