Brent crude rose 2.7% to $116.24 a barrel on 23 October, Transport Topics reported7. Front-month Brent had settled 4% higher at just above $113 a barrel a day earlier8.
For an Indian refiner or importer, that headline price is only the first line of the delivered cost. The second line, freight, is now big enough to change which crude a refiner buys and who pays to move it1, 9.
Goldman Sachs put the global average crude freight rate above $20 a barrel, against $3 a year earlier, in research reported on 22 October. That is seven times the year-earlier level1, 2. It split the increase into five parts2. War-risk cover to cross the Strait of Hormuz accounts for $7 a barrel, ship-to-ship transfers outside the Persian Gulf $4, and higher marine fuel prices $41, 2. Inefficient tanker allocation and diversions add $3, and restrictions on the Iranian tanker fleet $21, 2.
The International Energy Agency is blunter about the Gulf to Asia route. Middle East Gulf to Asia crude freight was above $37 a barrel by mid-October, more than five times the pre-war level, it said3. On a 2 million barrel very large crude carrier (VLCC) cargo, that is more than $74 million of freight, against less than $15 million before the conflict10.
Two lines on the invoice
Most crude benchmarks are priced free on board, which means the buyer pays for the voyage2. Indian Oil, the country's largest refiner, planned to buy about 47% of its crude imports from Middle Eastern producers under annual deals on a free-on-board basis in the year to March 20279. It now plans a slight cut in those volumes for 2027/289. Some producers have begun offering crude on a delivered basis and absorbing part of the freight to hold on to buyers, according to the same report9.
The per-tonne numbers show what the buyer carries. Platts assessed the VLCC rate from the Persian Gulf to west coast India at $95.83 a tonne on 19 October, against $19.15 a tonne on 27 February, for a 265,000 tonne cargo4.
The US route has seen an even bigger jump. The US Gulf Coast to China rate touched a record $79.6 million earlier in October11. It was almost $60 million on 22 October, against an average below $8 million in the five years before the war, Baltic Exchange figures cited by Transport Topics show11. Valero's head of oil trading, Randy Hawkins, said refiners paid $30 to $35 a barrel to move crude from the Gulf Coast to Asia, as much as seven times last year's cost11.
Who absorbs the freight
Part of the freight bill is now showing up in the crude price instead. Goldman said producers serving distant markets may have to discount more to keep buyers1. US grades show the pattern. Export Permian crude traded 25 cents above futures at Magellan East Houston on 21 October, down from more than $3 six weeks earlier11. Mars crude's premium fell to $6 from $17.50 in late March11.
Refiners that cannot pass the cost on absorb it. Asian refiners processing Middle East crude ran at negative margins in September as delivered costs rose, the IEA said3. Goldman makes the same point: refiners far from their crude "would have to either pass higher freight costs on to final consumers or accept lower net refinery margins"1.
In India, the pump has not taken the strain. Retail diesel prices have stayed largely unchanged despite higher international prices, Kpler's Sumit Ritolia said, which has shielded consumers and limited demand destruction12. The import bill still rose 46.3% to $90.6 billion in April to September, on volumes that were almost flat at 122.7 million tonnes against 121.8 million tonnes a year earlier13.
Indian refiners have been running above 100% utilisation and earning strong diesel export margins, which Kpler says will cushion the higher import bill but not offset it12. Aviation turbine fuel shows the other path. Domestic ATF prices rose ₹16 a litre from 1 October to about ₹137, 46.2% higher than a year earlier, and Air India, Air India Express and Akasa Air added fuel surcharges14. Goldman expects high freight to keep supporting refined product prices, and so the diesel and other fuels refiners sell, while squeezing their margins2.
Freight is not only going up
The spot market has cooled at the edges. Fearnleys reported VLCC rates shedding WS 100 to 150 points in the week to 21 October5. Goldman said global freight rates had fallen slightly in recent days, probably as the risk premium eased, though the average is still seven times last year's level2.
That easing comes off records. The IEA said tanker rates hit historic highs in September and kept climbing into October10. Jefferies raised its 2027 VLCC earnings forecast to $65,000 a day from $60,000, citing trading inefficiencies, an ageing fleet and future stock rebuilding. It estimates 51% of crude tankers are at least 15 years old6. Arrow Research sees freight upside that could extend through the first quarter of 202715. Norden has warned the tanker market may be near its peak6.
What to watch
Three signals will decide whether freight keeps adding to India's delivered cost.
Tanker supply. US energy secretary Chris Wright said Washington would authorise sales of sanctioned tankers to approved investors who would refurbish the vessels15. The volume is disputed. Kpler estimates only 24 of about 160 OFAC-sanctioned VLCCs could return to mainstream trades, Braemar 19, and Arrow Research 22 tankers including 14 VLCCs15. BRS counts 148 US-sanctioned deepsea tankers, 2.5% of the global fleet4. Gibson Shipbrokers says 70% of OFAC-listed tankers are at least 20 years old4.
The war-risk premium. Goldman's $7 a barrel for Hormuz cover is the part to watch if strikes pause1, 2.
The rupee. The dollar was at 94.94 rupees on 23 October, 8.1% above a year earlier, so a dollar freight bill costs more in rupees than it did last October16. India's crude basket averaged $121.25 a barrel so far in October, against $65.08 a year earlier13.
Indian Oil's planned cut to 2027/28 term volumes reflects the uncertainty over Middle East supply9. On the retail side, Oxford Economics sees November as the last realistic window for a fuel price increase, before campaigning for early-2027 state elections17. It says a move could push inflation to 6.2% in the December quarter17.