Floating Oil Storage: A Means to Increase Oil Profits or Evidence of the Effectiveness of the Embargo on Iran?

Abstract

This article begins by introducing the nature of the tanker market in recent years and the main reasons for deflecting tankers from their normal usage of transporting oil and converting them into floating storage devices due to changes in the market structure. The research then defines the reasons for using tankers for floating storage and concludes with a depiction of the use Iran makes of floating storage in its attempt to contend with the volatile situation of the oil market.
The oil tanker market has considerable influence on the modern economy. The increasing importance of oil as one of the main elements in energy consumption caused the tanker market to become a significant and influential factor in the oil industry. In 2009, for example, half of the 88 million barrels of oil consumed worldwide was transported by various types of tankers, with the rest being transported overland. However, changing consumption patterns, government maritime laws, dependence on tanker building companies and the need to scrap some of the tankers due to superannuation or surplus have made the market very volatile and been detrimental to tanker industry profits. Generally speaking, factors such as world demand for oil products, the distance between oil producing countries and oil consuming countries, the laying of transatlantic pipelines, the number of tankers converted to floating storage devices, and tanker availability as well as the number of tankers designated for scrapping have influenced the industry and its cost effectiveness.