Oil rise will put up shipping costs

Press, Volume CXI, Issue 32540, 25 February 1971, Page 1

Oil rise will put up shipping costs

(New Zealand Press Association!

WELLINGTON, February 24.

It was too early to predict the likely effect of recent increases in oil prices negotiated by producing countries overseas, but inevitably they would impose a further burden on all shipping services to and from New Zealand, Mr G. Hunter, chairman of the Overseas Shipowners’ Committee, representing the four British lines in the New Zealand trade, said today.

“According to the United Kingdom Government, one of the most inflationary factors in the world today is the price of oil, which has soared during the last year,” said Mr Hunter in a statement.

“Virtually no sector of the British economy has escaped. Industry, business, bus fares, road haulage and private motoring have all been affected.

“From the point of view of shipowners, the dramatic rise in the cost of bunkering is a classic example of cost escalation over which they have no control—and this is but a single item of a number of such costs.” Mr Hunter said that since January 1, 1970, the price of oil had increased for a variety of reasons. One had been the expanding demand for oil. In Britain, for instance, coal production had fallen, and although coal was now being imported, the burning of fuel oil, as well as the sale of petrol, had risen sharply. Other reasons include higher charter rates for tankers, the closing of the transArabian pii>eline, and reduced production in Libya. “There is no doubt that the price of oil will continue to rise,” said Mr Hunter. “Already the agreement in Teheran, by which the price of crude oil has risen by US35c a barrel from the average posted price of Gulf oil of SUS 1.80 has resulted in the prices of petrol and bunker fuel oils being raised. “Libya, the largest exporter of oil in the world, will be the next country seeking an increased price. Libya accounts for nearly one-quarter of Britain’s imports and onethird of oil imports into the European Community. “Lloyd’s list reports that Libya has already said the Gulf terms do not even meet their minimum demands, presumably foreshadowing a further increase.

I “It also reports that British land foreign shipowners face a big increase on what they pay for bunker fuel oils. A 20 per cent increase for all grades of fuel oil has been announced in the Caribbean. Increases for the United States, Canada and South America will not be far behind. “Prices for oil and petrol in New Zealand are bound to be affected, and the rise in bunker oil will be paid by all shipping lines in the New Zealand trade Continental as well as British.” Mr Hunter said the price of bunker oil had more than doubled during the last 14 months, and the Caribbean increase already announced would add a further 20 per cent to the lines’ bunkering bill for 1971. Oil companies in the last 14 months had applied no fewer than nine increases for oil, including last week’s, which came into effect only eight days after the Teheran agreement. “Now the ‘Journal of Commerce’ comments in London that the cost of fuel oil is bound to be reflected in a further round of freight increases and higher charges for most forms of transport, particularly road haulage,” said Mr Hunter.