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Comment by phreeza | Hacker News Reader

So am I right thinking these ships are fully loaded?

If so, I guess the implicit assumption is that the price will rise back faster than the costs of having an idle ship sitting in the water? If the market was efficient, wouldn't it be irrational for the holders to assume this?

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If suppliers don't want to trade at current prices, the ship is going to be sitting idle somewhere - and it's more profitable to sit idle near America while full than to sit idle in the Gulf of Oman while empty.

The alternative would be land-based storage tanks. They also cost money.

This happens sometimes. Example: http://www.telegraph.co.uk/motoring/news/6601779/Oil-tankers...

Often ships sit loaded for months on end (sometimes due to customs or duties / ownership issues). There's also a proximity issue. If a loaded ship is sitting close to the states but in international waters, it's easier to get the load back into the states. If you leave the cargo in a storage facility somewhere you still have to pay for the storage, and in addition the transit + time when you actually want to use/sell/offload it.

The market is efficient, but only on the long run. People making decisions like this make the market efficient by storing oil when it is cheap (or when it appears to be cheap).

I fail to see how deliberately not doing something with a resource makes anything more efficient.

"Efficient" has a very specific meaning in this case.

https://en.wikipedia.org/wiki/Efficient-market_hypothesis

It's obvious that moving oil in space helps, right? You move the resource from a place it's relatively plentiful to a different place where oil is relatively scarce. Say, from the Persian Gulf to Australia.

The same thing is happening here:

These ships are trying to move oil from a time when oil is relatively plentiful to a time when it's relatively scarce. It's riskier, but if they succeed, everybody wins: they make money, and they do it by lessening that future scarcity.

i don't think you fully appreciate how cheap (relatively) boats are, it's why trade between the US and China works even for the cheapest of goods.

This is a great point. Operating a tanker ship might appear expensive (hundreds of thousands per day), but when you spread that cost across the cargo it holds, it's actually pretty cheap.

I remember hearing that shipping something from China to the US can be under $1 per pound.

I think $1/pound is too high.

The Shanghai Containerized Freight Index (SCFI) has it at $1102 to ship a forty-foot container (FEU) from China to the US west coast [1]. A 40' container has a 61,200 lb payload capacity [2]. That's 1.8 cents/pound. How close the cost gets to this depends on the payload density, but $1/pound seems high.

[1] http://www1.chineseshipping.com.cn/en/indices/scfinew.jsp [2] http://www.dsv.com/sea-freight/sea-container-description/dry...

I didn't know the exact number that's why I put "less than $1/pound".

You are correct though. If you look at some of the products like fruit that we get from Asian, the cost per pound would have to be pennies or else they couldn't charge $2/pound for the produce in the US.

According to the recent earnings report from North American Tanker [0], their cost per day is $12K, while they charge $35K/day on the spot market. This is for their Suezmax, which can hold 1M barrels of crude.

[0]Warning PDF:http://hugin.info/201/R/1966091/717954.pdf

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