Hormuz risks drive increase in road haulage for smaller oil parcels

Truck deliveries of small oil parcels and gasoline cargoes within the Persian Gulf region have surged recently, as companies aim to save time, circumvent risks associated with the Strait of Hormuz, and maintain a consistent cash flow, according to traders and brokers interviewed on September 10. Previously, such deliveries were commonplace in the UAE, Oman, Bahrain, and Saudi Arabia, but now volumes have surged significantly, with even bunker fuel for ships being transported via land routes.

For parcels of 5,000 metric tons or less, these shipments are divided into numerous trucks that undertake multiple trips from ports like Ruwais and Hamriyah to Fujairah, as reported by sources at the APPEC conference in Singapore. Each round trip from Hamriyah to Fujairah via road costs approximately 3,300 dirhams ($900) for a 50 mt truck parcel, translating to around $18 per metric ton. In contrast, transporting small tankers through the Strait of Hormuz for a small tanker would cost at least four times this amount.

Due to the substantial disparity in transport costs and the inherent risks, over 95% of small tanker trade on this route has shifted to road transport. Larger cargoes of 35,000 metric tons or higher are still transported by sea. The frequency of road deliveries has risen due to the region's geography, with Fujairah, which houses extensive tank storage facilities, situated outside the Strait of Hormuz, while much of the UAE lies within the Persian Gulf.

An oil trader based in Hamriyah Free Trade Zone cited an instance where his company hired 28 trucks for 18 days to transport around 5,000 metric tons of bunkers from Hamriyah to Fujairah. Due to the highly fragmented nature of the trucking trade, precise figures are unavailable, but half a dozen traders stated that hundreds of such instances occur weekly, and thousands of trucks have been deployed as many traders seek to avoid the Strait of Hormuz, which is costly, perilous, and can involve indefinite waiting times that disrupt cash flow.

The increased road traffic has led to unloading delays, according to oil brokers and traders. One trader recounted that when his company first hired trucks to move bunkers to Fujairah, it was for a single trip each, with a tight midnight deadline. Delays beyond even a few minutes resulted in additional costs of a few thousand dirhams per truck.

Now, the company schedules truck deliveries over several weeks to facilitate multiple trips back and forth. Several UAE-based traders have also acquired their own 20 trucks to handle bunker transportation to Fujairah, as they also operate a logistics business.