The Offshore Marine Market
Have you seen the price of fuel at the pumps over the past couple of years? It’s amazing how quickly these prices can increase and impact our individual spending habits, but have you thought how the price of fuel is impacting the global marine industry?
Interestingly enough, the increasing price of fuel has a very positive effect on the offshore marine market. Offshore marine service providers employ their vessels to global petroleum companies to provide services supporting the construction, positioning, and ongoing operations of the offshore oil and natural gas drilling rigs and platforms. A majority of the revenues realized by these operators are directly a result of the “day rates” achieved in providing these services.
As the price of fuel increases, and the known reserves decrease, the amount of exploration undertaken by the petroleum companies increases. Trends in oil and natural gas prices, strongly influenced by development of the fields, combined with changes in production efficiencies, has a major impact on the number of operating and new vessels. In general, this marine sub-segment is most strongly influenced by the upstream expenditures the oil companies have related to oil and gas exploration. As this exploration moves into deeper and deeper water, the costs involved in the exploration increases as well. Consequently, the market demand for larger and more expensive vessels capable of supporting these activities has increased substantially. Factor into this the average age of the existing fleet (most built in the boom of the 1970's) and there is an increasing demand to scrap out old vessels and replace with new larger, more technically advanced vessels.
As more demand exists for exploration, and more known reserves are identified further and further offshore, the marine offshore market assets will increasingly become a further cost to the petroleum companies. The impact of this is clearly seen in the results of the major engine manufacturers, such as Caterpillar & MaK. During the most recent peak in oil prices, Caterpillar saw our engine deliveries to the offshore customers increase more than five-fold. A great byproduct of a very difficult element of our daily lives. Of course, the result of this boom in shipbuilding is higher prices for ships and equipment. Eventually this cost filters down to you at the pump. Higher costs for equipment by the fuel companies equates to one of the many contributors to higher fuel price at the pump.
Now that you partly know why your fuel price is so high at the pump, what are your thoughts about the effects on both the Marine industry and you as a consumer?
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