How Will Holland America /Carnival corp Handle the 2 or 3 million barrel decrease in Oil Out put

[mcrcruiser]

Opec announced a  2 or 3 million barrel cut back    in oil supplies  . What type of pressure do you think that will put on  Holland America cruises  ?

[Mary229]

I am sure, like airlines, they hedge and will not be significantly impacted by short term pressures.  It is the long run where they will be impacted and likely most of those cruises haven’t been priced yet. 

[vicd1969]

They could always implement a fuel surcharge. I don't think they did that even when oil was at around $120 a barrel this past year.

[mcrcruiser]

5 minutes ago, vicd1969 said:

They could always implement a fuel surcharge. I don't think they did that even when oil was at around $120 a barrel this past year.

With what is happening with inflation &  the importance to protect their cabin prices  if the  cruise lines added fuel  up  chargers  ,imo ,they would be pushing many more people away  from booking cruises . Insurance is not cheap  plus other cost items  to get to & from a cruise pier . Bottom line is when you add it all together less & less of the general population will be able to afford cruises  . Thus ,imo ,if the added ant fuel surcharge  to the cost  the bookings would  fall  immediately 

[DaveOKC]

2 minutes ago, mcrcruiser said:

With what is happening with inflation &  the importance to protect their cabin prices  if the  cruise lines added fuel  up  chargers  ,imo ,they would be pushing many more people away  from booking cruises . Insurance is not cheap  plus other cost items  to get to & from a cruise pier . Bottom line is when you add it all together less & less of the general population will be able to afford cruises  . Thus ,imo ,if the added ant fuel surcharge  to the cost  the bookings would  fall  immediately 

They have to be careful not to price themselves out of the market.  The higher the prices, the fewer people will cruise.  Simple Econ 101.

 

[mcrcruiser]

1 hour ago, DaveOKC said:

They have to be careful not to price themselves out of the market.  The higher the prices, the fewer people will cruise.  Simple Econ 101.

 

That is what I said in  my post . The higher the cost to cruise the lower the number of potential people who could afford this luxury . Therefore , this deadly killer of inflation could sink  the cruise lines who rely on the mass markets for survival  & profitability 

[Mary229]

Don, the YouTuber, interestingly said today that there is evidence that the average passenger is spending much more on the ships then pre-pandemic and that is what is fueling many of the current price drop offers. (You like my pun😉).  If this trend holds up it may forestall price increases in base fare rates.  The current energy market is much too fickle for modeling prices as it is politically driven not a supply, demand or even inflation driven. 
 

the cause of inflation currently is devaluation of the currency and supply chain issue, it is not energy driven

Edited October 6, 2022 by Mary229

[JeffElizabeth]

Agree. Now would not be a good time to implement fuel surcharges.  They will probably eat the increase or have hedged the market.

 

Might see more low price deals to fill the ship's, because they use almost the same amount of diesel at 50 or 100% capacity.  

[Guardsy]

It was noted in news reports this morning that OPEC nations are already UNDER-producing and have not reached their production goals for some time.  So, it should have little effect long-term, other than a slightly higher price.

[chengkp75]

Carnival Corp brands do not use fuel futures contracts, and haven't for years.  However, there is no direct correlation between crude oil price and bunker fuel price, unlike gasoline.  Since bunker fuel is a byproduct of the refining process, price increases in bunkers tend to lag behind crude.

[AKJonesy]

Going to the point made by some of the posters with regard to price point, we are seeing this play out in the general economy.  We have already seen, as an example, some restaurants drastically changing their menus and making offerings far different than what they have in the past.  When a steak is > $50 just for the steak, then you add on the sides, this is getting to the pp where people just say it is no longer affordable to eat out.  Some friends that own a business in MT said that if the cost of energy and food continues it is LIKELY they and other businesses will be forced to close going to the point that they can't go past a price point because people will just no longer pay it.  I am speaking about average "joes" here and not the uber wealthy who are on yachts and going to the finest of restaurants.  But, I think we probably have all seen this and are closing in on prices that are no longer justifiable.  I am hoping that the cruise industry can hang in there, but many economists are talking about long term inflation and that hits everyone.  When people, even on this forum talk about days gone by and some of the things that are no longer offered, I get that cruise lines have to cut costs everywhere.  They are bleeding money.  

[LawDog61]

With the trend towards larger ship across most cruise lines, I have to think that the consumption of bunker fuel on a per - passenger - mile  is decreasing.

[chengkp75]

7 hours ago, LawDog61 said:

With the trend towards larger ship across most cruise lines, I have to think that the consumption of bunker fuel on a per - passenger - mile  is decreasing.

Not really.  More passengers means a bigger ship, which means more power to push it along, which means more fuel.  The economies of scale found in the larger ships are mainly in capital costs at construction and things like fewer higher paid crew (one Captain instead of two).

[HappyInVan]

I wouldn't worry about it. The industry's excess capacity means that budget travellers will enjoy low fares. Others may not be happy about budget cuts.

 

The important thing is this. I have money in my wallet. I can choose the cruises I want to travel on, or the land-based alternatives.

[Hlitner]

The world petroleum market is much more complex than many folks acknowledge.  When OPEC cuts the tap, lots of things happen.  Other non-OPEC countries will usually increase production (quietly).  But more importantly, a price increase in crude will likely drive the world into a deeper recession which actually causes a decrease in the demand for petroleum.  The danger to OPEC is the cartel (i.e, OPEC) loses control over worldwide pricing (this has happened in the past) and their member States actually make less money.  

 

One irony is that the USA, Canada and Mexico have plenty of crude reserves and could pull the rug out from under OPEC by adopting policies that increase production.  This happened during the first two years of the Trump administration and the results were that the USA (and North America) became net exporters of petroleum and the prices dropped and then were stable.  But we now have this strange situation where the Biden administration goes around the world begging other countries (and OPEC) to increase production while doing everything possible to curtail production within the USA.  Perhaps there is some logic to that policy, but the result is higher petroleum prices, inflation, recession, and no worldwide environmental benefit.  Go figu

 

Where does this leave HAL and the cruise industry.  Just one more nail in the coffin.  The ability of the cruise lines to increase pricing in a very soft market is questionable and gets into an economic law known as price elasticity.  Raise prices in a recession and it is likely that sales will fall, ships will have more empty capacity (opportunity lost revenue) and cruise lines will continue to lose money.  The obvious economic solution is to reduce supply (cut the number of cruises) by pulling some ships out of service.  Meanwhile, we have MSC which continues to expand with the addition of about 2 big ships per year plus a new cruise line (Explora Journeys) with 6 ships to be built within a relatively short period of time.  Something will have to give....and I fear that is going to happen somewhere within the CCL family of cruise lines.

 

Hank

 

 

[HappyInVan]

13 hours ago, LawDog61 said:

With the trend towards larger ship across most cruise lines, I have to think that the consumption of bunker fuel on a per - passenger - mile  is decreasing.

 

Chengkp75 is correct. There's not much difference between the Carnival Splendor (2006 113k GT 1,600 staterooms) and the Mardi Gras (2020 181k GT 2600 staterooms). In terms of tonnes/stateroom, that's 7 tonnes on both ships.

 

Of course, a ship twice as big means that the company can squeeze in resort features like water parks, a roller coaster, a row of specialty restaurants, full stage revues etc.

 

There is a huge difference in tonnage per pax (and fuel efficiency) at a different price point. For example, Ponant ships (10k GT) contain just 100 staterooms!

[mrmoviezombie]

On 10/6/2022 at 4:14 PM, chengkp75 said:

Carnival Corp brands do not use fuel futures contracts, and haven't for years. 

I would assume that bunker fuel costs are a relatively minor fraction of the total costs to run a cruise ship.
 

At this point I would suspect that debt servicing costs are now the dominate consideration that the lines have to worry about.

[chengkp75]

43 minutes ago, mrmoviezombie said:

I would assume that bunker fuel costs are a relatively minor fraction of the total costs to run a cruise ship.
 

At this point I would suspect that debt servicing costs are now the dominate consideration that the lines have to worry about.

While you are correct that debt service is a large portion of the corporate balance sheet, bunker fuel is about 15% of operating costs, and the largest single line item, per ship.

Edited October 8, 2022 by chengkp75

[Gr8daze]

This was a decrease in quota not actual production. They haven’t actually met that quota in a long time. I’m sure it will be used to jack up the prices. That’s the whole point. But it isn’t going to result in an actual decrease in output. 

[leerathje]

On 10/6/2022 at 12:25 PM, mcrcruiser said:

With what is happening with inflation &  the importance to protect their cabin prices  if the  cruise lines added fuel  up  chargers  ,imo ,they would be pushing many more people away  from booking cruises . Insurance is not cheap  plus other cost items  to get to & from a cruise pier . Bottom line is when you add it all together less & less of the general population will be able to afford cruises  . Thus ,imo ,if the added ant fuel surcharge  to the cost  the bookings would  fall  immediately 

 

It will be the same for ALL travel though.  And the price of crude doesn't juse affect Carnival....it's all cruise lines.

 

Driving by car is astronomical, and flying is very expensive as well.  What can you do that doesn't involve petroleum, except do a stay-cation?

 

L.

 

Edited October 8, 2022 by leerathje

[LocoLoco1]

Hedging Fuel: Wealthy consumers of Fuel can do well by ‘forward pricing’ of such an expense. Broke companies, on the other hand, sometimes don’t have the luxury of buying such contracts. Certain cruiseships recently were impounded for inability to pay for fuel. Guessing wrong on fuel futures can boomerang on the user. It would be PURE SPECULATION as to what CCL’s fuel desk has done. 

[chengkp75]

15 minutes ago, LocoLoco1 said:

It would be PURE SPECULATION as to what CCL’s fuel desk has done. 

It has been reported in the last many years' SEC filings that Carnival Corp does not buy fuel futures.

[Florida_gal_50]

1 hour ago, leerathje said:

 

It will be the same for ALL travel though.  And the price of crude doesn't juse affect Carnival....it's all cruise lines.

 

Driving by car is astronomical, and flying is very expensive as well.  What can you do that doesn't involve petroleum, except do a stay-cation?

 

L.

 

And yet there are many people that will try to tell you differently.  Everything cane be done without petroleum.

[Mary229]

1 hour ago, LocoLoco1 said:

Hedging Fuel: Wealthy consumers of Fuel can do well by ‘forward pricing’ of such an expense. Broke companies, on the other hand, sometimes don’t have the luxury of buying such contracts. Certain cruiseships recently were impounded for inability to pay for fuel. Guessing wrong on fuel futures can boomerang on the user. It would be PURE SPECULATION as to what CCL’s fuel desk has done. 

I would be surprised if anyone in the industry would fuel a cruise ship without a substantial contract at this point.  No one would take that risk. 

[Wakepatrol]

On 10/6/2022 at 3:29 PM, DaveOKC said:

They have to be careful not to price themselves out of the market.  The higher the prices, the fewer people will cruise.  Simple Econ 101.

 

The inside and ocean view cabins are the same prices or less than 20 years ago