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Shipping a crude cargo through Hormuz costs $20 million, TotalEnergies CEO says
TotalEnergies CEO says shipping crude through the Strait of Hormuz costs $20 million per cargo, a freight premium that producers are absorbing through wider discounts on Middle Eastern crude.
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TotalEnergies CEO Patrick Pouyanne said Tuesday that shipping a crude cargo through the Strait of Hormuz runs about $20 million, a number that highlights how the world's most important oil chokepoint still carries a hefty freight premium even with global prices below $100 a barrel.
The figure emerged during a conference presentation in which Pouyanne described the cost structure of moving oil from the Middle East to refiners in Asia and Europe. For a standard Very Large Crude Carrier holding 2 million barrels, the $20 million freight bill works out to roughly $10 a barrel, more than double the typical spot rate for a VLCC sailing from the Persian Gulf to China.
That spread is what traders call the Hormuz risk premium. It covers war-risk insurance, longer transit times due to naval escorts, and the cost of rerouting around the Arabian Peninsula if the strait closes. Most of the premium flows to shipowners and insurers, not producers.