According to WPB, the cost of moving an oil cargo through the Strait of Hormuz has climbed to as much as $10 million to $20 million in some cases, providing one of the clearest indications yet of how the conflict is transforming maritime risk into a direct transportation cost for Gulf energy trade.
The new figures were presented by Paul Bradshaw, a director at Emirates National Oil Company (ENOC), during the APPEC conference. His assessment provides specific operational numbers for costs that have previously been discussed largely through changing insurance rates, vessel availability and broader shipping risk.
Cargo insurance can now reach around 5% to 6% of cargo value in some cases, potentially adding approximately $10 million to the insurance cost of a shipment. Additional war-risk premiums, which Bradshaw said were effectively zero before the war, have risen to as much as 10% of cargo value in some cases.
Taken together, Bradshaw estimated that the additional cost associated with moving cargo through the Strait of Hormuz can reach approximately $10 million to $20 million.
The figures should not be interpreted as a universal tariff applied to every tanker or every voyage through Hormuz. Actual costs depend on the vessel, cargo value, insurance arrangement, route, timing and the risk assessment applied to a particular voyage. Nevertheless, they illustrate how dramatically the economics of Gulf shipping have changed.
The pressure is no longer limited to insurance prices. ENOC says only a limited number of shipowners are now prepared to accept the risks associated with operating in the region. A smaller pool of willing vessels can create an additional cost even before insurance is calculated, because charterers must compete for the tonnage that remains available.
That scarcity also affects scheduling. When fewer owners accept Gulf voyages, securing a vessel for a specific loading window becomes more difficult, increasing the possibility of delays, replacement of nominated vessels or changes to loading plans.
Recent traffic data reinforce the scale of the disruption. Only six commodity vessels were recorded passing through the Strait of Hormuz on September 8, down from nine a day earlier and below the preceding 10-day average of 12 vessels.
Before the conflict severely disrupted the waterway, Hormuz was one of the world’s busiest commercial energy corridors. The current reduction in traffic means that the issue is no longer simply whether the Strait remains technically navigable. The commercial question is whether a shipowner is willing to accept a voyage and, if so, at what price and under what insurance conditions.
The increase in war-risk costs changes that calculation significantly.
War-risk insurance is designed to cover risks that conventional marine policies may exclude or restrict during armed conflict. When the probability of attack, detention, mine damage or other conflict-related losses increases, insurers can demand an additional premium before a vessel enters the designated high-risk area.
During relatively stable periods, that additional charge can be small. Under the current conditions surrounding Hormuz, however, the cost has become large enough to materially change the economics of an entire cargo.
The effect becomes even more significant because insurance is only one part of the additional expense. Shipowners can demand higher charter rates for entering the region, voyages can take longer when alternative routes or operational precautions are required, and waiting periods can increase fuel consumption and other vessel costs.
ENOC also indicated that some market participants have considered moving cargoes without full insurance coverage because the cost of obtaining protection has become so high. This should be treated as a market observation rather than evidence that uninsured voyages have become standard practice across the industry.
The fact that such an option is being considered at all, however, demonstrates the severity of the cost problem. When the price of insurance approaches a level at which commercial operators begin comparing the cost of coverage with the financial risk of sailing without complete protection, conventional shipping economics are being fundamentally altered.
The disruption is also changing who manages the voyages. Some national oil companies have taken greater control of their shipping operations, allowing them to manage vessels, routes and costs more directly during wartime conditions.
This approach can provide large producers with greater operational control, but it is not equally available to all market participants. Smaller traders and independent exporters often depend much more heavily on third-party shipowners, charterers and insurers.
They can therefore be more exposed when the number of willing vessels contracts.
The consequences also extend beyond the Persian Gulf. When shipowners avoid high-risk areas, ships can be repositioned toward other routes. Cargoes may also travel through longer and more complicated alternatives, changing vessel availability and transportation economics in markets far from Hormuz.
For the bitumen industry, this is where the latest figures become particularly important.
The $10 million to $20 million estimate should not be directly applied to a typical bitumen cargo. The figures were provided in the context of oil-vessel transit and cargo insurance, while bitumen cargoes can have very different values, vessel sizes and commercial structures from crude-oil shipments.
A large crude tanker carrying a high-value cargo has a completely different insurance exposure from a smaller specialized vessel carrying bulk bitumen. Applying the same dollar cost or percentage mechanically to every bitumen shipment would therefore be misleading.
The transmission mechanism to bitumen is nevertheless direct.
Bulk bitumen relies on a relatively specialized fleet capable of maintaining the product at elevated temperatures during transportation. The number of suitable vessels is already much smaller than the global crude tanker fleet, which means the withdrawal of even a limited number of owners from Gulf employment can have a disproportionate effect on available capacity.
If a bitumen vessel owner accepts a voyage involving Hormuz, the additional risk still has to be priced somewhere. It may appear through higher charter rates, additional insurance, stricter contractual terms, higher security costs or compensation for the possibility of delay and diversion.
For a buyer, these costs ultimately affect the final delivered price even if the FOB price of the bitumen itself remains unchanged.
This distinction has become increasingly important in Gulf bitumen trading. A reduction of several dollars per metric ton in an FOB quotation can quickly become irrelevant if the cost of securing a suitable vessel increases much more sharply.
The reliability of the loading window is another concern. Bitumen transactions normally specify a period during which the vessel must arrive and the cargo must be ready for loading. If shipowners become reluctant to enter the Gulf or insurers change their conditions shortly before a voyage, keeping that schedule becomes more difficult.
A delayed or cancelled vessel can create additional storage requirements at the loading terminal, increase heating costs and potentially force the exporter or buyer to secure replacement tonnage at short notice.
For bulk bitumen, the problem is magnified by the specialized nature of the vessel fleet. Replacing a conventional petroleum tanker may already be expensive in a tight shipping market, but replacing a vessel equipped to carry heated bitumen can be even more difficult.
Packaged bitumen faces a different exposure. Drums, jumbo bags and containerized material do not depend on dedicated heated bitumen tankers, but they remain exposed to changes in liner services, port calls, container availability, insurance and regional shipping schedules.
The latest ENOC figures therefore should not be converted into a single new freight surcharge for the global bitumen market. Instead, they provide evidence that the underlying cost of accepting Gulf maritime risk has moved to an unusually high level.
This is particularly important for destinations such as India, East Africa and Southeast Asia, where the delivered economics of Gulf-origin bitumen can be highly sensitive to transportation costs.
A supplier may still have sufficient bitumen in storage and a competitive FOB offer, but neither guarantees a competitive delivered cargo if the vessel required to move the product is unavailable or demands a substantially higher rate.
The effect can also differ significantly between origins. Cargoes loaded inside the Persian Gulf must account for Hormuz transit exposure, while products already positioned at ports outside the Strait may face a different insurance and vessel-acceptance profile.
This difference can gradually influence the commercial value of alternative export gateways. Infrastructure in Fujairah and other locations outside Hormuz becomes more valuable when the cost of crossing the Strait is measured not only in additional sailing risk but potentially in millions of dollars of additional insurance and transportation expense for large oil cargoes.
For bitumen, however, alternative ports still need suitable storage and handling infrastructure before they can offer the same flexibility. A crude pipeline or conventional petroleum terminal does not automatically create a viable bulk-bitumen export route.
The latest numbers also demonstrate why the impact of the Hormuz crisis cannot be assessed solely through crude prices. Brent can rise or fall from one session to another, but the cost of executing a specific cargo depends on whether a suitable vessel is available, whether insurance can be obtained and what premium the owner requires to accept the voyage.
For bitumen buyers, this makes delivered cost increasingly important relative to the headline FOB price.
The market should therefore watch several indicators alongside product prices: the number of shipowners willing to accept Gulf voyages, additional war-risk premiums, actual charter indications, vessel availability, reliability of loading windows and the number of commercial vessels continuing to transit Hormuz.
The latest ENOC figures provide a concrete measure of how far the shipping environment has moved from normal conditions. Additional costs of $10 million to $20 million on some oil voyages and war-risk premiums reaching as much as 10% of cargo value cannot be treated as marginal adjustments to transportation economics.
They represent a fundamental repricing of maritime risk.
For the bitumen industry, the exact dollar figure will be different because cargo sizes, vessel types and values differ substantially from crude oil. The commercial direction, however, is the same: fewer willing shipowners, more expensive risk coverage and less predictable voyages increase the cost and complexity of moving Gulf cargoes.
The most important development is therefore not that every bitumen shipment will suddenly cost millions of dollars more. It is that the price attached to crossing Hormuz has reached levels high enough to influence whether some oil voyages remain commercially viable at all.
As long as that condition persists, Gulf bitumen suppliers and buyers will need to treat shipping capability, insurance and delivery reliability as central components of the transaction rather than secondary costs added after the product price has been agreed.
By WPB
News, Bitumen, Strait of Hormuz, War-Risk Insurance, ENOC, Shipping, Freight, Tankers, Gulf, Marine Insurance, Vessel Availability, Asphalt
