Tanker demand is expressed in "ton-miles" which are measured as the
product of (a) the amount of oil transported in tankers, multiplied by
(b) the distance over which this oil is transported. Tonnage of oil
shipped is primarily a function of global oil consumption, which is
driven by economic activity as well as the long-term impact of oil
prices on the location and related volume of oil production. In
addition the tonnage of oil shipped is also influenced by factors such
as pipelines, political events and risk, as well as weather.
The distance over which oil is transported is the more variable element of the ton-mile demand equation. It is determined by seaborne trading and distribution patterns, which are principally influenced by the locations of production and the optimal economic distribution of the production to destinations for refining and consumption. Seaborne trading patterns are also periodically influenced by geo-political events that divert tankers from normal trading patterns, as well as by inter-regional oil trading activity created by oil supply and demand imbalances.
The United States is the leading importer of crude oil in the world. Since 1995, U.S. crude consumption has increased by 10%, over the same period U.S. crude production has decreased by an aggregate 24.5%. Driven by the imbalance of supply and demand, U.S. crude oil imports have increased by 46.2%.
Tanker supply increases with the deliveries of newbuildings and decreases with the scrapping of older vessels. Typically newbuildings are delivered 18 to 36 months after they are ordered. Every two and a half years oil tankers undergo a class survey, which with time becomes progressively more expensive. If the number of newbuildings delivered stays below the number of older tankers scrapped, the demand for modern tonnage will increase, as may the rates they command. In today’s market the 2010 IMO deadline on single hulled tankers is a playing major role in the supply equation; resulting in the early scrapping of outdated single hulled vessels.