Optimal ship speed and the cubic law revisited: Empirical evidence from an oil tanker fleet

We develop a flexible framework for the estimation of the fuel consumption-speed curve for ships which allows for speed-dependent elasticity with endogenous thresholds. Using a large dataset of noon reports for 16 crude oil tankers, we estimate the corresponding elasticities net of weather effects. Our empirical findings confirm that the classical cubic law for fuel consumption is valid only near the design speed but also that the sensitivity with regards to sailing speed can be substantially lower at the sailing speeds actually observed. Our results can be used to question the economic and environmental benefits of slow-steaming and fuel levies.