Shipping industry fears fuel shortages as Iran war squeezes bunker fuel supply
Summary
The war involving Iran has closed the Strait of Hormuz, cutting off supplies of bunker fuel, a heavy oil used to power most cargo ships. This shortage is causing fuel prices to rise, especially in Asia, leading shipping companies to slow down ships and plan for alternative fuels. The fuel shortage is expected to increase shipping costs, raise prices for consumers, and affect businesses around the world.Key Facts
- Bunker fuel is a thick, heavy oil used to power about 80% of goods shipped by sea globally.
- The closure of the Strait of Hormuz due to the Iran war has blocked key sources of bunker fuel, especially from Middle Eastern countries like Iraq and Kuwait.
- Singapore is the world's largest hub for refueling ships with bunker fuel, but its reserves are running low and prices have risen sharply.
- Before the conflict, bunker fuel cost around $500 per metric ton in Singapore; prices have increased to over $800 per metric ton.
- Shipping companies are reducing vessel speeds and changing schedules to save fuel in the short term.
- Some companies may struggle to survive the increased fuel costs caused by the shortage.
- Asia depends heavily on Middle Eastern oil and has started using more coal, buying more Russian crude oil, and considering nuclear power to deal with energy problems.
- More than half of global seaborne trade passed through Asian ports in 2024, so disruptions there affect supply chains worldwide.
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