The soaring cost of shipping is lifting the price of oil for consumers

Disruptions in the Middle East are pushing tanker rates to historic highs The price of oil is only part of what determines the cost to supply the world with fuel. Crude oil and the products refined from it must travel – often thousands of kilometres by specialised marine tankers – from producing regions and refining centres to the places where they are consumed. Typically, transport makes up a small proportion of the overall price of oil, but when shipping becomes more expensive, costs can mount across the supply chain.

That pressure is now building across global oil markets, which have been repeatedly roiled by the war in the Middle East since February. While attention has focused on the availability of Gulf crude oil and the re-opening of trade routes through the Strait of Hormuz, freight costs have also soared in recent weeks – making it far more expensive to move crude and oil products around the world.

In September, tanker rates surged to historic highs. By mid-October, the cost of shipping crude from the Middle East Gulf to Asia on a large tanker had climbed to over $37 per barrel, more than five times its level before the war began.

For some refiners, especially those in Asia, these soaring transport costs can mean the difference between a profitable operation and a loss-making one. For economies heavily reliant on imports, higher freight rates add further upwards pressure on energy costs.

This story was originally published by Hellenic Shipping News. Read the full story at Hellenic Shipping News →