Hormuz crisis adds €4.6 billion to bunker fuel bill – T&E

Global shipping companies have spent an estimated €4.6 billion ($5.3 billion) in additional fuel costs since the Middle East war began on March 1, Transport & Environment (T&E) noted in a recent report.

MAP: Middle East regions including the Red Sea and Strait of Hormuz. Getty Images

Conventional fuel oil prices have surged by 65% between 1-20 March on the back of a sharp rise in Brent and gasoil prices amidst Hormuz closure and a global supply disruption. LNG prices have increased even further by 75% since the war first started, T&E estimates.

This has added at least €340 million ($390 million) to daily bunkering costs, bringing the industry's additional bunker bill to €4.6 billion on top of existing bunkering expenditure.

T&E also noted that rising conventional fuel costs amid the global supply disruption have narrowed the price gap between fossil fuels and low- and zero-emission alternatives such as e-ammonia and e-methanol.

“Fossil fuel prices now compare directly with current estimated production costs of c.€2,000/toe [mt of oil-equivalent] for e-ammonia and €2,600/toe for e-methanol,” it said.

“While the trend may be temporary, it highlights a critical point: the volatility of fossil fuel markets offsets much of the structural cost disadvantage of clean fuels.”

T&E recommended that the EU make “all reasonable effort to reduce its dependence on fossil fuels,” calling the switch to low- and zero-emission alternatives an "immediate economic and strategic opportunity" for the shipping sector.

Need for green transition

Climate group Opportunity Green and fuel producers Liquid Wind and Ineratec have also raised arguments.

“Actually what we should be looking towards is a just and equitable transition to a globally decentralised energy economy that will support the shipping, or even the aviation industry, and ensure net-zero emissions. And I think that [the Middle East crisis] we’re seeing at the moment is a very good argument to invest in truly net-zero alternative fuels,” Em Fenton, senior director for climate diplomacy at Opportunity Green, told ENGINE.

Germany-based Ineratec argued that “decentralised” production facilities could “reduce European dependency on crude oil imports, diversifying supply structures while simultaneously lowering emissions across fuel supply chains.”

Sweden's Liquid Wind was equally direct.

“Recent turmoil in the Middle East and sharp spikes in global oil and gas prices highlight how exposed Europe remains as long as it relies on imported fossil energy. When major shipping routes can be disrupted overnight, the true cost of fossil dependence becomes clear,” the company noted.

T&E urged lawmakers to mandate the uptake of green hydrogen-based fuels in the upcoming FuelEU Maritime revision, and called for “more tangible provisions” on the bunkering of these fuels to be included in the revision of the Alternative Fuels Infrastructure Regulation.

By Konica Bhatt

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