Material Insights · Understanding the Material World

Crude oil and Tankers, barges and fuel trucks

About three-quarters of the world's oil travels by sea, so tanker capacity, chokepoints and sanctions decide how much a barrel costs on arrival. When routes lengthen or close, freight can rise from about USD 2 a barrel to several times that within weeks.

Crude oil (energy) and Tankers, barges and fuel trucks (energy): 6 relationships.

How they are linked

1. Carries most oil

Physical flow · Strong · Crude oil → Tankers, barges and fuel trucks

Oil is produced far from where it is refined and burned, and ships are the cheapest way to move liquids over long distances.

  • about 76% of world oil supply that travelled by sea, first half of 2025
  • 79.8 of 104.4 mb/d seaborne versus total liquids supply, first half of 2025

Pipelines, rail cars, barges and road tankers handle the rest, mostly inside continents and for the last mile. Because so little oil is consumed where it is produced, demand for tankers is set by both the volume shipped and the distance each cargo travels.

Sources: US Energy Information Administration

2. Hormuz and Red Sea

Shared risk · Strong · Both ways

A few narrow straits carry a large share of seaborne oil, so any closure strands cargoes and forces ships onto much longer routes.

  • 20.9 mb/d oil through the Strait of Hormuz, first half of 2025
  • about 25% of maritime traded oil passing Hormuz, first half of 2025
  • 84% of Hormuz crude and condensate going to Asia, 2024

Bab el-Mandeb flows fell from 9.3 mb/d in 2023 to 4.1 mb/d in 2024 as attacks on Red Sea shipping sent tankers round the Cape of Good Hope, lengthening voyages. The 2026 war around Hormuz was a far larger shock: by mid-October 2026 the IEA put the cost of moving crude from the Gulf to Asia on a large tanker at more than five times its pre-war level, even as Gulf exporters used ship-to-ship transfers and bypass routes to restore exports to over 75% of pre-war levels in September.

Sources: US Energy Information Administration; US Energy Information Administration; Hydrocarbon Engineering

3. Freight in the delivered price

Cost and price · Asymmetric · Tanker rates → delivered crude cost

Buyers pay for the barrel plus the freight to bring it home, so a spike in tanker rates lifts the landed cost of crude even when the benchmark price is steady.

  • USD 80,000 to 100,000 normal VLCC day rate, Gulf to Asia
  • about USD 2/bbl typical freight, Gulf to China at average rates
  • about USD 9/bbl freight at March 2026 rates of USD 420,000 to 440,000 a day

In normal markets freight is a small part of a barrel's cost, but it becomes material when routes close or sanctions shrink the usable fleet. The burden falls hardest on distant importers in Asia, which take 84% of Hormuz crude and condensate.

Sources: US Energy Information Administration; Thunder Said Energy; Hydrocarbon Engineering

4. Fuel for the fleet

Physical flow · Weak · Crude oil → Tankers, barges and fuel trucks

Ships and road tankers burn fuel oil, marine gasoil and diesel refined from crude, so the fleet is also a small oil consumer.

  • 600 to 700 b/d fuel burned by a VLCC under way
  • about 1.6 mb/d hydrocarbons used by the world tanker fleet

A tanker's fuel bill is one of its largest running costs, so owners slow down when fuel is dear and speed up when freight rates are high. Slow steaming also absorbs spare fleet capacity, which is one reason rates react sharply when demand for ships jumps.

Sources: Thunder Said Energy

5. Sanctions and the shadow fleet

Policy · Rising · Sanctions → tanker supply and trade routes

Price caps and sanctions on Russian, Iranian and Venezuelan oil have created a parallel fleet of older tankers with opaque owners and insurers, which splits the market in two.

  • 72% of tankers exporting Russian crude that were shadow fleet, February 2026
  • 58% and 20% China's and India's shares of shadow fleet crude volumes, February 2026

Ships tied up in sanctioned trades are unavailable to mainstream charterers, which tightens the regular fleet and adds to freight. The shadow fleet also carries higher spill and insurance risk, and new designations by Western governments can strand a buyer's cargo at short notice.

Sources: KSE Institute

6. Price link: freight demand

Cost and price · Moderate · Both ways

Tanker rates rise when more oil is shipped over longer routes, which tends to happen when supply disruptions also lift crude prices.

  • 0.15 monthly change correlation
  • 0.51 12-month change correlation
  • 3 months lag at which the link is strongest

The site's freight proxy is a broad US deep-sea freight index rather than a tanker rate, so the monthly link is slight while yearly moves correlate more clearly. Episodes such as the Red Sea diversions and the 2026 Hormuz war show the stronger link that a pure tanker index would capture.

Sources: Material Insights (World Bank, FRED, IMF data)

For investors

Key learnings

  1. Tanker earnings depend on distance as much as volume, so route closures and sanctions that lengthen voyages lift rates even when oil demand is flat.
  2. Freight is normally about USD 2 a barrel from the Gulf to China but rose to several times that in 2026, so delivered crude cost can diverge sharply from Brent.
  3. The shadow fleet splits tanker supply in two, and changes in sanctions enforcement can loosen or tighten the mainstream fleet quickly.

What to track

  • VLCC Middle East Gulf to China day rate (TD3C): A sustained rise signals longer routes or a shortage of usable ships, raising landed crude costs for Asian refiners (Daily · Baltic Exchange, shipbroker reports)
  • Tanker transits through Hormuz and Bab el-Mandeb: Falling transits warn of rerouting, longer voyages and supply gaps (Weekly · EIA, IEA Oil Market Report, ship tracking)
  • Sanctioned and shadow fleet tanker counts: More designations shrink the usable fleet or strand discounted cargoes (Monthly · KSE Institute shadow fleet tracker, OFAC, EU)

For policymakers

Key learnings

  1. India sits on the routes most exposed to Gulf chokepoints: China, India, Japan and South Korea together took 69% of Hormuz crude and condensate in 2024.
  2. A freight shock raises the import bill even without a crude price rise, so energy security planning needs to cover shipping capacity and insurance as well as barrels.
  3. Buying discounted Russian crude has tied part of India's supply to shadow fleet tankers, which carry higher sanctions, insurance and spill risk.

What to track

  • Freight and insurance in India's crude import cost: A rising share flags pressure on refiners, fuel prices and the current account (Monthly · PPAC, refiner disclosures)
  • India's crude import sources by route: Greater dependence on Hormuz or sanctioned trades raises exposure to disruption (Monthly · PPAC, ship tracking data)
  • Western sanctions designations of tankers: New listings can strand cargoes bound for Indian ports (As announced · OFAC, EU, UK)

India

India imports over 85% of its crude oil, is one of the four Asian buyers that took 69% of Hormuz crude in 2024, and took 20% of Russian shadow fleet crude volumes in February 2026, so tanker rates and sanctions bear directly on its fuel costs.

Sources

  1. World Oil Transit Chokepoints, US Energy Information Administration (2026)
  2. Today in Energy: Strait of Hormuz oil and LNG flows, US Energy Information Administration (2025)
  3. Oil tankers: the economics, Thunder Said Energy (2026)
  4. Middle East crude exports have risen strongly, but oil product markets remain very tight (IEA), Hydrocarbon Engineering (2026)
  5. Share of Russian-flagged shadow tankers jumps from 3% to 21% in nine months, KSE Institute (2026)
  6. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  7. World faces steeper oil, gas declines; import-heavy India vulnerable: IEA, Down To Earth (2025)