Japan's Crude Imports Hit by Record-Breaking Freight Costs

Soaring freight costs are making Japan's crude imports the most expensive in the world. The cost of transporting oil has become a major driver of prices, with freight accounting for nearly a fifth of the cost of a single cargo.

The problem lies with Very Large Crude Carriers (VLCCs), which can move around 2 million barrels at once. Due to supply chain disruptions, these tankers are spending more time at sea and taking longer routes, increasing costs. For example, Indian buyers are now importing oil from Guyana and Brazil, committing ships to journeys of 30-40 days.

VLCCs waiting for ship-to-ship transfers in the Strait of Hormuz can spend up to 10 days in queues, tying up capacity that could otherwise serve the wider market. This has led to extremely high charges, with some reported at $16-20 per barrel. The cost of moving Saudi crude through the strait to a Gulf of Oman transfer point can weigh heavily on the entire voyage.

Japan is particularly vulnerable due to its reliance on US crude imports, which have become more expensive due to the long journey around Cape Good Hope. Japanese buyers are also seeking alternative routes and suppliers, such as Saudi Arabia and the UAE, but their share of imports has decreased since the conflict began.