Oil producers, traders and refiners are preparing for a war between the United States and Iran that runs for years rather than months — and for the freight and insurance costs that come with it, according to a market column carried by Hiru News on Sunday.
The assessment comes out of this year’s Asia Pacific Petroleum Conference (APPEC) in Singapore, where the Reuters columnist Clyde Russell reported a subdued mood and described the conflict as “a war of egos” in which neither Washington nor Tehran will accept anything short of visible victory.
One delegate told Russell: “We need a political settlement, but that will take regime change in Washington or Tehran.” The prevailing view at the conference, the column says, was that change in the United States is the likelier of the two — which points the industry towards November’s US midterm elections and, beyond them, to a war lasting into next year or longer.
The numbers behind the headline price
Brent and WTI are both above $100 a barrel. But the column’s central argument is that the futures price now understates what buyers actually pay, and the shipping numbers are where the war shows up hardest:
- The benchmark daily rate for a very large crude carrier from the Middle East to China has hit a record of almost $800,000, per Bloomberg data.
- Freight from the Persian Gulf to North Asia has reached $30 per barrel, against $6 before the war — a fivefold rise.
- Marine insurance is running at $2.50 per barrel, up from $0.05 — fifty times the pre-war rate.
- Russia’s ESPO blend has moved to a premium of roughly $20 a barrel over Brent as Chinese independent refiners run short of alternatives, with the US naval blockade of Iranian ports and the competition for Venezuelan crude closing two supply channels at once.
Longer routes tie up tankers for longer, tightening the pool of available vessels and pushing rates higher again. Gulf producers are having to discount their cargoes to move them at all, and those discounts — rather than the futures chart — have become what traders watch.
Refining is the tighter constraint
The squeeze is worse in fuels than in crude. Refineries have been running above normal rates to replace lost Middle Eastern and Russian production, without closing the gap.
“We’re still not running enough refining capacity to prevent those draws, and we keep eating into the surplus that exists around the world,” Vitol chief executive Russell Hardy told the conference.
What it means for Sri Lanka
Sri Lanka imports effectively all of its crude and refined fuel, and every one of these costs lands on the Ceylon Petroleum Corporation’s import bill. Freight and insurance are charged on top of the barrel price, so a cargo landed in Colombo today carries roughly $32.50 a barrel in shipping and cover that would have cost about $6.05 before the war — a difference that does not appear anywhere in the Brent quote.
The CPC said on Friday that pump prices would not change for now, and the Energy Minister has said no power cuts are expected in the coming months. Neither statement addresses how long those positions hold if landed costs stay at this level. Gulf states and Iran meet in Oman on Monday over transit arrangements in the Strait of Hormuz, with no signed deal expected.
A note on sourcing
The column is an Oilprice.com piece syndicated by Hiru News, drawing on reporting by Reuters and Bloomberg. Its figures are attributed to those outlets rather than independently gathered, and the originating reports could not be fetched directly. The forward-looking judgements — that the war runs for years, that the midterms are the pivot — are the columnist’s analysis, not established fact.
Not reported
No Sri Lankan outlet has yet put figures on what $100-plus crude and record freight rates are costing the CPC, what stock cover the corporation holds, or whether the Treasury is absorbing any part of the difference. That question has now been open on this story for a week.
