Ship Fuel Costs up $393 Million/Day as US, Israel Strikes on Iran Spur Oil Prices Higher

Shipping companies are spending an extra €340 million ($394 million)/day in additional fuel costs due to the ongoing conflict between the U.S., Israel and Iran, according to the European Federation for Transport and Environment (T&E) in a report on March 27.

The organization has estimated global shipping companies have spent an approximate total of €4.6 billion in extra fuel costs since the start of the U.S.-Israel-Iran conflict in the Middle East on Feb. 28. The shipping industry is directly exposed to fuel price volatility and supply disruptions since 99% of the global fleet runs on fossil fuels. Efficiency measures, electrification and e-fuels would reduce the industry’s exposure to price fluctuations, according to the T&E report.

“Chaos in the Strait of Hormuz is putting global maritime trade under the spotlight,” said Eloi Nordé, shipping policy officer at T&E. “But it’s on the oil markets where its impact will be felt the most. The war is costing the industry millions every day.”

“Some governments and parts of the industry have spent the last year bashing green maritime measures as being too expensive, yet those costs pale in comparison to this super-disruption. If anything, this crisis should be the catalyst for more investment in European e-fuels and greater uptake of energy efficiency measures to avoid fossil fuel shocks in the future,” he added.

The cost gap between marine gas oil (MGO) and e-fuels has shrunk to near parity in some ports, according to the report. The volatility of fossil fuel markets offsets much of the structural cost disadvantage of clean fuels.

MGO bunker prices in the Port of Rotterdam have jumped higher by $724/metric ton to $1,448/mt, according to OPIS pricing data between Feb. 27, the day before the war started and March 31.

Reporting by Stacy Maphula, smaphula@opisnet.com; Editing by Rob Sheridan, rsheridan@opisnet.com