Written by: Salma Al-Saqqa
Crude oil transport costs are witnessing record highs, as shipping costs have jumped from about $3 per barrel to more than $20, casting a heavy shadow on global energy markets and curbing the ability of importing countries like India to benefit from improved Middle East supplies.
Reasons for rising maritime transport costs
Economic data indicate that the cost of shipping and tankers has doubled significantly as a result of geopolitical risks associated with the Strait of Hormuz and tensions in the region. Global financial institutions explained that transport fees now account for a large percentage exceeding 25% of the total cost of delivering oil to refineries, compared to only about 3% previously. These costs include shipping wages, insurance, and other delivery expenses amid supply chain disruptions and the use of alternative routes.
Pressures on oil companies and fuel prices
This sharp rise in transport and logistics costs has put pressure on the profit margins of oil marketing companies, especially in countries that rely heavily on imports. Despite a decline in actual crude oil premiums, the high transport costs are absorbing this decline and increasing operating costs. Analysts warn that continued high shipping costs could gradually reflect on retail prices for petroleum products such as gasoline and diesel, in addition to their potential impact on the transport, manufacturing, and general inflation sectors. In a related context, liquefied natural gas (LNG) markets are witnessing similar upward pressures as a result of rising seasonal demand and supply logistics challenges.
