According to the Baltic Exchange, VLCCs that reaped $177,036 a day in 2008 were last at $8,900. These vessels would need $29,700 a day in order to simply break even for Frontline.That is a lot of idle supertankers. I wonder what this means for prices at the pump?
Given that oil is a fungible product—which means that a change in production at one location means a change in price everywhere♠—oil tankers being idle may have an impact similar to a drop in production. It does raise questions in my mind about what is going on in China, which I thought would have continuously driven up crude oil prices and thus crude oil production. But, while China is producing a lot of vehicles (since 2009 the world's largest auto producer), there is a slowdown in growth for this year.
Regards — Cliff
♠ Another way of looking at it is that until we put up some horrendous trade barriers (remember the Great Depression) any additional oil we pump here in the US will be available to the world market and thus if there are others willing to bid more for that oil it will not lower our price of gasoline at the pump here in Lowell. If, however, there is not a need for the oil, the price will fall, but then that pumping may become not cost effective (cost to produce being less than price when sold).