How Oil Tankers Work

In addition to classifying these mighty maritime vessels as crude tankers and product tankers, we can sub-categorize them even further. Some tankers are built to haul oil from one point to another, while replenishment oilers are designed to ferry fuel out to ships at sea and refuel them. Sometimes, if sea-bound tankers become too old or uneconomical to operate, they're used as floating storage units.

If you work in the oil transport business or have an interest in it, you'll probably hear the following terms:

Two different classification scales are used to categorize ships. The ship descriptions above use the Average Freight Rate Assessment (AFRA) system. However, another method, called the flexible market scale, differs slightly in its weight limits for some size categories of ships.

In the next section, you'll learn some of the rules and regulations that govern how oil tankers are built, operated and maintained.

On March 24, 1989, the world watched in horror as one of history's most environmentally destructive oil spills marred Alaska's Prince William Sound. The accident -- caused when Exxon's tanker Valdez ran aground -- would make the ship's name synonymous with man-made catastrophe. The Valdez spill would become a case study in how operator fatigue, environmental factors and faulty decision-making can mix for disastrous results.

The tanker ran aground just after midnight on the sound's Bligh Reef and gushed out nearly 11 million gallons (41.6 million liters) of oil. The slick killed countless birds, sea otters and other marine life. Viscous, foul-smelling oil coated the once-pristine shoreline and spread out to cover 120 square miles (310.8 square kilometers) of ocean around the tanker [source: Mauer].

If anything good came from the Valdez spill and others like it, it's that global standards for design, safety and maintenance have since become more stringent. The biggest recent change to hit the supertanker industry is the transition from single-hull to double-hull construction. Double hulls aren't as prone to breaches that result in oil spills, although they're not totally impenetrable. Some observers say that the protection provided by double hulls is exaggerated somewhat. Nonetheless, authorities demand that the transition to a global double-hulled oil tanker fleet be completed sooner rather than later.

The United States and various international bodies have established deadlines for implementation of the double-hull design. In 2007, the European Union (EU) made it mandatory for ships carrying heavy oils to be double-hulled to use ports in EU nations or to drop anchor in their waters. The United States passed a law in 1990 to phase out single-hull tankers by 2015. The deadline was later moved up to 2010. The International Maritime Organization (IMO), a United Nations agency that regulates global shipping, also has called for the eradication of single hulls by 2010.

Oil spills represent one threat to the environment, but explosions and the fires that result can pose a real danger to crew members aboard oil tankers. Even in an empty cargo compartment, a single spark can turn fumes into an inferno. That's why tankers of 20,000 DWT (22,046 tons) and above have inert gas systems installed that take gas from the ship's boiler flue, and pump it into empty oil tanks and partially filled tanks. This inert gas makes the air within those spaces nearly impossible to ignite [source: International Maritime Organization]. The IMO also requires inert gas systems on all new oil tankers.

Oil tankers feature thoroughly designed safety and security systems to guard against accidents. But how do tanker crews deal with those who wish to do intentional harm -- like pirates?

Generally speaking, petroleum products like gasoline may not cost much at the pump, but the cargo of a fully laden tanker can be worth tens of millions of dollars. This fact has attracted the unwanted attention of pirates that attack tankers at sea and hold crews and cargo hostage for big ransoms.

Modern-day pirate exploits leaped into the public consciousness in November 2008, when pirates off the coast of Kenya seized the Liberian-flagged MV Sirius Star supertanker as it carried a payload of 2 million barrels of oil. The pirates demanded $25 million to release the ship's crew. A rash of similar piracy incidents in the treacherous Gulf of Aden had shipping companies and the navies of industrialized nations scrambling to improve high seas security [source: Paphitis].

Pirate attacks increased in early 2009, particularly in the Gulf of Aden region. However, by then, the bandits were having more difficulty capturing ships due to crewmembers' growing awareness of the risks of traveling with such valuable cargo and an increase of naval ships in the area. In fact, the International Association of Independent Tanker Owners (Intertanko) issued a document for tanker personnel, "Best Management Practices to Deter Piracy in the Gulf of Aden and off the Coast of Somalia." For many pirates, political instability and crushing poverty in their homelands make the dangerous but potentially lucrative heists worth the effort. The Intertanko guide offers several tips that have helped ships foil pirates as they sail in high-risk waters:

It's generally recommended that crews cooperate fully with pirates to avoid unnecessary violence.

Obviously, the oil shipping trade is big business. To find out more about the business aspects of oil tankers, go to the next page.

Before an oil tanker takes on a single drop of cargo, the company that owns the ship enters into a highly detailed agreement called a charter. Several types of charters exist. There's the bareboat charter, in which a company that wants to use a ship agrees to pay all of the boat's operating expenses for a set amount of time, usually measured in years. Other options include the spot charter, in which the ship is contracted to deliver a specific amount of cargo between one port and another within an agreed time frame; and time charters, in which a party pays the ship's owner to use the ship for a specified amount of time.

In the shipping business, profits are made through shrewd understanding of the markets. For the most part, there's greater demand for tankers than there is capacity, so long-term charters of several months to several years are common [source: Platou Report].

A large tanker will typically carry a crew of about two dozen and can cost $100 million or more. After paying for expenses, VLCC-class ship owners can expect profits of at least $60,000 a day. That profit varies depending on several factors, including tanker availability and the strength of the oil market. During times of high oil demand, daily profit per tanker can skyrocket [sources: Strauss Center and Wright].

When the current global financial crisis took hold in 2008, it appeared that the oil industry-friendly era of fuel-guzzling cars, trucks and SUVs had ended. Fears about oil supplies running out and the dangers of climate change caused by burning fossil fuels has triggered a worldwide race to produce cars, trucks and even airplanes that can run on eco-friendly fuel sources.

So, what does the future of the oil tanker industry look like? Frontline, the biggest owner of oil tankers, warned in February 2009 of "weak fundamentals" facing its industry for the rest of the year. Still, earnings for tankers have held up well compared to ships that carry other goods -- collectively known as dry bulk and container ships.

Falling oil prices and tanker demand, for instance, helped to depress Frontline's fourth-quarter 2008 profit to $52.7 million. That's compared to $201 million a year earlier, when the oil market was much stronger [source: Wright]. In the long term, though, the industry seems optimistic about demand, since older, single-hulled ships are being scrapped and must be replaced to meet the need for oil around the world.

For more information on oil tankers, take a look at the links on the next page.