In the outrageously camp film The Spy Who Shagged Me, made in 1999, super-spy Austin Powers battles with the forces of darkness in the form of Dr Evil. The doctor’s most outrageous tactic is to invent a new Time Machine which allows him to travel back to the 1960s where he steals Austin’s Mojo, leaving the unlikely sex symbol spy totally “shagless”. “Crikey!”, he expostulates, “I’ve lost my Mojo”.
Big Boy Boost
Over the years, investors in the VLCC market have shared an equally debilitating experience. The first of these miracles of modern shipping appeared in 1967. Over 1,000 feet long and carrying 2 million barrels of oil, they were the last word in efficiency, delivering Middle East oil to Europe and Japan, who were rebuilding their economies, for less than $1 a barrel. As US domestic oil production fell in the early 1970s it boosted imports even more, and to meet this demand Saudi Arabia increased output from 2.8m bpd in 1967 to 9.7m bpd in 1977. The VLCC market went mad. Investors queued to order 4 million barrel ships and the VLCC fleet grew faster than any other shipping fleet in history, from zero in 1967 to 193m dwt in December 1979.
Mighty Mojo Missing
Unfortunately, around that fateful date in the late 1970s, VLCCs, like Austin Powers, lost their Mojo. The problem was not Dr Evil and his Time Machine; it was two oil crises in quick succession. The first in 1973 pushed oil to $10/barrel, and after the second crisis in 1979 oil reached $30/barrel, by which time it was changing hands for 15-20 times more dollars than a decade earlier. These developments in the oil market triggered a double barrel downer for VLCC demand. First, a long and deep recession in the world economy undermined long-haul imports, and secondly a major round of oil saving technology cut demand even more (for example power stations switched from oil to coal, a massive structural change in oil’s market). By 1986 Saudi Arabia’s production had dropped by two-thirds to 3.6m bpd and VLCCs were in deep trouble. The fleet dropped 37% to 110m dwt in 1988, surely some form of record.
20 Years Out In The Cold
For twenty years from 1983 to 2003 the VLCC fleet struggled along in a grim and Mojo-less world. Then in 2003 a big dose of Chinese medicine got the fleet kick started again. Long-haul imports by the big three of Europe, USA and Japan were topped off by China and the Asian tigers, and from 2003 to 2013 the VLCC fleet grew at 4% pa. But since 2007 demand has been sapped by high oil prices, increased US production, a credit crisis, and a deep OECD recession. As a result crude oil tonne miles have only increased by 5% in total since 2007.
Dr Evil’s Wicked Way
So there you have it. Although it’s not the 1960s, Dr Evil is still at work on the VLCC fleet’s Mojo. Of course today’s Mojo surgery is not as dire as the 1980s, but the flagging crude demand growth since 2007 and brisk fleet growth have created spare capacity. Luckily some of it is soaked up by slow steaming, so when he’s in the mood, our hero can still enjoy a nice little spike. But sadly Austin’s still very short on stamina. Have a nice day.