BANGKOK, May 12: The Iran war and the closure of the Strait of Hormuz have triggered a major crisis in the global shipping industry by disrupting supplies of bunker fuel, the heavy, low-grade oil that powers most cargo ships.
Bunker fuel, a thick sludge-like byproduct left at the bottom of refined crude oil storage, is essential for maritime trade, which carries about 80 percent of goods traded worldwide.
Experts warn that shortages of this fuel could sharply increase shipping costs, raise consumer prices, and damage businesses across global supply chains.
Asia has been hit hardest because it relies heavily on Middle Eastern oil. Singapore, the world’s largest bunker fuel refuelling hub, is already experiencing shrinking reserves and soaring prices.
Before the conflict, bunker fuel in Singapore cost around USD 500 per metric ton, but prices have surged to over USD 800 per metric ton by early May.
Analysts say the prolonged disruption of heavier crude supplies from countries such as Iraq and Kuwait could worsen shortages significantly.
Governments and industries across Southeast Asia are adopting “energy triage” measures to cope with the crisis.
Countries are increasing coal use, importing more Russian crude oil, and reviving nuclear energy plans to compensate for dwindling fuel supplies.
Since more than half of global seaborne trade passes through Asian ports, disruptions in the region are expected to affect the global economy.
For now, shipping companies are absorbing much of the financial burden, but analysts believe these higher costs will soon be passed on to consumers.
The European Federation for Transport and Environment estimates that the Iran war is costing the global shipping industry nearly USD 400 million every day.
Experts say bunker fuel shortages tend to push shipping costs upward quickly, creating ripple effects throughout supply chains and eventually increasing prices for a wide range of goods and services.
Consumers in Singapore are already seeing the effects, with local ferry operators increasing fares and cruise lines adding fuel surcharges.
To reduce costs, shipping companies are slowing vessel speeds, suspending some voyages, and revising schedules. According to Clarksons Research, average speeds of bulk carriers and container ships have dropped by about 2 percent globally since the war began.
The crisis is also accelerating interest in alternative and greener fuels. Companies are increasingly investing in ships capable of running on both conventional bunker fuel and cleaner alternatives such as liquefied natural gas (LNG).
Angad Banga, CEO of the Caravel Group, said about one-third of the ships currently under construction for his company will be dual-fuel capable, giving operators greater flexibility during fuel market disruptions.
However, challenges remain. While there are more than 890 LNG-powered ships operating worldwide, the infrastructure needed to support them is still limited, creating bottlenecks.
Green fuels are also more expensive and not yet produced at a large enough scale to fully replace traditional bunker fuel. Despite these obstacles, industry experts believe the current crisis could accelerate the shipping sector’s transition toward cleaner energy.
Rising fossil fuel prices are narrowing the cost difference between conventional and green fuels, making alternative energy options more economically attractive. Many companies now see fuel flexibility as essential for surviving future geopolitical and energy shocks. (AP)
