Transportation costs for crude oil passing through the Strait of Hormuz have surged to $20 million per very large crude carrier (VLCC), according to Patrick Pouyanne, CEO of French energy major TotalEnergies. The sharp rise reflects the substantial economic toll imposed by recent disruptions to maritime shipping in one of the world’s most strategically vital waterways.
Cost Breakdown and Market Implications
This figure covers a round-trip voyage from the Strait and translates to roughly $10 per barrel of crude oil — factoring in both elevated freight rates and significantly higher insurance premiums linked to transiting the narrow, high-risk passage. Despite these steep costs, TotalEnergies continues to find it economically viable to ship crude via the Strait, Reuters reported.
Pouyanne explained that the company is currently purchasing Gulf-origin crude — notably from producers like Iraq and Qatar — at prices between $50 and $60 per barrel. Producers in the region are offering steep discounts to secure buyers amid mounting logistical uncertainty. This pricing stands in stark contrast to benchmark Brent crude, trading above $90 per barrel, creating a healthy margin that absorbs much of the added transportation expense.
A Different Story for Refined Products
The picture is markedly less favorable for refined petroleum products. Due to smaller vessel capacities and disproportionately high transit costs — estimated at around $50 per barrel — shipping refined fuels through the Strait remains uneconomical. This dynamic is contributing to supply tightness in refined product markets and helping sustain elevated global prices for gasoline, diesel, and other distillates.
Push Toward Alternatives
Rising risk and cost have accelerated efforts to develop alternative export routes out of the Middle East. Pouyanne confirmed that TotalEnergies is advancing investments in parallel infrastructure, including the Baghdad-to-Syria pipeline and the expansion of the Habshan–Fujairah pipeline in the United Arab Emirates. The latter project aims to double its capacity from 1.8 million barrels per day, bolstering the UAE’s ability to export oil without relying on the Strait of Hormuz.
Historically, the Strait handled about one-fifth of global oil and liquefied natural gas (LNG) shipments. Though tensions have heightened risks, it remains a critical global energy artery — and TotalEnergies continues to utilize it for crude shipments where pricing and margins remain compelling.