An investigation into the existence of a two-tier spot freight market for crude oil carriers

Developments in environmental legislation have exercised increased pressure on the tanker sector to improve its quality. To date, the most influential and, indisputably, the most controversial piece of legislation against oil pollution is the U.S. Oil Pollution Act that was introduced in 1990. This paper attempts an empirical examination of the effects of these developments in the spot freight market. Using a database of Worldscale fixtures over a period of four and a half years, a series of statistical tests was performed with the aim of detecting the existence of any premium paid for vessels of lower age, double hull construction, or trading to the U.S.A. The results were mixed, indicating in several cases some form of premia for US.-bound vessels, but less evidence of premia for lower age and better hull construction.