Oil tanker freight reaches a sixty-year high: shipping oil from the US to China is more expensive than launching a rocket!

The global tanker market is experiencing an unprecedented freight storm. The Iran conflict has reshaped the Middle Eastern crude oil trade landscape, compounded by a severe shortage of fleet supply. VLCC freight rates have soared to their highest levels in sixty years—a single shipment of crude from the US to China now costs as much as $80 million, surpassing the launch cost of a SpaceX Falcon 9 rocket.

According to Bloomberg on October 9th, a tanker charter from the US this week translated to shipping costs of $41 per barrel, compared to an average of just $4.50 per barrel on the same route last year. This cost accounts for about 45% of West Texas Intermediate crude futures prices.

Shipbroker Gibson pointed out, the cost of this voyage is about $80 million, higher than the standard $74 million quoted for a SpaceX Falcon 9 launch. The same amount earlier this year could have bought an equivalent tanker. Shipbroker SSY noted that, even after adjusting for inflation, current freight rates are the highest since the advent of supertankers in the 1960s, surpassing even the "Tanker War" period during the Iran–Iraq War in the 1980s.

Meanwhile, the surging freight costs are being passed along the entire energy supply chain. European refiner Repsol saw its refining profit margin at $36 per barrel in Q3, which has, according to RBC analysts, shrunk to around $15 in October, partly due to steep tanker costs. Russell Hardy, CEO of the world's largest independent oil trader Vitol Group, said at a conference this week, "There is simply not enough shipping capacity on the market; we're seeing almost parabolic price rises."

Supply Gap: Chain Reaction in the Strait of Hormuz

The root cause of this freight surge is a structural shipping shortage triggered by the Iran War.

After the outbreak of the Iran War, transit risks through the Strait of Hormuz soared, prompting many shipowners to divert routes, drastically compressing effective global shipping capacity. As Middle Eastern crude exports gradually recover, industry executives estimate that oil transit through the Strait of Hormuz has now risen back to about 80% of pre-war levels, but trade flows are far more complicated. Middle Eastern oil producers increasingly rely on "ship-to-ship" transfers at sea, each transfer adding roughly an extra week to the voyage, further stretching the turnover of the global tanker fleet.

Repeated trade flow disruptions have exacerbated the predicament. The Hormuz passage was once stalled, with many tankers sailing empty between the Middle East and other regions searching for cargo. Now, with Gulf transport restored, ships must be redeployed—a process that often takes weeks. Meanwhile, Iranian crude exports to China have actually ceased, forcing Chinese buyers to switch sources and pushing up mainstream market tanker demand. In addition, Iranian attacks on merchant ships have put some tankers into dry dock for repairs, while others are circumventing Africa to avoid Houthi threats, adding thousands of extra miles to their routes.

Lauren Gallinari, director of business intelligence at shipbroker MJLF & Associates, stated, "We've certainly seen extreme freight markets before, but the speed, magnitude, and breadth of this round are remarkable."

Freight Figures: Shipping Costs Per Barrel Approach Half the Crude Price

The absolute value of freight rates has reached levels that make the market difficult to price.

According to Bloomberg data, chartering a VLCC to ship US crude to Asia now costs $77 million, while the 2025 average is just $9.2 million. Vitol's Hardy commented that volatility is now so extreme that traders can hardly estimate shipping costs within a margin of a few dollars.

Clarksons Securities analysts wrote, "With almost no additional capacity available, freight rates are increasingly determined by how much the charterer can withstand."

The impact goes far beyond VLCCs. Suezmax tankers are earning over $680,000 in daily returns, about five times higher than at the start of this month; freight rates for ships carrying propane and other gases are near record highs, more than triple levels at the end of last year.

The Wallstreet Insights article noted, the shipping composite index also verifies the breadth of this boom. According to Clarksons data cited by Shipping Circles, the ClarkSea Index hit a record high for four consecutive weeks as of October 2, reaching $75,658 per day, surging 73% in a single month, 66% year-to-date, and 84% higher than the 10-year average. Significantly, this round of firmness is not just driven by tankers—LNG carriers, dry bulkers, containerships, and car carriers are all simultaneously operating at "exceptional or robust" levels.

Downstream Transmission: Refining Profits Under Pressure, Inflation Risks Climbing

Soaring freight rates are accelerating transmission from midstream to downstream, rapidly eroding refiners' profit margins.

Shell said in a trading update this week that parts of its Q3 results will be affected by "rising variable costs of long-term shipping charters under current macroeconomic conditions," echoing similar disclosures earlier this year.

Hedge fund Svelland Capital founder Tor Svelland warned, "The market is climbing steadily, but at some tipping point, refiners will easily choose to cut output. When transport costs rise from 5% to 50% of cargo value, trade flows will stop."

The Wallstreet Insights article mentioned that, on a political level, the Trump administration faced urgent inflation-suppression headwinds ahead of mid-term elections as rising diesel prices hit the US industrial and agricultural sectors. The US oil industry has pressed the government to encourage increased diesel exports to ease the global shortage. Morrow also said he expects China to gradually boost refined oil exports, calling it the "key hub" for resolving the global refining shortfall.

Currently, the market's central question has shifted from "How high can freight rates go?" to: How much more strain can the global crude trade system withstand before surging freight rates fully erode refining margins?

Asset Revaluation: Second-Hand Ship Prices Rarely Surpass New Builds

The shipping asset market's valuation logic is being reshaped amid skyrocketing freight rates.

According to Clarkson Research Services, second-hand tanker prices have surged to a record $240 million per vessel, more than 60% higher than at the end of last year. The Wallstreet Insights article reported, citing Clarksons data, that a 15-year-old VLCC now averages around $160 million—up 44% from three months ago, and above the $131 million price of a newbuild—an occurrence virtually unheard of in the industry. Meanwhile, captains willing to sail through the Strait of Hormuz now command monthly salaries of up to $100,000, and VLCC daily charter rates for Middle Eastern routes momentarily hit a record $1.3 million.

The total market capitalization of the world's largest listed shipping companies has exceeded $70 billion, a new record. Middle Eastern oil producers such as Iraq, the UAE, and Kuwait have all stepped in recently to buy tankers, attempting to secure shipping capacity and avoid price swings. Shippers in West Africa and South America have begun splitting cargoes originally transported by VLCCs into two smaller Suezmax ships to cope with tight capacity.