Pakistan could face another increase in fuel costs in the coming weeks as the price of transporting crude oil across major shipping routes has escalated by 258 percent.
While markets have largely focused on crude oil futures, the physical oil market is facing another major pressure point: shipping.
The cost of transporting 2 million barrels of crude oil from West Africa to China has climbed to around $23.59 per barrel, according to the latest market data.
That is a massive increase from $6.50 per barrel in July. The shipping cost has therefore jumped by about 258 percent in just two months.
This matters because the price consumers ultimately pay for fuel is influenced by more than the headline crude oil price. Transportation, freight, insurance and other supply-chain costs can also raise the cost of bringing petroleum products to markets.
Countries like Pakistan rely heavily on imported crude oil and petroleum products and a prolonged increase in international shipping costs could add pressure to the domestic fuel bill.
The timing is particularly important as Pakistan has already been dealing with higher fuel prices and rising international energy-market risks. As of September 18, petrol sits close to Rs. 390 per litre while diesel remains above Rs. 400 per litre.
A sharp rise in freight costs can also make oil imports more expensive even if crude prices themselves do not increase at the same pace.
For Pakistan, that could mean the next fuel-price review will depend not only on where crude oil trades, but also on how expensive it becomes to bring that oil home.
Note
Ukraine a short while ago attacked Moscow with over 1,600 drones which hit the city’s main oil refinery. This comes only days after President Trump said Ukraine and Russia agreed not to hit energy targets.
The site that was struck supplies more than 33 percent of the Moscow region’s supply.
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