Calculating Shipping Costs as a Share of Oil Cargo Value
Summary
The document describes a way to express a fixed tanker transportation payment as a percentage of the oil cargo’s value. It relates vessel capacity in barrels to the futures contract’s stated unit size, then uses the quoted futures price to value the cargo. The worked example illustrates the intended calculation and points toward the simpler underlying relationship: divide shipping payment by the value of the shipped oil, then convert the ratio to a percentage.
This is a practical unit-conversion and cost-normalization question rather than a trading strategy or market analysis. The example assumes one route, a fixed payment, and a specified cargo capacity, with futures prices used as a valuation reference. It sets aside contract pricing details, delivery terms, and other commercial factors. The calculation’s usefulness therefore depends on consistent units and on whether the chosen futures price reasonably represents the cargo value being compared.
Key ideas
- Express transportation expense as a fraction of the cargo’s market value.
- Convert vessel capacity and futures contract units consistently before valuing the cargo.
- The percentage is the fixed payment divided by cargo value, multiplied by one hundred.
- The example assumes a fixed route and payment and does not address broader shipping terms.
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Full text
# Transactional costs for shipping in % based on futures market price
# Transactional costs for shipping in % based on futures market price
Real case: Imagine I want to move an oil from one terminal to another.
I have about 20 +/- tanker companies, but all of them have max capacity on their top deadweight (DWCC) vessel about `10'000'000 b(arrels)` (1)
As you may know, oil is traded in futures contracts with contract_size `x1000b`, but quotes are for `x1b`
Vessel companies have many options to evaluate their payment for transportation based on how much oil will be delivered by one ship for certain customer. (2)
One of formulas (3) I'm using calculate the the transaction cost % based on nearest future contracts price, for example:
$$ (FullPayment / (({\dfrac{DWCC}{contractsize}})) / contractprice ) * 100 $$
For example: $$ 20000 / (({\dfrac{10'000'000}{1'000}}) / 74) *100 = 2.7% $$ So the question is: `Is it okay? Can this formula been much more simplify then that?`
> (1): Actually, there are much more companies, routes and vessel capacities, but the question isn't about it. It's also not about Incoterms/FOB/futures contract pricing, so I'm not interested in theory.
> (2): In this certain example payment is fixed. Ship always goes by one-route from terminal A to terminal B in X days. Don't ask about any other options.
> (3): The real formula is a bit more complicated than that, but basis of this exact situation is still the same. If you think it's a bit `simple` for QF just remember that in real case there are much more data and all this calculations
## Answer by AlexZeDim (score 2, accepted)
https://quant.stackexchange.com/a/45305
Guess it's all about Rubber Duck Problem Solving. Actually I was working on huge part of old legacy code/formula that misdirect me and I know that I'm probably missing something. But when I form the problem I easily solve it. Just calculate price of all `(DWCC x price)` and divide it by `transaction cost`
Thank you, QFShown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.