Energy efficiency and voyage rates : an assessment of a potetntial two-tier market. The case of the VLCC spot market
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- Master Thesis 
This thesis presents the first analysis of the two-tier market hypothesis, regarding realized operational efficiency in the VLCC spot freight rates. Investigating this hypothesis is an important objective, because the existence of an efficiency premium in the spot market will induce ship owners to invest in more environmentally friendly vessels. We utilize a panel data set of 1,007 voyage rate fixtures between January 2013 and September 2016, on routes between the Persian Gulf and the Eastern part of Asia. We test for an energy efficiency premium by implementing two different multiple regression models, firstly by adopting the traditional approach using an “external” market index as the market proxy. Our results suggest that the market rate proxy for a standardised vessel is dominant in terms of explanatory power, and our findings show no evidence for an efficiency premium after controlling for macro-, contract- and ship-specific variables. Secondly, seeking to circumvent the problems, which the market rate proxy presents, we construct a new market indicator from microdata. We control for contract- and ship-specific variables, as well as time, charter and owner fixed effects, and we find weak evidence for a two-tier market where energy-efficient vessels attract a premium in the freight rates. In a separate analysis, we examine whether fuel-inefficient vessels, which in theory should have a competitive disadvantage against more efficient ships, compensate by slowing down their speed. By estimating a multiple regression model with macro- and ship-specific variables, our findings suggest that energy-inefficient vessels tend to correspond to higher operational speed.