Spot and time charter rates for tankers, 1970-77

In this paper we have tried to develop and test some ideas concerning the relationship between the current "spot" rates for oil tankers and the rates charged for longer-term charters. Previous writers [in particular Zannetos (1966a, 1966b)] have argued that there are similarities between this relationship and the "term structure" of interest rates. After a brief discussion of the main changes that have occurred in chartering activity over the period 1970 to 1977, we examine recent studies of the tanker charter market, in particular the work of Zannetos (1966a, 1966b). We then provide a theoretical basis for the form of the relationship between spot and time charter rates, and test it empirically. In so doing, we are able to shed some light on the probable nature of the formation of "rate expectations" in the tanker market.