Exploring the drivers of bunker fuel prices

Abstract

Bunker cost accounts for 50% to 60% of a ship’s total running costs and is therefore an extremely important variable to manage. However, bunker prices are quite volatile and often moves in an unpredictable manner. Exploring the drivers of bunker prices is essential to manage the risk. But not many pay attention to the drivers of bunker fuel price. There is scope therefore for further improvements in risk management in bunker purchasing. This report looks at the subject from the view of traders. It aims to provide a comprehensive picture of the bunker industry. The focus is how to analyze available information and to make some predictions. Instead of giving exact price predictions, this report provides some guidelines for bunker price trend predictions. We hope that it can be of some use to people in the industry. The first part of the report provides basic knowledge about the industry. This is drawn from literature reviews and interviews of professionals in industry. The main part provides deeper exploration of the drivers and factors affecting bunker fuel prices. It discussed about major drivers and minor drivers, and also additional costs which add to the bunker price. Following further analysis, future prices trends are predicted.