Case Study about Bunker Fuel
Introduction: Bunker Fuel is traded in US Dollars world-wide, every major port has its own set of rates and therefore it becomes quite complicated to write a comparative study on an alternative to the US Dollar as a reference currency for bunker fuel. For this reason we have taken the pricing system of WTSA WTSA has a system of bunker fuel pricing and different surcharges (e.g. refrigerated containers) that is clearly explained on their website. Our starting point has prices in US Dollars; these prices represent our starting point. When we turn US Dollars prices into Wocu1prices we introduce an element of volatility that needs to be considered when we look at the results of this case study. The exchange rate USD/Wocu has its own volatility and therefore any Wocu result would be better if we could have a starting point for the Wocu without that element of volatility
The availability of data in the WTSA website allows us to use what is essentially a pricing structure aimed at the US Dollar market for a generic trend for bunker fuel prices across different markets. This case study deals with bunker fuel in an oversimplified way; there is no consideration of surcharges and of different pricing for different agreements. However, the principles behind the case we are discussing remain the same whatever the agreement and it is safe to assume that the surcharges (priced in US Dollars themselves) will behave according to similar logic. Although the shipping world is fairly used to use the US Dollar as their main working currency, the clients of shipping lines ultimately pay in their local currency. We shall show how using the Wocu means a reduced volatility and therefore easier and more reliable cost forecasts. Easier and more reliable assessments of future shipping costs may be one of the decisive factors in the decision to enter new markets. Keep reading..
