Local shipping companies are feeling the benefit of plunging global oil prices, and the savings are being passed along to customers as the cost of bringing goods and materials to the Island falls.

Oil prices have dropped around 50 per cent since last June. Brent crude oil was trading just above $53 yesterday.

The cheaper oil means lower running costs for Bermuda’s three container ships Oleander, Somers Isles and Bermuda Islander.

At the same time global tanker companies, including Bermuda-based Frontline, Nordic American Tankers and Teekay Tankers, have been presented with opportunities to profit from increased demand for tankers, which can be used by traders as storage facilities for the cheaper oil. The stored oil can be sold and delivered at a later date when prices improve.

For Bermuda the direct boost from lower oil prices will begin filtering into the economy in the next few weeks as fuel surcharges drop.

Bermuda Container Line, which operates the Oleander, will reduce its fuel surcharge per 20ft container from $180 to $152 on February 1.

The surcharge is changed each quarter to reflect the global price of oil and is based on what the company is charged in the US for its fuel.

Barry Brewer, president and CEO of Neptune Ltd, which owns Bermuda Container Line, said: “2008 was the last time fuel prices were this low. We know it is not going to stay low, but we don’t know when it will go back up.”

He said cheaper oil represented a boost for shipping companies.

For Bermuda the cost of importing goods from the US will be lower, although given the Island’s small size and correspondingly small volume of trade, the savings will be less than those enjoyed by bigger countries served by larger ships.

The Island would enjoy deeper benefits if there were an accelerated pick-up in the economy. Import levels remain low when compared to the early and mid-2000s. “Imports are coming in at 1999 volumes,” said Mr Brewer.

At the start of the year the US introduced a new policy forcing ships sailing within 200 miles of the country to burn more expensive ‘eco-fuel’ to reduce sulphur emissions. It had been feared the change would add around $50 to the cost of bringing a container to Bermuda. However, the impact of the new rule has been negated by the fall in oil prices.

It is a similar story for the container ships Bermuda Islander, operated by Bermuda International Shipping Ltd, and the Somers Isles, run by Somers Isles Shipping.

George Butterfield, Meyer Freight manager, said: “Meyer Freight represents the Bermuda Islander and the Somers Isles which have adopted a policy of adjusting the fuel surcharge on a quarterly basis. Even with the United States implementing an ECA [Emissions Control Areas] requirement to start using higher cost, low emission fuel, costs have been offset by this historic drop in fuel cost. These savings have been passed on to our customers.”

Demand is increasing for oil tankers to be used as storage facilities, allowing traders to store oil bought at today’s low prices and then sell it on in the future for a profit when prices climb. This presents profitable opportunities for the world’s major tanker firms including Bermuda-based Frontline, Teekay Tankers and Nordic American Tankers.

“The most significant impact of a lower oil price is an increase in oil demand,” said Herbjorn Hansson, chairman and CEO of Nordic American Tankers, in a letter to shareholders late last year as falling oil prices took hold. “Lower prices may trigger stockpiling or have a more general positive impact.

“Let me be very clear that the effect is positive for the world tanker business.”

Katie Dale, of research company Market Realist, has identified the offshore storage potential in her report on the rising contango, a market structure which allows traders to lock in profits by buying oil now and selling it for delivery at a later date when prices are higher.

“Global oil traders are likely to store crude oil in tankers mainly due to the widening contango. This makes storage profitable for the first time since the financial crisis of 2008,” she wrote.

“Crude tankers such as Nordic American Tankers, Teekay Tankers and Frontline are likely to benefit with oil traders adopting this market strategy.

“For the first half of 2015, the International Energy Agency expects 300 million barrels of crude to be put into storage globally, including onshore and offshore.”