Shipping Oil Through Strait Of Hormuz Costs $20 Million, TotalEnergies CEO Says
Our take
The recent statement from TotalEnergies CEO Patrick Pouyanné, quantifying the cost of shipping oil through the Strait of Hormuz at $20 million per vessel, underscores a growing fragility within global energy transport routes. This figure, representing insurance premiums, rerouting costs, and heightened security measures, isn’t merely an accounting anomaly; it reflects a systemic risk increasingly impacting the maritime sector and, by extension, global economies. The escalating tensions in the region, particularly concerning Iran's actions, have demonstrably amplified this risk. We’ve observed a worrying trend of increased maritime incidents, evidenced by [IMO Warns Of Rising Piracy In The Gulf Of Aden As More Than 90 Seafarers Remain Captive] and further highlighted by the recent [Fire Breaks Out On Saudi Oil Tanker Near Red Sea Port Of Yanbu After Houthi Attack]. These events, coupled with Iran’s recent blacklisting of tankers and threats of fines and detentions, as detailed in [Iran Blacklists 45 Tankers, Threatens Fines, Detention And Cargo Confiscation In Strait Of Hormuz], paint a picture of a waterway becoming increasingly unpredictable and hazardous.
The Strait of Hormuz's strategic importance cannot be overstated. Historically carrying approximately one-fifth of global oil flows and a significant portion of liquefied natural gas (LNG) shipments, it acts as a critical chokepoint connecting producers in the Middle East with global markets. The costs associated with navigating this route are now significantly impacting energy prices and supply chain stability. The $20 million figure represents a substantial premium, directly impacting the cost of energy for consumers and businesses worldwide. Beyond the immediate financial implications, this situation highlights the vulnerability of our integrated data ecosystem when reliant on a single, strategically sensitive route. The ripple effects extend beyond oil and gas, impacting petrochemical industries and any sector dependent on reliable and affordable energy supplies. This underscores the urgent need for a more diversified and resilient maritime infrastructure.
The current situation necessitates a comprehensive reassessment of maritime risk management strategies. Traditional insurance models may need recalibration to accurately reflect the escalating geopolitical risks. Furthermore, the potential for increased naval presence and enhanced security protocols, while potentially mitigating immediate threats, also introduce complexities and costs. Investment in alternative transport routes, such as pipelines or overland routes, may offer long-term solutions, though these options often involve significant infrastructure development and geopolitical considerations. Data-driven solutions, leveraging real-time monitoring and predictive analytics – a core tenet of World Data Ocean’s mission – are crucial to understanding and mitigating these evolving risks. Calibrated assessments of vessel traffic, security threats, and climate indicators can provide actionable intelligence for maritime operators and policymakers alike.
Looking ahead, the question remains: how will the escalating tensions in the Strait of Hormuz reshape global energy trade patterns? The increased costs and risks associated with this vital waterway are likely to accelerate the search for alternative supply sources and transportation routes. Longitudinal data analysis on maritime traffic patterns, security incidents, and geopolitical events will be critical to understanding the long-term consequences of this evolving situation. Will we see a permanent shift towards greater diversification of energy supply chains, or will the reliance on the Strait of Hormuz persist despite the growing risks? The answer will profoundly impact global energy security and the stability of the maritime sector for years to come.
The cost of sending a very large crude carrier through the Strait of Hormuz and back is now about $20 million, but the trade remains profitable because Middle Eastern producers are selling crude at steep discounts, TotalEnergies Chief Executive Patrick Pouyanne said on Monday.
Pouyanne said producers inside the Persian Gulf were selling crude at around $50 to $60 a barrel as they were keen to get their supplies to the market after six months of conflict. Brent futures, by comparison, were trading above $90 a barrel on Monday.
A VLCC can carry about 2 million barrels of oil, meaning the additional freight cost of moving through the Strait of Hormuz works out to roughly $10 a barrel, Pouyanne said.
TotalEnergies is one of the largest traders of oil from Iraq and Qatar, two countries that have continued moving crude through the Strait of Hormuz in recent weeks, according to Pouyanne.
The waterway carried about a fifth of global oil flows before the Iran war and was also a major route for LNG shipments. The route has been disrupted during the six months of conflict because of threats of bombing and mines, although a growing number of producers have continued moving cargoes through it.
The continued movement of crude through the strait has helped prevent oil prices from rising sharply beyond $100 a barrel, while also creating profitable opportunities for traders and shipowners willing to take on the higher transport costs.
Some cargoes are shipped directly to refineries, while others are first moved to ships in the Gulf of Oman before continuing to their final destinations.
Difference Between Crude And Fuel Markets
Pouyanne said the situation is different for refined petroleum products such as gasoline and diesel.
Smaller product tankers carry less cargo, increasing the transport cost through Hormuz to as much as $50 a barrel, he said. At that level, moving refined products through the waterway is not commercially viable.
This has created a difference between the crude and fuel markets. Crude prices have remained bearish, partly because oil is still moving through Hormuz, while refined fuel markets remain tight.
Gasoline and diesel prices have also risen following Ukrainian attacks on Russian refineries, Pouyanne said. The limited movement of refined products through Hormuz has added to the shortage of oil products.
Iran Blacklists 45 Tankers
Iranian authorities have blacklisted 45 tankers that they said had broken its rules for crossing the Strait of Hormuz. The vessels could face fines, detention and cargo confiscation.
The announcement was made in an X post by the Persian Gulf Strait Authority, a new Iranian body established to manage the waterway.
Iran also said it would take action against vessels transferring cargoes with the blacklisted ships.
The list includes VLCCs, LNG tankers, LPG tankers and clean product vessels, among others.
TotalEnergies Looks at Alternative Export Routes
Despite the profitability of moving discounted crude through the Strait of Hormuz, TotalEnergies is continuing to invest in alternative export routes.
Pouyanne said the company plans to become a partner in a proposed pipeline linking Baghdad to Syria. It also plans to invest in doubling the capacity of the Fujairah pipeline in the United Arab Emirates.
The existing Abu Dhabi Crude Oil Pipeline, also known as the Habshan-Fujairah pipeline, can carry up to 1.8 million barrels of oil per day from Abu Dhabi’s oil fields to Fujairah on the UAE’s eastern coast, allowing exports through the Gulf of Oman without passing through the Strait of Hormuz.
References: Bloomberg, Reuters
Read on the original site
Open the publisher's page for the full experience