Gasoline prices averaging $4.36 a gallon nationally have never been this high at this time of year, according to AAA data, and diesel sits roughly 20 cents below its all-time peak. The Strait of Hormuz is no longer paralyzed, yet the cost of moving crude out of the Persian Gulf has exploded, keeping pump prices elevated for drivers, truckers and farmers worldwide.
Why tanker and insurance costs have soared
The daily rate to hire a Very Large Crude Carrier (VLCC) from the Persian Gulf to China has jumped from $65,000 last year to $1.6 million today, according to London-based research firm Clarksons. Before the Iran war began, the same voyage cost about $230,000 per day. “That’s insane,” said Tom Kloza, chief energy adviser at Gulf Oil. “If you own a tanker, you’re in great shape – as long as it goes unscathed by the war.”
Multiple commercial vessels, including at least two crude tankers, reported projectile strikes in the Strait of Hormuz in recent days, according to the United Kingdom’s Maritime Trade Operations. Insurers now charge $30 million to $40 million for a round-trip voyage through the strait, The Wall Street Journal reported, and some shippers are offering sailors up to $25,000 per trip — more than a year’s wages for many crew members.
Physical crude prices far above futures
All those expenses — tanker hire, hazard pay, insurance — have pushed the real-world cost of getting crude out of the Gulf from roughly $2 per barrel to about $33, Kloza said. The result is a wide gap between financial benchmarks and physical prices. Dated Brent, the price for immediate delivery of physical barrels, stood at $135.74 a barrel on Thursday per S&P Global Platts, well above the Brent futures price of about $100 and near April’s all-time high. “We’re getting a reasonable amount of crude out, but that’s misleading because the cost of that crude exiting is incredible,” Kloza said.
Three simultaneous conflicts constrict supply
According to CNN reporting, the global energy system is contending with two or three wars at once. The US-Iran conflict has stretched longer than many expected. Houthi drone and missile attacks have disrupted the Bab al-Mandeb Strait, another critical chokepoint. Ukrainian drones have damaged Russian refineries, prompting Moscow to limit fuel exports; China has also restricted exports to protect domestic supply. “The wars have not been resolved. There is no peace. The energy system is still constricted,” said Jan Stuart, global energy strategist at Piper Sandler.
US refineries at capacity with hurricane risk looming
American refineries are the only major ones still running flat out, producing as much gasoline, diesel and jet fuel as possible. Some are now scaling back for routine seasonal maintenance, and Hurricane Isaias could knock additional production offline or damage Gulf Coast facilities if it tracks through the region.
Vanishing buffers leave no margin for error
Global commercial and emergency stockpiles that acted as shock absorbers at the start of the year have been aggressively drawn down. “We are running on very, very low inventories. We don’t have buffers anymore,” Stuart said. That scarcity has baked a larger risk premium into current prices. Kloza summarized the outlook bluntly: “You have to end all three wars – or even two out of three wouldn’t be bad.”