Pirates attacked a leisure vessel this week. This got me thinking about how much a modern day pirate could impact the price of any commodity transported by water. Then I found that recently, pirates hijacked a US bound oil tanker off of the coast of Somalia. The Oil, being as valuable a product as it is will make the ransom for the tanker astronomical. Especially for the vast quantity that was on the tanker. Pirate attacks and hijackings cost the global economy over $12 billion a year. All that can do is cost us more at the pump.
Because of the danger of sailing through the area, the shipping companies have to pay the seamen more money to sail. They also pay increased insurance rates on ships that move through pirate infested water. The increase in cost because of the pirates impacts us directly through higher costs for anything imported to the US from the Middle East and India. That includes oil, cotton and many other highly used items.
7 comments:
Very nice analysis. Should the US consider establishing military escorts through some of these most pirated areas? How would that help or hurt economically?
I agree with Kern about the US possibly establishing military escorts for ships. If we do, how much will that cost American tax payers though? Is it actually more cost effective for ships to arm themselves? With pirates being as unpredictable as they are is it even possible to defend against hijackings?
The military escort would be a great idea for the US. It would cost more money, but I'm sure not as much money as we are losing. This might actually decrease the popularity of the pirates, knowing the military is around might scare them off, I don't think we would need to use many people for this because I think it is more of an intimidation issue.
I don't think that the military idea is very sound. First of all you are suggesting that the Middle Eastern countries would be alright with having another country's war ships constantly sailing through their waters, which is probably not okay with them. Secondly you seem to fail to recognize the cost of having a military escort with every shipment of anything. This would cause the prices of everything to increase even more than they already have. Lastly there are only some 280 ships in the Navy to begin with and at least half of them are deployed currently. To be able to escort each ship that passes through the pirate infested area we would need at least the rest of the fleet which would leave the US unprotected, and I'm pretty sure the US government wont go for that idea.
Why not just arm the ships with more weapons? It seems to me that military escorts would cost way too much to protect cargo ships. I don't care what kind of ship pirate ship you have unless they're backed by government of another country, no ship and no sane person is going to go against a ship with a 50 caliber minigun mounted on the left and right of the cargo ship.
Could the US consider another route for the transportation? How could this affect costs?
I agree with Garret. Many, if not all, of these cargo ships arent armed at all except with maybe a water cannon. However, the only problem with arming these cargo ships with lethal weapons is that people could take this the wrong way, causing conflict. Maybe if the countries along the routes of the cargo ships worked with the US to protect them from pirates. Since we're sending cargo ships into these foreign seas, there's bound to be some countries who would help us. The US could then increase trade with these countries or something of the sort, in exchange, thus positively effecting the US economy, the other country's economy, and the world economy in general.
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