Oil Is Flowing, but Shipping It Has Never Been This Costly / Wages for ordinary seafarers have risen to four to six times the usual level / Conflicts are raising freight costs through two channels: “first, imposing direct and specific costs, and second, reducing the available operating time of ships” / The UAE is loading oil at Fujairah port, outside the Strait of Hormuz, but this has not eliminated the queue of waiting ships

A $77 Million Cost for a Single Sea Voyage, a Record Crude Freight Rate, and a Plunge in LNG Shipping Rates: What Factors Explain This Divergence, Who Pays the Cost, and How Long Can Tanker Owners Keep Earning Such Revenues?

S&P Global wrote: $77 million cost of a cruise, record-breaking crude oil freight rates, and a drop in liquefied natural gas (LNG) freight rates; What factors explain this divergence, who pays for it, and how long can tanker owners make such incomes?

According to the selection report, this article continues: On Wednesday, Bloomberg reported that chartering a giant tanker to transport US crude oil to Asia now costs $77 million per cruise. In 2025, the average cost of the same trip was $9.2 million.

A giant oil tanker carries about 2 million barrels of oil; Therefore, the cost of carrying each barrel comes to about 38.50 dollars.

For comparison, the price of a barrel of West Texas Intermediate (WTI) crude oil was $90.64 on Friday morning.

By Friday, this number had increased again. Reuters reported that the ship brokerage company "Simpson, Spence & Young" (Simpson, Spence & Young) has estimated the cost of this trip at 80 million dollars this week; It means about 40 dollars per barrel, while before the war this figure was 8.60 dollars.

Japan's Cosmo Oil temporarily reserved a tanker for loading in late November at a fee of $81 million. Meanwhile, SK Energy Company and Trafigura Trading Company tried to book the oil tanker with a rent of 76-77 million dollars, but they did not succeed.

This difference is important: the rate estimate by the broker is an estimate of the prevailing market rate; But the definitive booking of the ship means a real agreement to do the transaction. Now both indicators show the same reality.

In October 2019, the last time tanker freight rates made such headlines, the cost of the same trip reached a peak of $16-17.5 million; It means about 8 dollars per barrel.

The average cost of a giant oil tanker trip from the US Gulf to Asia in 2025 was $9.2 million; This figure has reached 77-80 million dollars this week, equivalent to about 40 dollars per barrel.

Transportation costs at this level determine which types of crude oil are still economically viable for refineries to transport. Refineries continue to consider oil quality, product yield and supply reliability; But the shipping cost of $40 per barrel can overcome all these factors.

Reuters reported that traders now consider the US-China oil trade uneconomic, and Asian refiners are considering buying Murban oil from the United Arab Emirates and Medanito oil from Argentina instead.

The war that started on February 28 stopped the normal traffic of ships in the Strait of Hormuz. Within days, most war risk insurance companies pulled out of the Persian Gulf region, and by April, about 800 ships were trapped in the region.

Two pauses in the conflict, one in the form of a cease-fire in April and the other in the form of an Iran-US memorandum of understanding in June, reduced shipping rates for several weeks each time.

During the summer, the Persian Gulf countries continued to export in an unusual way; Including using pipelines to the Red Sea and Fujairah, using smaller tankers to transfer oil to giant tankers that were waiting in safer waters, and passing the tankers through the strait with their locator transmitters turned off.

According to shipping data, exporters in the Persian Gulf region were exporting oil more than the pre-war level in about half of the days of that month until September; However, freight rates continued to rise.

Oil is flowing again, but it has never been more expensive to transport. The shares of the companies that own oil tankers have doubled and even tripled. For those who own or intend to buy this stock, the main question is how long this boom will last.

The answer must be sought in the question of why the flow of oil was restored, but the ships did not return to the market.

Before getting into the full analysis, note one thing: LNG carriers have gone the opposite way. On Tuesday, the spot charter rate for an LNG carrier in the Atlantic Ocean was 91% below its peak in March and even below pre-war levels.

One war, one strait and two completely opposite results.

The reason for this difference shows what exactly has become scarce in each of these two markets.

1. Why did time become a scarce resource at the disposal of ships?

First, I need to explain about the figures, because these figures measure different indicators.

The daily income of a tanker owner after deducting fuel and port costs is measured by the "Time Charter Rate Equivalent" or TCE index.

The Baltic Exchange publishes the estimated rate of the TD3C route from the Persian Gulf to China both in this form and as a single trip fare.

But the figure of 77 or 80 million dollars for the journey of the tanker from the United States is something else: the total amount that the charterer pays for the entire trip, including fuel.

Both indicators increase when time becomes scarce for ships. This year, this shortage has occurred for four reasons.

Two of these factors are solutions that take more time from ships to transport each barrel of oil.

The first solution: choosing a longer route

Saudi Arabia transports crude oil through pipelines through the desert to the Red Sea port of Yanbu. The cargo destined for Asia then passes from the south, through the Bab al-Mandab strait and near the positions of the Houthis; Or to avoid this route, they take a long way around Africa.

Some other shipments go north and are transported through the Suez Canal or Soumed pipeline to the port of Sidi Karir in the Mediterranean Sea. From there, Europe is only a few days away; But cargoes loaded by Asian buyers on Sidi Carrier have to travel much longer, and refineries face delays in receiving oil.

The United Arab Emirates is loading oil at the port of Fujairah, outside the Strait of Hormuz. This eliminates the need to cross the strait, but does not eliminate the problem of waiting in line for ships.

The second solution: using smaller tankers to transport the cargo

In this method, smaller tankers load inside the Persian Gulf, pass through the Strait of Hormuz, and transfer their oil to giant tankers waiting outside the strait.

The Wall Street Journal reported that the cost of one round trip is about $40 million.

Clarksons estimated in late September that 15% of the world's giant oil tankers are in the Gulf of Oman; While this share was 10% at the beginning of July.

Transferring cargoes takes time, and the inefficient operation of transferring oil from one ship to another has been one of the reasons for the jump in shipping rates. The waters outside the strait became so congested that the site for these transfers extended to the Gulf of Kutch, off the coast of India.

The other two factors are the restrictions that determine what ships are basically available.

Ship owners, crews and insurance companies decide whether to enter the Persian Gulf for each voyage separately. Each time one of them refuses to make the trip, a ship is removed from the pool of ships that can be used to carry oil in this area.

About 166 giant tankers, equivalent to approximately 18 percent of the entire fleet, are under sanctions and their average age is about 22 years. A refinery that needs transportation in compliance with regulations and without the risk of sanctions cannot use these tankers.

Another change moved capacity between different markets instead of removing it from the market.