Towing business in the port feels tug to keep its diesel fuel expenses low

February 20, 2000

At Moran Towing of Marylland, tugboats are chugging out from their Fells Point dock earlier in the morning. And it's not because of congested waterways.

By allowing more time to reach the ships they tow, the tugs can run slower and burn less diesel fuel, said Paul P. Swensen, division vice president and general manager at Moran.

For Moran, which docks about 20 to 50 ships and barges a week in tls port of Baltimore -- more than half the port's towing business -- that's one way of trying to hold down expenses amid rising fuel coats. Slowing down, adding minutes to a trip, can 'shave fuel consumption by 5 percent to 10 percent, Swensen said.

Diesel fuel generally accounts for as much as a quarter of a tugboat company's operating expenses. Because of the fiercely competitive nature of the business, Swensen would not disclose what the percentage is for the Baltimore operation of Moran, which is based in reenwieh, Conn.

But, he acknowledged, "It's a significant factor in our operating expenses," second only to labor costs.

Swensen has watched closely as diesel fuel jumped from 70 cents a gallon to as high as $1.34 per gallon the past few weeks. Tugboats use between 60 and 120 gallons of diesel fuel per hour, depending on whether they are towing or pushing.

"It eats into our profitability for sure, but at some point we have to pass that along to our customers," said. "In any transportation industry, the cost of fuel is one thing you can't depend on."

Moran builds "fuel escalators" into its contracts. When prices go above a certain level, the company passes along the increased fuel cost as a percentage of the total of service.

"We've reached that point." Swensen said, adding that it should not come as a surprise to shipping lines. "We told our customers back in the fall that based on projections, we would have to implement a fuel surcharge.'' That happened in Baltimore in mid-January. Reactions have been mixed.

It's been negative, but understanding," he said. "Ship owners t:hey're paying more for fuel. Nobody's ever happy when you get an increase. Overall, they've been more than understanding.

At some point, if it continues at these levels, we would, like anybody eIse, review our Pricing structure based on Iong-term benchmarks," he said. "We would have to make adjustments that are more permanent."

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