According to Goldman Sachs Group, global oil transportation costs have surged approximately sevenfold over the past year due to the Middle East conflict, and they may remain elevated for the foreseeable future.
The average price for crude oil shipping has skyrocketed to more than $20 per barrel, compared to just $3 per barrel a year ago. This increase includes a $7 premium tied to heightened conflict risk in the Strait of Hormuz, along with $4 each from rising fuel costs and the impact of ship-to-ship transfer operations.
"Sustained higher freight rates present some upside risk for us," Goldman Sachs analysts said. "Additionally, there are risks such as intensified attacks on shipping, damage to oil infrastructure, and a persistently stronger geopolitical risk premium." Currently, the bank's baseline forecast for Brent crude is a decline to $90 per barrel by year-end.
Following the outbreak of hostilities between the United States and Iran, vessels in the Persian Gulf and surrounding waters came under attack, throwing the global shipping market into disarray. In the early days of the conflict, cargo volumes passing through the Persian Gulf plummeted.
Although conditions in the Strait of Hormuz have since improved somewhat, ships are transporting goods through the disputed waterway and then transferring them to larger tankers, which then deliver to processors. Goldman Sachs analysts noted that high crude oil shipping rates could "reduce refiners' overall demand for crude, as the actual landed cost of crude rises."
"Refiners may also seek closer suppliers, thereby altering established trading patterns," they said. At present, "as long as the Middle East conflict remains in its current state, crude oil freight rates will continue to stay elevated."
The analysts noted that nearly one in six tankers in the Persian Gulf and the Gulf of Oman is currently engaged in daily ship-to-ship cargo transfer operations.
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