There is oil in the world, but the prices for shipping it are skyrocketing due to a shortage of oil tankers.
In some places, few or none of the huge ships are left for charter, and on the US-Asia route, shipping costs have roughly tripled in recent weeks. Shipping from Houston, Texas, to Asia now costs about $26 extra per barrel, equivalent to $52 million per cargo. Some long-distance oil shipments are now so expensive that they are unprofitable, and buyers are looking for closer deliveries.
“Never been so expensive”
The price of Brent oil is currently hovering around $100 a barrel. Sales of Angolan oil, which is usually transported thousands of miles to China, are sluggish.
"It's never been more expensive to transport oil," Saad Rahim, chief economist at trading giant Trafigura, told the Bloomberg Commodity Investor Forum. "When the cost of transportation makes up a larger portion of the value of the cargo, logistics becomes a much bigger issue," he said.
The oil tanker market is also in an exceptional boom, which benefits the few shipowners who dominate the market.
One of them is South Korean billionaire Chung Ga-Hyun. In December, he began buying up a large number of giant oil tankers. The timing of the investment has raised eyebrows in the industry. According to The Wall Street Journal, his company Sinokor was estimated last summer to own one in ten - a total of 80 - of the world’s very large crude oil tankers, known as VLCCs.
The Iran conflict, the cause
The main reason for the shortage of ships is the conflict between the US and Iran, which is tying up more ships in the Strait of Hormuz. At the same time, the conflict in Yemen is causing more and more ships to avoid the Red Sea and instead take the long detour around Africa.
Asian buyers are simultaneously replacing lost supplies from the Middle East with oil from America, which is tying up even more ships.
