Skyrocketing Shipping Costs Reveal the World’s Deepening Energy Crunch

Surging tanker rates signal mounting pressure in global energy markets

Freight rates for very large crude carriers, or VLCCs, have climbed to unprecedented levels as disruptions around the Middle East reduce the number of tankers available for service.

Data from maritime intelligence firm Kpler indicates that VLCC earnings could remain above $100,000 per day into next year. That would be more than double historical levels, which have rarely exceeded approximately $45,000 per day.

The increase reflects a combination of security concerns, longer voyages and strong demand for crude shipments. Fewer vessel operators are willing to transit the Strait of Hormuz, a critical energy shipping route. Tankers avoiding the area must use longer alternatives, keeping each vessel at sea for more time and reducing the number of ships available to load new cargoes.

That tightening of available capacity has pushed rates sharply higher on several major trade lanes. Earnings for VLCCs on the benchmark Middle East-to-China route have approached $800,000 per day, according to figures cited by The Kobeissi Letter. The U.S. Gulf-to-Asia route has seen offers as high as $29.5 million for a single voyage, before war-risk premiums and other charges related to possible delays.

The figures represent the cost of moving crude, rather than a direct increase in the price of the oil itself. However, transportation is an important part of the delivered cost of energy. Higher tanker rates can add pressure to refiners, importers and other companies that depend on long-distance crude shipments. Those costs can eventually work through energy markets and contribute to broader inflationary pressure.

“There’s quite a few bottlenecks all at the same time,” said Alex Grant, Equinor’s global head of crude trading. “The market is quite stressed with all of that.”

VLCC spot rates averaged about $103,900 per day Friday, according to Clarksons. That was roughly four times the five-year average for the same period. Rates had last moved above $100,000 per day in November before falling to approximately $38,000 per day in mid-January, near estimated cash-breakeven levels for some vessels.

The recent rebound has also changed trade patterns. More VLCCs are now moving toward China, with shipments from the U.S. Gulf accounting for a larger share of activity. Kpler analyst Matthew Wright told FreightWaves that 13 U.S.-to-China VLCC fixtures had been booked during the month, compared with four in February and six in January.

For trucking companies and professional drivers, the tanker market is another indicator of stress moving through the energy supply chain. Crude must be transported by water before it reaches many refineries, and refined products then move through pipelines, rail networks and trucks to reach fuel terminals and retail locations. A disruption in one part of that chain can increase costs and complicate delivery planning elsewhere.

The tanker market does not determine diesel prices by itself. Fuel prices also depend on crude values, refinery availability, inventories, seasonal demand, taxes and regional supply conditions. Still, exceptionally high ocean freight costs add another expense to the movement of energy, particularly on routes that require longer voyages or special security arrangements.

The current market is also highlighting limits within the VLCC fleet. When ships spend more time completing each trip, fewer vessels are immediately available for new cargoes. Charterers seeking prompt tonnage may therefore have to pay a premium to secure a ship quickly, even if overall crude demand has not changed substantially.

“It is a very, very high earnings environment and there is a premium to be paid for prompt tonnage,” one market analysis noted. The premium reflects the value of securing a vessel immediately rather than waiting for capacity to become available later.

Owners of crude tankers have benefited most from the recent surge. Shares of companies with predominantly crude-tanker fleets, including Frontline, Nordic American Tankers and DHT, have posted stronger year-to-date gains than some product-tanker operators. Product-tanker companies such as Scorpio Tankers and Ardmore Shipping have performed better over a longer one-year period, according to the market comparison cited in the source material.

For now, Kpler’s outlook suggests that elevated VLCC earnings may persist well beyond the immediate disruption. If vessels continue avoiding the Strait of Hormuz and longer routes remain necessary, available capacity could stay tight into next year. That would keep pressure on the cost of moving crude and add another source of uncertainty for the broader energy and transportation sectors.