Crude freight rates have surged from about $3 to more than $20 a barrel as war-risk premiums, rerouting and tanker disruption offset easing physical oil premiums and threaten to squeeze Indian refiners and fuel retailers.
Crude shipping costs have climbed sharply even as some physical supplies recover, underscoring how geopolitical risk continues to distort energy markets long after oil starts moving again. Goldman Sachs said freight rates for crude have risen to more than $20 a barrel from about $3 a year earlier, a jump driven by a higher war-risk premium in the Strait of Hormuz, ship-to-ship transfers outside the Gulf, dearer marine fuel, rerouting and tanker inefficiencies, and the sidelining of Iran’s fleet. The bank said the Hormuz-related risk alone adds about $7 a barrel to freight costs.
The Strait of Hormuz remains the key pressure point. Reuters and AP have reported a series of recent attacks on tankers in and around the waterway, heightening fears of broader conflict and forcing vessels to operate with tighter security measures, altered movements and, in some cases, military protection. Those incidents have helped keep insurance and freight charges elevated, even though crude continues to pass through the strait.
For India, the immediate issue is not simply the price of crude itself but the cost of getting it to refineries. The landed bill includes freight, insurance and related charges, and that is where the strain is showing up. Jefferies said physical crude premiums have eased as exports from West Asia, excluding Iran, have picked up, but higher transport costs are offsetting much of that relief. The brokerage estimated that oil marketing companies could be facing petrol and diesel losses of roughly ₹28 to ₹34 a litre, while another report cited by Webindia123 said freight is now accounting for more than a quarter of landed crude costs, compared with about 3% before the conflict.
That does not mean pump prices must rise immediately. Fuel retailers can absorb some of the extra cost, crude producers can adjust discounts and governments can influence pricing through policy decisions. Still, sustained freight pressure would squeeze refining margins and leave state-linked oil companies under strain, especially if domestic retail prices do not keep pace with import costs. The effect could also spill into the wider economy by lifting transport and manufacturing expenses and adding to inflationary pressure.
The pressure is not limited to crude. Jefferies said spot liquefied natural gas prices rose 12% week on week to $29 per million British thermal units, suggesting that broader energy markets remain tight heading into winter. Even so, the impact is uneven across companies. Higher petrochemical margins could support Reliance Industries’ oil-to-chemicals earnings, even as expensive shipping weighs on parts of the wider energy chain. For India, the crucial test is whether freight rates, crude premiums and fuel prices normalise quickly enough to prevent a prolonged squeeze on consumers and refiners alike.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
