Ship fuel prices skyrocket
Marine fuel prices are rising rapidly due to the war in the Middle East. Bunker fuels such as IFO380 and VLSFO have become significantly more expensive in a short period of time. The rising costs are causing concern across the global shipping industry and may ultimately affect transport costs and supply chains.
A tonne of the widely used medium-heavy fuel oil IFO380 currently costs an average of $784.20, according to the so-called global average bunker price. This represents a sharp increase compared with the situation at the end of February, when the price was around $467.50 per tonne.
The rise came immediately after the escalation of the conflict in the Middle East. On the Monday following the first bombing of Iran, the price had already climbed to $509.50. Since then, prices have continued to surge, and the market is expected to remain volatile for the time being.
Prices vary widely by bunker port
Marine fuel prices vary by region. In the port of Rotterdam, prices are close to the global average. In other major bunker ports, costs are even higher. In Singapore, one of the main fuel hubs for international shipping, the price has now risen above $1,000 per tonne.
For shipping companies and logistics providers, this means a significant increase in operational costs. Fuel is, after all, a major component of a vessel’s total operating costs. Higher bunker prices can therefore indirectly lead to higher freight rates and additional surcharges throughout the logistics chain. You can read more about the role of sea freight in international logistics on our blog.
Low-sulphur fuel prices also rising fast
Not only traditional heavy fuel oil is becoming more expensive. VLSFO, the low-sulphur variant widely used since stricter environmental regulations were introduced for international shipping, is also rising sharply in price.
Just before the outbreak of the conflict, shipping companies were paying an average of $576 per tonne for VLSFO. Meanwhile, the global average price has risen to around $841.50 per tonne, representing an increase of more than 45 per cent in a short period of time.
Rising prices affect the entire logistics chain — from shipping companies and freight forwarders to the importers and exporters who ultimately depend on stable transport costs.
Shipping fuel prices increasingly sensitive to crises
This is not the first time that geopolitical tensions have strongly affected marine fuel prices. A similar shock occurred in February 2022 after Russia’s invasion of Ukraine. At that time, the price of a tonne of IFO380 rose to around $750.
The price of low-sulphur fuel increased even further. VLSFO temporarily climbed above $1,100 per tonne. Later that year, the market stabilised again and prices returned to more normal levels.
Historically, the bunker fuel market reacts quickly to geopolitical events, as oil prices and energy supply are closely linked to international tensions.
During the first months of the COVID-19 pandemic, marine fuel prices reached historically low levels. A tonne of IFO380 then cost around $150, while VLSFO was priced at less than $250 per tonne.
Prices during pandemic just historically low
The current situation contrasts sharply with the early days of the COVID-19 pandemic. At that time, much of international shipping temporarily came to a standstill. Cruise ships were laid up and global trade slowed sharply.
This sudden drop in fuel demand caused bunker prices to fall dramatically. IFO380 was then available for around $150 per tonne, while VLSFO cost less than $250 per tonne.
The current surge shows how strongly marine fuel prices depend on geopolitical developments and global trade flows. As long as tensions in the Middle East persist, prices are likely to remain high or even rise further.
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