Posts Tagged ‘light sweet crude oil’

Fuel price decline sweet cruise news in tough market

With markets in free fall and cruise line stock prices getting hammered to 6 and 7 year lows, Carnival released a bit of positive news today.

Effective October 31, 2008, the existing fuel supplement will be eliminated for all new bookings on 2010 departures. Additionally, the company established guidelines for reimbursement of the current fuel supplement charge for 2008 and 2009 voyages.  Essentially, if the price of light sweet crude oil is below $70 per barrel, the fuel supplement will be refunded in the form of a shipboard credit.

The news is interesting on several levels.  For one, it seems to illustrate that at current cruise ticket prices, oil at around $70 per barrel is "cost neutral" to Carnival's earnings per share.  So any drop under that area should help Carnivals bottom line earnings.

From a consumer marketing standpoint, I think it is also a smart move.  As long as the refund system is implemented in a simple to understand and straightforward way, it turns the pesky little surcharge into a clear customer partnership.  Consumers now have a "buy-in" or shared stake in cheering for lower oil prices along with Carnival.  Inherent with that buy-in also comes an easier acceptance of handing over a few extra bucks of compensation if oil goes higher.