At what point do fuel costs

[csoud68]

Catch up to the individual cruiser in terms of costs? 

 

Cruiselines have a business model predicated on reasonable fuel costs and its getting out of hand.

 

 

[donaldsc]

Not sure exactly what you are asking about but I guess that the answer would be that it will occur whenever the cruise lines decide to do it.

 

DON

[CruiserBruce]

Most cruise lines put a clause in the cruise contract that allows them to attach a fuel surcharge at short notice. Coming soon, I suspect. 

[DirtyDawg]

At the end of Q1 RCL had 55% of their remaining fuel purchases for 2022 under hedging agreements which are below current the market prices but they were higher than the hedges they put on in Q4. So this will be a slow process. It likely will be later this year when they might 'need' to apply fuel surcharges or raise prices. Which means they might start applying these tomorrow. 😉

[Heidi13]

4 hours ago, csoud68 said:

Catch up to the individual cruiser in terms of costs? 

 

Cruiselines have a business model predicated on reasonable fuel costs and its getting out of hand.

 

 

You are most likely considering the spot market pricing, whereas the cruise lines will be purchasing bunkers on long term contracts.

 

As noted previously your cruise contract will include a clause that provides the cruise line the option to charge a fuel supplement, should a stated spot price exceed a specified amount.

[urbanhawk]

I have a 23 day transpacific booked for Sept. I've been holding my breath, that a fuel surcharge could be added.😬...I hope for everyone's sake, this doesn't happen.

[chengkp75]

If you look at comparisons between gasoline prices and bunker prices, you will see that there isn't a direct correlation.  Since Russia's invasion of Ukraine, gasoline prices have gone up 120%.  Over the same time, "IFO380" (the residual fuel used by ships with scrubbers) has only gone up 20%, marine gas oil (diesel fuel) up 52%, and even the VLSFO (low sulfur residual fuel required without scrubbers) only 26%.  Residual fuel oil is an end product, or what's left over after refining all the gasoline and diesel out of the crude, so it's volatility on the market is much less than gasoline.

 

As noted by others, most of the cruise lines use "bunker futures" contracts to even out the price swings of bunkers, and while the slower rising bunker prices will eventually lead to higher cruise fares, I don't see a fuel surcharge in the near future.

[sparks1093]

4 hours ago, chengkp75 said:

If you look at comparisons between gasoline prices and bunker prices, you will see that there isn't a direct correlation.  Since Russia's invasion of Ukraine, gasoline prices have gone up 120%.  Over the same time, "IFO380" (the residual fuel used by ships with scrubbers) has only gone up 20%, marine gas oil (diesel fuel) up 52%, and even the VLSFO (low sulfur residual fuel required without scrubbers) only 26%.  Residual fuel oil is an end product, or what's left over after refining all the gasoline and diesel out of the crude, so it's volatility on the market is much less than gasoline.

 

As noted by others, most of the cruise lines use "bunker futures" contracts to even out the price swings of bunkers, and while the slower rising bunker prices will eventually lead to higher cruise fares, I don't see a fuel surcharge in the near future.

We just booked a ship powered by LNG (Mardi Gras). Has that price remained somewhat stable?

[chengkp75]

24 minutes ago, sparks1093 said:

We just booked a ship powered by LNG (Mardi Gras). Has that price remained somewhat stable?

With the relatively small LNG bunker market, it is difficult to get market prices, as most bunker brokers don't deal in it.  Especially in the US, where it is very limited in availability.  In Rotterdam, probably because of the ban on Russian gas, LNG bunkers have gone from being $200 less than VLSFO to being about $300 more, on an energy equivalent basis (LNG isn't sold by the ton like fuel oil, it is sold on the amount of gas that gives the same amount of energy as a ton of fuel).  US natural gas prices have gone way up, so the LNG powered ships may transition to a higher liquid fuel mix in the engines (residual or diesel), and use less LNG.

[SmoothFlying]

12 minutes ago, sparks1093 said:

We just booked a ship powered by LNG (Mardi Gras). Has that price remained somewhat stable?

At this point with the LNG and new fuels being talked about with this 'Forced to go GREEN because we DEMAND it' gang, ( I heard one 's0-called' expert proclaim solar power is the cure, and is just around the corner for the cruise industry because ' it's GREEN, CLEAN and FREE') and I thought that's going to be one BIG bank of batteries but who knows because I saw on the news where they're working on solar powered engines for civilian aircraft. So, are the new cruise ships with their fuels the answer and is solar power even possible?

 

Mac

[chengkp75]

Solar power for a ship is just not feasible.  Solar power is a low density generating system, meaning it takes a lot of area to generate a small amount of energy.  On land, this is fine, as you just need to keep buying land to put more panels on to increase power, but a ship is a fixed area, and you can't put enough panels on it to generate the hotel load, let alone propulsion.  I think the ultimate answer is fuel cells and batteries, but this is way down the road.

 

And, let's be honest, most of the decision to go to LNG was for cost savings, not ecology, as at the time, natural gas in the US was at a significant discount compared to fuel oils.

Edited June 8, 2022 by chengkp75

[cruisingguy007]

Hope we don't see fuel surcharges but we will probably see fare increases instead. Banning oil speculation would be a great start. These paper traders drive up prices and serve no purpose/benefit to consumers. The whole BS drivel about them distributing risk and providing a hedge is nonsense when they have driven costs up 40%-50%. It serves no one but hedge funds and bankers. A barrel costs around $11 to extract in OPEC countries, $36-$51 in the USA, Canada, UK, Brazil etc, even accounting for refining* it just doesn't make sense that oil is sitting at $122 a barrel right now with no end in sight. These banksters and hedge funds are artificially driving the price up 40%-50% for doing nothing but hustling paper as middlemen. It's robbery and needs to be curtailed as bleeding consumers, businesses (including cruise lines and suppliers) and transportation dry isn't stimulating the economy, it's contracting/concentrating it. It's nuts!   

 

*  https://www.energy.gov/eere/vehicles/fact-676-may-23-2011-us-refiners-produce-about-19-gallons-gasoline-barrel-oil   

[chengkp75]

16 minutes ago, cruisingguy007 said:

Hope we don't see fuel surcharges but we will probably see fare increases instead. Banning oil speculation would be a great start. These paper traders drive up prices and serve no purpose/benefit to consumers. The whole BS drivel about them distributing risk and providing a hedge is nonsense when they have driven costs up 40%-50%. It serves no one but hedge funds and bankers. A barrel costs around $11 to extract in OPEC countries, $36-$51 in the USA, Canada, UK, Brazil etc, even accounting for refining* it just doesn't make sense that oil is sitting at $122 a barrel right now with no end in sight. These banksters and hedge funds are artificially driving the price up 40%-50% for doing nothing but hustling paper as middlemen. It's robbery and needs to be curtailed as bleeding consumers, businesses (including cruise lines and suppliers) and transportation dry isn't stimulating the economy, it's contracting/concentrating it. It's nuts!   

 

*  https://www.energy.gov/eere/vehicles/fact-676-may-23-2011-us-refiners-produce-about-19-gallons-gasoline-barrel-oil   

Not sure what the link has to do with arbitrage oil futures, but its a widely known fact about what a barrel of crude can produce.  It has also been known since I worked in the offshore oil field about 40 years ago, that each barrel of oil is bought and sold 7 times before it gets to the consumer.  Is it right?  Probably not, but it is no different than the automatic trading on the stock market.  Doesn't do anythinng for the consumer, just for the shareholders and investors.

[cruisingguy007]

14 minutes ago, chengkp75 said:

Not sure what the link has to do with arbitrage oil futures, but its a widely known fact about what a barrel of crude can produce.  It has also been known since I worked in the offshore oil field about 40 years ago, that each barrel of oil is bought and sold 7 times before it gets to the consumer.  Is it right?  Probably not, but it is no different than the automatic trading on the stock market.  Doesn't do anythinng for the consumer, just for the shareholders and investors.

 

I doubt it's widely known, people like to blame the oil companies, you hear it all the time. Do they have some culpability, sure, they work in concert to control the market and create artificial shortages by pulling back refining capacity and they benefit from foreign contracts in an inside trading scheme but it doesn't account for all the manipulation. It's the raw materiel contracts that are never received and traded upstream that account for the lions share of manipulation. The hedge funds and banksters are always looked out for over the consumer. I can only hope this nonsense sparks a rebellion of sorts and wakes the sleeping lion. To many essentials are allowed to be manipulated/artificially controlled or have a controlled financial component that inflate costs and pocket picking by middlemen who contribute nothing but always have their hands in someone pocket. It's madness. I can only hope they push too far and get too greedy, maybe consumers will wake up, grab the tar and feathers and fight back.        

[Hlitner]

The OP only tells part of the story regarding costs.  Not only do cruise lines have to now pay more for their fuel (even a 20% increase in cost is significant) but they have even bigger percentage increases in food prices.  And also consider that booze prices have also increased and many cruise lines either include drinks or sell drink packages.   Of course the normal solution would be to simply increase the price of cruises, but the price elasticity of cruises is a problem.  Currently, most cruise ships are operating significantly below capacity because many folks are still afraid to get on a ship (because of COVID related issues).  And now we have the biggest enemy of all which is inflation.  When the cost of everything goes up, one of the first ways folks tighten their belt is to reduce their discretionary spending (cruises, travel, vacations, etc).  And all the major cruise lines substantially increased their debt in order to survive the COVID shutdown and much of that financing will be impacted by rising interest rate.  What we have is a near Perfect Storm working against the entire cruise industry.

 

Hank

[cruisingguy007]

1 hour ago, Hlitner said:

The OP only tells part of the story regarding costs.  Not only do cruise lines have to now pay more for their fuel (even a 20% increase in cost is significant) but they have even bigger percentage increases in food prices.  And also consider that booze prices have also increased and many cruise lines either include drinks or sell drink packages.   Of course the normal solution would be to simply increase the price of cruises, but the price elasticity of cruises is a problem.  Currently, most cruise ships are operating significantly below capacity because many folks are still afraid to get on a ship (because of COVID related issues).  And now we have the biggest enemy of all which is inflation.  When the cost of everything goes up, one of the first ways folks tighten their belt is to reduce their discretionary spending (cruises, travel, vacations, etc).  And all the major cruise lines substantially increased their debt in order to survive the COVID shutdown and much of that financing will be impacted by rising interest rate.  What we have is a near Perfect Storm working against the entire cruise industry.

 

Hank

 

Well said, plus you can toss in housing costs going sky-high, again due to similar manipulation factors, institutional/foreign investors and mortgage loans that drive prices higher and it looks even worse. Folks are taking it from all angles. I'm not adding any more cruises or vacations to the books (other than those I have booked already) and have drastically reduced discretionary spending. Even non-discretionary where I can. I just don't see this ending anytime soon and the irrational exuberance will be tough to tame without major sectors dropping by 50% or more and that won't happen if things are artificially propped up. They will let the air out slowly and start blowing the balloon back up at the first opportunity. In the land of 7-10 year car loans, financing cell phones for years and 50 year mortgages, the financial fairy-tale will go on as long as people believe everyone else is doing it, there is no other way and people sign up to be debt slaves or pin their hopes on playing the greater fool game. A perfect storm indeed. The timing couldn't be worse for the lines, the only good news is that the lines may end up relatively OK because of the insanity. Plenty may just slap a cruise on a credit card with high interest and pay for the cruise multiple times lol. Only possible in the land of irrational exuberance, many are conditioned to it and have come to accept it as a way of life as debt/credit has raised the price of everything. May be happening already.  

[JRG]

19 hours ago, cruisingguy007 said:

Currently, most cruise ships are operating significantly below capacity because many folks are still afraid to get on a ship (because of COVID related issues).  And now we have the biggest enemy of all which is inflation.

 

 

@HlitnerYour observation was confirmed today   BOA's analyst regarding cruise demand slipping,  This may be a bigger enemy to the cruiselines right when now coupled with inflationary pressures.

 

Add in the trickle-down cruise-economics.

 

The looming price increase whether by fuel surcharge or fare increases across the board seems inevitable unless it has already started,   I have not been watching prices. I am surprised more posters have not responded to this thread because it affects all cruisers,   how materially remains to be seen.

 

Add tsunami to the perfect storm forecast.

 

It may be a good time to buy if you have the self-discipline to manage your expectations.

 

Will prices go up to cover the costs   or

Will prices go down to fill cabins.....

 

 

 

 

 

 

 

 

[JRG]

3 minutes ago, JRG said:

Additionally....

I think the statement that was used was something to the effect that cruiselines are no longer taking the position that "new bookings are strong".   

 

This would be the red-flag to me, at the moment.

[cruisingguy007]

4 hours ago, JRG said:

I think the statement that was used was something to the effect that cruiselines are no longer taking the position that "new bookings are strong".   

 

This would be the red-flag to me, at the moment.

 

Some lines are better positioned than others, luxury/niche lines may face more pressure as some of their customer base seeks out cheaper fares. The cheaper mass market lines may be able to absorb some of these customers if their current base customers must reign in discretionary spending (trickle down). I think luxury lines like Virgin will be hit hardest. When that paper money/equity starts dropping back down to earth for everyone, a $1500-$2K cruise will look a whole lot better than a $3K-5K cruise (or much more on some lines).The lines have increased costs, protocol challenges that reduce customer pools and economic challenges for a large part of the country. Not to mention labor issues. It really is a cluster for the industry right now but if they can press through without too many roadblocks and interference, they can certainly come out on the other-side of this eventually.       

Edited June 10, 2022 by cruisingguy007

[happy cruzer]

Once low season (when the kids go back to school) gets here is when I think we will see which way the industry goes - higher to cover costs or lower to fill cabins.  Either way may not work at all if the inflation rate continues for another year.

[Tonopah]

We fortunately booked our voyage(s) and paid for it over a year ago. We will not be able to afford another cruise/crossing at all after that, not just due to fuel surcharges or increased cruise prices, but also due to the breathtaking rise in the cost of living.