Freight rate determinants in the offshore market : does energy efficiency pay?
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- Master Thesis 
There is a growing interest in the dynamics of freight rates in the offshore market, yet, the research within the field of microeconomic freight rate determinants is limited. This paper is an attempt to fill this gap by investigating microeconomic determinants of time-charter freight rates for Offshore Support Vessels (OSVs) in the global offshore market. We utilize a comprehensive panel data set of 40,537 individual fixtures for Platform Supply Vessels (PSV) and Anchor Handling Tug Supply (AHTS) vessels between 1984 and 2015. Through a division into spot and term charter rates, we pursue to verify to what extent there exists a relationship between realized freight rates for individual fixtures and macro-, contract- and ship-specific variables. Our findings suggest that the market proxy for a standardised vessel dominates in terms of explanatory power, typically explaining around 80% of the rate for individual fixtures. Additionally, we find operating region, build country, vessel size, vessel age and other ship-specific properties, e.g. dynamic positioning system 2 (DP2) and ice class, as significant determinants of OSV freight rates. Moreover, we examine the presence of a freight rate premium for energy-efficient OSVs using four different definitions of efficiency. The time-charter market represents a classical principal-agent problem, where shipowners should, in a competitive market, obtain a premium reflecting the fuel savings that accrue to charterers. We suggest a two-tier market where energy efficiency pays off in the AHTS term market, whereas the PSV market is subject to an apparent market failure.