Post by Stanford University Graduate School of Business

After unloading their cargo, oil tankers often make return voyages with nothing in their tanks. New research by Professor Kostas Bimpikis charts a course toward less inefficiency at sea. Empty sailing, known as “ballasting,” is a major source of fuel consumption and carbon emissions. Bimpikis and his coauthors analyzed nearly 235,000 tanker voyages to see what can be done. Their answer, he says, “Points to consolidating the market.” The researchers find that a significant share of empty sailing stems from a fragmented industry where each owner optimizes their own fleet rather than working together. This lack of coordination creates a “fragmentation tax” accounting for 7% to 16% of empty sailing. “If you consolidate the market, you can mitigate most of those empty miles,” Bimpikis says. Shipping pools, where owners share vessels and manage them together, could cut ballasting-related emissions by up to 15%, the paper finds. The arrangement also makes business sense: Larger pools find cargo more quickly, spend less time sailing empty, and reduce fuel costs. “Even after sharing the gains, each participant is better off,” Bimpikis says. From shipping to trucking to other fragmented industries, the findings reveal that “Some degree of consolidation could be beneficial,” Bimpikis says. The key is not to take it too far. “If you consolidate too much,” he cautions, “you create monopolies.” https://brnw.ch/21x44uX