The field of maritime economics is very broad and includes the integrated study of ocean transportation (shipping) and port operations within a global supply chain management context. Few researchers span this widely however, and tend to specialize in either shipping economics or port/supply chain optimization. Shipping economics can be further broken down into sub-fields such as studying the functioning and price determination in the various freight markets (bulk, industrial and liner shipping), derivatives and risk management, shipping finance and the economics of ship operation, among others. Shipping economics plays a key role alongside technological innovation, as the understanding of price formation, dynamics and risks will always be the basis of economic evaluation of both evolutionary and revolutionary changes in ship design and operation. The most basic building block of shipping economics is the study of how the decisions of individual shipowners and shippers, relating to the demand for cargoes or the building, scrapping and operation of ships, affect the supply and demand for ocean transportation in a highly complex and volatile system. The ability to model the behavior of the shipping markets then gives us the ability to model the uncertainty of freight rates, ship values and operational parameters such as idle times and optimal vessel speeds.
The main applications of recent advances in the modeling of shipping markets relate to optimal operational and investment decisions under uncertainty. Shipowners make decisions concerning the optimal operation of their ships every day, such as the next destination/voyage of a ship, which speed to sail with, whether to hedge fuel and freight market exposure, assessing counterparty risks of charterers, or whether a ship should be put into cold layup due to a poor market outlook. On the investment side, research may deal with the optimal time to invest or divest in a newbuilding contract or second-hand ship, the optimal fleet mix (size & type) for a given level of risk, or managing ship value risk through the use of derivatives. An area that is likely to grow importance in the next few years is the economic evaluation of measures to reduce fuel consumption and emissions from ships, in large part due to new environmental legislation. Given the choice between competing technological solutions, for instance the retrofitting of exhaust gas cleaning systems or the switching between heavy fuel oil and higher-priced distillates, which is the most cost efficient option to satisfy regulations? In reality this is a very complex question with several sources of uncertainty such as the price risk and co-variation of the different grades of marine fuel oil in the future, the trading pattern of the vessel and the amount of time it spends in Emission Control areas, as well as the possible future expansion of emission regulations.