Oil prices disguise the increasing fuel efficiency of air and sea freight

The transport sector is the most important consumer of oil, yet it is also one of the most important influences on the price of oil. This creates a reciprocal predicament. The fluctuations in the price of oil are difficult to estimate, injecting uncertainty into the transport market. In turn, the disproportionate growth of transport as a part of the world’s economy amplifies the demand for oil.

Yet, the market for fuel in freight transport is changing in key areas. Most notably, both aircraft and container ships are becoming much more fuel efficient.

The difficulties in estimating the fuel efficiency of new aircraft is characterised by arguments over the relative merits of different aircraft. Certainly, newer aircraft such as the Airbus A380 or Boeing 787 utilise both size and design to deliver lower fuel consumption per ton carried, possibly as much as a 20% improvement. Translating this into true performance is a different matter, however Lufthansa, for example, claimed a 2.8% fall in consumption per tonne/kilometre in 2012 and is looking to sustain this performance. However, the sector is still vulnerable to oil prices, with the cost of fuel as a proportion of overall aircraft operational costs somewhere between one half to one third.

The situation in container shipping is more dramatic. Here, the consumption in fuel per container/km has been substantial, largely as a result of economies of scale. Drewry’s estimates that the Maersk E-class vessels burn 35% less fuel per TEU than the previous class of post-panamax ships. In turn, these vessels consumed 20% less than the 9,000 TEU vessels which they had replaced. Essentially, fuel consumption per TEU has halved since the introduction of post-panamax ships in the 1990s.

Actual fuel reductions are even more dramatic due to the use of slow steaming, which can reduce fuel consumption by over 50%, with new types of engines making this a more viable option on a sustained basis.

However, over the past ten years, these efforts have been partially undermined by the substantial increase in the price of oil. Combined with the steady increase in volume, this has kept fuel as a major cost driver for both airlines and shipping lines, with airlines at present seeing aviation fuel accounting for approximately 20% of total company expenditures.

However, the partially successful attempts to control fuel consumption in these two sectors must be seen as an important progress towards a more stable and viable transport sector worldwide, making the role of transport more predictable in increasing the productivity of shipping goods. The big exception to this is, of course, road freight. If this ever sees comparable management of fuel consumption and energy efficiency, the market will be completely transformed.