Tanker cost elasticities revisited

Abstract

This paper re-examines the literature on ship economies of scale, and presents the results of re-estimating a model of tanker costs for 2007. The results are interesting for two reasons. First, they are remarkably similar to those estimated for tankers in the 1960s and 1970s, despite the transformations in the tanker market since that time. Second, the results imply that tanker size is not driven by scale economies, but by factors that relate to demand and other considerations. This paper concludes by noting some limitations in the approach used in the study.