The Best Peak Oil Investments: Maersk

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Tom Konrad CFA

Containerized shipping is the most efficient way to move goods, but few ships are nearly as efficient as they could be.  One company is steaming ahead of the pack.

It seems obvious that more international trade increases greenhouse gas emissions.  After all, if we buy local products rather than products made halfway around the world, we will save all the carbon emissions required to ship them to us.  It also seems to make sense that rising fuel prices will lead to a decrease in international trade, as companies reduce fuel use by assembling things closer to markets.

This facile intuition can lead us to some very inaccurate conclusions.  The manufacture of materials typically accounts for far more of their embodied carbon than their transport, and the mode of transport will also have a big impact on embodied carbon.

Here is a chart showing the associated CO2 emissions of various modes of transport (source):

Air plane (air cargo), average Cargo B747
500 g
Modern lorry or truck
60 to 150 g
Modern train
30 to 100 g
Modern ship (sea freight)
10 to 40 g

With trucks emitting far more CO2 per mile than cargo ships, a consumer in Los Angeles will have lower emissions from transport of an iPad shipped in from China than he would if he could buy the same item assembled in Indiana. (That is, if Apple were to assemble iPads in Indiana.)

Contrary to the obvious assumption, rising fuel prices might actually cause the use of ships for freight, as manufacturers reduce fuel use not by shipping things shorter distances, but by relying more heavily on efficient sea freight at the expense of less efficient land- and air-based modes of transport.  Efforts to reduce carbon emissions might also end up increasing international trade and shipping, as countries with strict carbon emissions shift production (and emissions) to countries with less strict caps (or no caps at all.)

Ship Shape

While rising fuel prices and greenhouse reduction goals may end up favoring the shipping industry as a whole, they will also do a lot to re-shape the industry.  Fuel, after all, is not just a source of emissions for the shipping industry, it is a cost, so higher fuel prices mean that more efficient shippers will have a greater cost and profitability advantage.

There are many highly economical measures that a ship owner can take to improve the efficiency of their vessel, many of which were discussed in a panel on shipping at the Carbon War Room‘s Creating Climate Wealth Conference on May 4th.  According to Peter Boyd, the Carbon War Room’s COO, there is the potential to save 30% of shipping fuel just by applying measures with paybacks of three years or less.  Such measures include hull coatings, sails, using fans to force air bubbles under the ships hull, making the ship ride higher in the water, and waste heat recovery from the ship’s engines.  The economics of such measures are further improved because some ports give discounts or special privileges to more fuel efficient (and less polluting) ships.

The problem is that approximately two thirds of the shipping fleet is leased, not owned, by its operators.  This creates a split-incentive, because the ship owner (who would pay for the upgrades) does not get the benefit of savings on fuel consumption. 

Ship operators who own more of their ships will therefore have an advantage in terms of reducing fuel use.  The largest operator of container ships, A.P. Moeller-Maersk (Copenhagen: MAERSK-A,MAERSK-B), has such an advantage, since they own approximately half of the ships they operate.  Furthermore, Maersk has shown a commitment to fuel efficiency, providing data on all their ships (even the poorly performing ones) to, doing retrofits on their existing fleet, and aggressively incorporating fuel saving technologies into the new ships they order.

Ship operators who lease most of their ships only have one easy option to save fuel: slow steaming.  Just as you get better gas mileage by driving 55 than driving 70, ships can also unlock substantial fuel savings with “slow steaming.”  Maersk is also a leader in its commitment to slow steaming.  While any operator can choose to run its ships slower to save fuel, this, too, provides a hidden advantage for ship owners: Lowering ship speeds effectively lowers the global fleet’s carrying capacity, increasing the demand (and prices) for ships.


If you, like me, believe that current high oil prices are not just a blip, you should also believe that shipping companies with a proven commitment to efficiency will outperform their peers in the years to come.  Since the shipping fleet takes decades to turn over, energy efficiency first movers will retain a long term advantage, even if other firms belatedly wake up to the advantages.

What is less clear is how the shipping industry as a whole will fare as a result of long term increases in the price of fuel.  Shipping will probably gain market share from less efficient modes of transport, but higher fuel prices may also cause the entire transportation pie to shrink.  This uncertainty suggests that a long position in Maersk (MAERSK-B) might best be hedged with a short position in a broad transport ETF, such as the iShares Dow Jones Transportation Average (IYT.)

DISCLOSURE: No Positions.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.


  1. I’ve been spending a good deal of time researching fuel efficiency and emissions for domestic railroads and their CO2 numbers seem to cluster around 400 revenue ton miles per gallon of fuel consumed, which works out to something on the order of 25 to 30 grams per ton mile – which is a good deal lower than the numbers you quoted.

  2. When I looked at this table, was focusing on the relative numbers, which fit my general understanding of the impact of transport modes.
    Here is some European data that puts road transport at around 120 g/tonne-km, rail at about 22 g/tonee-km, and Maritime at about 17 g/tonne-km.
    converting to g/ton-mile we get about 40 g/ton-mile, which is still higher than your numbers. Shipping works out to be 26 g/ton-mile.
    My guess is that the difference includes CO2 emissions during loading, unloading, and other rail yard operations.


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