Analysis-Oil shipping costs spike, lifting prices from pump to grocery

Oil shipping costs have surged, driving up prices from the pump to groceries. In late November, a supertanker named Esteem Explorer will transport 2 million barrels of crude from the U.S. to Japan at a cost of $81 million, a significant jump from $9.1 million last year. This translates to $40.50 per barrel, about nine times last year's rate.

Refiners convert oil into fuel for food, retail goods, and construction materials, and the rising costs are fueling inflation in import-dependent countries. Every $10-per-barrel increase in shipping costs adds approximately 23 cents per gallon to gasoline, meaning the Esteem Explorer's shipping cost likely adds at least 80 cents more per gallon compared to last year.

Freight rates account for over 40% of US oil prices, up from 7% on average in 2025. Countries relying on imports, like India, the Philippines, and Indonesia, are hit the hardest. Attacks on ships due to the U.S.-Iran war and the Russia-Ukraine conflict have driven up freight and insurance rates. The Strait of Hormuz and the Red Sea have seen record-high oil tanker rates, with shippers paying nearly $34 per barrel to avoid risks.

Longer shipping routes due to attacks have tied up tankers, raising costs and increasing delivery times. The shortage of large crude carriers like the Esteem Explorer has also increased prices for smaller vessels. Some shippers charter ships on the spot market for a month before loading, and long-term contracts could be a bargain if prices continue to rise.

Tanker owners have profited immensely, earning up to $1.3 million per ship per day for a round trip from the Persian Gulf to Asia. As long as demand exceeds supply, tanker rates are expected to remain strong, but they may drop quickly once the crude oil market stabilizes.