Oil Tanker shipping Industry Introduction:    The oil shipping industry is one of the biggest gambles now days. Big players in this field are making fortunes or losing their life savings. The decisions are based on intuition and previous experiences. Mostly family owned business has boomed in the past and business owners have made millions in a short time.61820

    The governments of various countries have realized what an important role the industry plays in the economy of their countries and has begun to support this transport business in a major way, providing large subsidies and low taxations and various other incentives to the companies involved.

    The ships have become more specialized, flexible and larger over the years to cope up with the large demand in the international market owing to the increase in the worldwide energy consumption.

    The oil companies hold major market share in this business and use the services extensively however other commodities and cargo are also transported throughout the world by different kinds of ships specialized in the respective field.

    The shipping industry is a delicate balance between various essential components it comprises of; from when the ship is built to when the oil refineries buy the services to continue their business. Each part is extremely essential to understand and their way of doing business is very specialized.

    The Salen shipping company is one of the major players in the market with a large fleet of 32 vessels specialized to transport a variety of goods (crude oil, cargo, etc). They are a family owned firm with an experience of approximately 60 years.

Current situation:

    In 1967 the closing of the Suez Canal has increased the shipping distance drastically thus increasing the demand of larger oil tankers to reduces the per barrel cost of crude oil.

    A major crisis occurred in 1973 when the Middle East tripled the price of crude oil changing the nature of the business suddenly and making it very difficult for the market to cope with the changes.

    OPEC nations have introduced new regulations taking into account the environment thus working towards reducing the oil pollution caused. As a result the capacity of the oil tankers has been reduced by 20% and it is mandatory to have specialized equipment onboard the ship.

    In 1978 the demand of oil tankers is 30% lower that the available supply making it difficult to do business in today’s world.

Porter’s five forces

Industry competitors:

    There are around 1100 independent ship owners in 1978 scattered all over the globe.The major players in the field are the Scandinavians, the Greeks and the Hong Kong Chinese which hold the major market share.

Scandinavians:

    Ships owned by these countries are most technologically advanced and most well maintained in the world.

    They have the most specialized and skilled crew in the field and the Norwegians are most dominant.

    They are excellent ship builders with high competence in this field and most of the ships owned by the Scandinavians are manufactured within the region.

    Scandinavian owners pay higher taxes and duties however they are able to take advantage of the liberal reinvestment options.

    The Norwegians are known to be the biggest gamblers in this field mostly doing business in the spot market.

    The Scandinavians have had a strong hold in the market for a long time and have been highly respected. However now as many more newer countries are entering this business and have lower construction cost, cheaper labor, lower taxes they have a potential edge over the Scandinavians in the global market.

Greeks:

    The Greeks are smaller players than the Scandinavians in this field and they typically deal exclusively in oil tankers.