Investment decision-making research of oil tanker considering the reduce of oil spill risk

Abstract

An oil spill accident at sea contributes to an economic loss for oil tanker companies, and the uncertainty of shipping price has a serious impact on the oil tanker investment decision. In view of this, this study establishes an optimal investment decision model, considering the cost of oil spill under uncertain freight conditions with the expectation of investment income as the main optimization target. First, on the basis of the principle of demand and supply function curve, the relation equation of the fluctuating freight rate is established according to the traffic volume, and the size of the freight rate is obtained by considering any alterations of the transportation scale. Second, based on the tanker freight demand uncertainty, a model considering the additional maintenance costs of the oil spill as well as the optimal investment timing and scale is established. Finally, an empirical analysis is undertaken to know the optimal investment timing and scale of the tanker. The results show that on one hand, with the increase in freight uncertainty, the waiting value and scale to reduce the risk from uncertainty increase, and the additional maintenance costs for preventing oil spill will reduce the probability of oil spills and the requirement for investment timing and scale.