The divergence between recovering supplies and persistently high transportation costs highlights how geopolitical disruptions can continue to affect energy markets even after physical crude flows improve.
Why are crude oil shipping costs still high?
Goldman Sachs has identified five factors behind the increase in crude freight costs: the risk premium associated with the Strait of Hormuz, ship-to-ship transfers outside the Gulf, higher ship fuel costs, tanker inefficiencies and rerouting, and the sidelining of Iran's fleet.
The Strait of Hormuz is a critical energy shipping route connecting Gulf oil producers with international markets. Security concerns and disruptions around the region can force shipping operators to take longer routes, adopt alternative transfer arrangements and charge more for transporting crude.
Goldman Sachs estimates that the Hormuz-related war risk premium adds $7 per barrel to freight costs. Ship-to-ship transfers outside the Gulf contribute another $4, while higher ship fuel costs add $4 per barrel. Tanker inefficiencies and rerouting account for $3, with Iran's sidelined fleet contributing a further $2.
Marine fuel prices have also risen sharply. Singapore marine fuel prices have increased from $428 to $919 per tonne, raising the cost of operating tankers.
Shipping a barrel of crude now costs more than $20. A year ago it was $3. Goldman Sachs splits the jump into 5 drivers: -Hormuz war risk premium: $7 -Ship to ship transfers outside the Gulf: $4 -Ship fuel: $4 -Tanker inefficiency and rerouting: $3 -Iran’s fleet sidelined: $2 Fuel alone adds $4 a barrel. That’s what happens when Singapore marine fuel goes from $428 to $919 a tonne. Goldman says Gulf producers selling to Asia may have to discount their crude and Asian refiners take the margin hit. Closer barrels, such as Brent and ESPO, gain. Someone always pays the freight bill. Someone else collects it. Do not miss my latest article Ship Fuel Doubled In 2026. Who Pays And Who Collects? https://t.co/3e6ltfEiZ9
— Jack Prandelli (@jackprandelli) October 21, 2026
Why does this matter for Indian oil companies?
India imports a substantial share of its crude oil requirements, making transportation costs an important component of its overall energy bill. The landed cost of crude includes not just the benchmark oil price but also freight, insurance and other expenses associated with delivering the oil to refineries.
Jefferies estimates that physical crude premiums have fallen 65% week-on-week to $9 per barrel as West Asian exports, excluding Iran, have rebounded. However, elevated freight rates are offsetting some of the benefit from lower premiums.
Higher landed crude costs can put pressure on refinery economics and increase the financial burden on oil marketing companies (OMCs), particularly when retail fuel prices do not adjust in line with input costs.
Jefferies estimates petrol and diesel marketing losses for OMCs at ₹28 and ₹34 per litre, respectively. These estimates highlight the potential strain on fuel retailers, although actual losses depend on crude procurement costs, product prices, inventory effects and government pricing decisions.
Will petrol and diesel prices rise?
Higher freight costs do not automatically translate into higher petrol and diesel prices. The impact depends on whether oil marketing companies absorb the additional costs, whether crude producers offer discounts, and how domestic fuel prices respond.
If transportation expenses remain elevated, OMCs could face sustained pressure on marketing margins. Any eventual increase in retail prices would also depend on government policy and the pricing decisions of fuel retailers.
The broader inflation implications extend beyond transport fuels. Higher energy costs can raise expenses for transportation, manufacturing and other energy-intensive sectors, potentially adding to inflationary pressures.
What about natural gas and Reliance Industries?
Energy costs remain elevated beyond crude oil. Jefferies reported that spot liquefied natural gas (LNG) prices rose 12% week-on-week to $29 per million British thermal units (MMBtu). With supply chains taking time to normalise and winter approaching, gas prices could remain under pressure.
However, the impact is not uniform across energy companies. Stronger petrochemical margins could support Reliance Industries' oil-to-chemicals profitability, even as elevated crude transportation costs weigh on parts of the energy supply chain.
For India, the key question is how quickly freight rates, crude premiums and fuel prices normalise. Until shipping routes and supply chains stabilise, recovering crude availability alone may not be enough to bring energy costs down.