The increase in oil transportation costs has reached its highest historical level, primarily due to unrest in the Middle East. In September, transportation rates surged dramatically, and by mid-October, the cost of transporting crude oil from the Gulf to Asia on a large tanker exceeded $37 per barrel, which is more than five times the pre-war level.
Consequences of Increased Transportation Costs
For some refineries, especially in Asia, these transportation costs can mean the difference between a profitable operation and a loss-making one. For economies that are heavily reliant on imports, high transportation rates exert additional pressure on energy costs.
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Disruptions in the Strait of Hormuz and increased use of ship-to-ship transfers have extended delivery times and reduced fleet efficiency. This has contributed to rising transportation rates.
Impact on Oil Markets and Refineries
Transportation rates surged sharply following the attack on the East-West pipeline in Saudi Arabia on September 11, 2026. This pipeline has acted as a critical route for Saudi oil exports during the crisis. Additionally, increased oil purchases from China during this period have put further pressure on demand for Saudi oil and tankers.
Saudi Arabia quickly moved to repair and reopen the East-West pipeline, but these recent disruptions, along with a significant decrease in Saudi exports through the Bab el-Mandeb Strait, have led to increased costs on both sides of the oil trade. Importers are facing higher costs to obtain crude oil and petroleum products, while exporters are under pressure to lower their prices.
The impact of rising transportation costs has also extended to tanker markets. With increased travel times, demand for smaller tankers has risen. In the third quarter of 2026, demand for Suezmax and Aframax tanker classes was 20 percent higher than the previous year. For example, the cost of transporting crude oil from West Africa to Europe on a Suezmax tanker reached over $22 per barrel, which is more than four times the pre-crisis level.
These developments indicate that global oil markets and energy costs are being affected by unrest and disruptions in trade routes. While Saudi Arabia is striving to return to normalcy quickly, the consequences of this crisis are rapidly spreading and may impact the profitability of refineries and consumer costs worldwide.
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