What is BPD?
Barrels Per Day, or BPD, denotes the measure of oil output by the number of oil barrels produced in a day. It was named as such because when oil was first discovered, people stored it in whiskey barrels.
BPD can refer to an amount of crude oil produced globally — in a single country, a single oil field, and so forth. The measure, BPD, is generally used in oil spot markets and quoted in dollars. A single barrel of oil contains about 42 U.S. gallons and weighs nearly 0.134 tons.
Organization of the Petroleum Exporting Countries (OPEC) is a consortium of 13 oil-producing and exporting countries. OPEC influences the global BPD production and the worldwide price of oil.
The relation between the price of oil and barrels per day (BPD) is inversely proportional. This means that if BPD increases, the price decreases. And naturally so.
Because more BPD means more supply than demand, thus dropping the oil prices. A similar scenario happened during the pandemic — when BPD was extremely high, and crude oil rates went negative (less than $0), going as low as -$37.63.
The Relationship between Freight Rates and BPD
With the growth of the world economy, energy demand continues to remain a prominent resource. Crude oil is a significant source of energy that relies mainly on maritime transport.
Moreover, crude oil is used to produce diesel, the primary fuel carriers and shippers use globally. And accounts for approximately 20% of a carrier’s operating costs and could go up to 60% for ocean transport.
Visibly, oil prices directly affect the ongoing freight rates.
This means if the BPD output is lower, prices for crude oil and diesel will increase. And thus, freight rates will increase as well. Economic, political, and seasonal factors also affect BPD production and costs.
Depending on the type of shippers, the impact of BPD costs depends on the charged base rates and whether the transportation is bought at a “spot” or “contractual” rate. Contractual rates are more stable than spot because spot rates are open to uncertainty and driven by market conditions.
The relationship between BPD and freight is complex and unpredictable.
Small and mid-size businesses may find it challenging to mitigate costs and remain competitive. But with upcoming changes in BPD output announced, the situation may ease down in the short term.
Terms related to BDP
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