The cost of transporting approximately 2 million barrels of crude oil from the U.S. to Japan, which is set to take place in late November aboard the giant tanker "Steam Explorer," will reach $81 million. This is while the cost of transporting such a shipment last year averaged $9 million and $100 thousand.
Rising Costs and Impact on Prices
The transportation cost is equivalent to $40.50 per barrel, which has nearly increased ninefold compared to last year. This situation reflects the impacts of transportation costs on the rising prices in the market and exacerbates consumer concerns.
Refineries use oil to produce fuel that is used in the transportation of food, consumer goods, and building materials. Therefore, rising costs contribute to increasing inflation in import-dependent countries.
Economic Consequences of Rising Transportation Costs
According to Kenneth Medlock, a researcher in the economics and energy resources section at the Baker Institute for Public Policy in Houston, for every $10 increase in transportation costs per barrel of oil, about 23 cents is added to the price of each gallon of gasoline. Given the transportation costs of the "Steam Explorer," the price of each gallon of gasoline will be at least 80 cents higher than last year.
Medlock also noted that import-dependent countries such as India, the Philippines, and Indonesia bear the brunt of the staggering costs. The International Energy Agency also announced that the unprecedented increase in tanker rental rates has led to reduced profits for refineries in Asia.
Tensions arising from the U.S. and Israeli regime's war against Iran and military conflicts between Russia and Ukraine have also contributed to rising transportation and insurance costs. The cost of transporting oil from the Strait of Hormuz and the Red Sea to Asia reached an unprecedented $34 per barrel last week.
Additionally, the shortage of giant tankers like the Steam Explorer has driven up the prices of smaller tankers. The cost of transporting with Suezmax and Aframax tankers has quadrupled since the war began in February.
Eric Brookhuysen, head of research and consulting for tankers at Poten & Partners, predicted that as long as demand for crude oil exceeds supply, tanker rental costs will remain high.
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