THE EFFECTS OF FAST DECLINE IN CRUDE OIL PRICES ON THE TANKER MARKET IN THE SHORT RUN

Abstract

Oil prices have been steadily declining to
 around $27 since early 2016, while it was at around $120 in early 2013. This
 decline will surely have an effect on countries' petroleum demands. Oil
 transport by sea, one of the most important instruments of international oil
 trade, has also been directly influenced by these developments. The supply
 curve is inelastic in the short term and sudden demand increase in the tanker
 market has also caused sudden rise in freight rates. Since the entrance of the
 new transport capacity into the market lasted for approximately 3 years, this
 study examines a period of about 3 years and tries to examine the effects of
 oil prices on the tanker market in the short run. The purpose of this study is
 to contribute to the existing theory by examining the effects of this
 extraordinary decline in the recent era. In this study, the tanker market is
 divided into freight, new construction, second hand and scrap market, and each
 sub-market is examined separately. Correlation analysis has been used as the
 method of study. According to the findings, freight market and second hand
 market have been affected positively by the decrease of oil prices. However,
 the impact of the fall in oil prices on the new construction market has not
 been at the expected level. When the effects on the scrap market were examined,
 a relationship has been found in the positive direction as the opposite of the
 theory and the hypothesis.