Shipping Industry Faces Bunker Fuel Shortages After Strait of Hormuz Disruption

Global shipping companies are preparing for fuel shortages and rising costs after the Iran war disrupted supplies of bunker fuel through the Strait of Hormuz. The conflict has triggered concerns about a potential global shipping crunch. Ship operators rely on a heavy, sludge-like fuel known as bunker fuel to keep vessels running.

The disruption has affected supplies of the fuel that powers much of the global shipping industry and supports Asia’s largest refuelling hub. Bunker fuel is a low-grade petroleum product, heavier and more polluting than the refined fuels used by cars and aircraft.

It forms at the bottom of crude oil storage containers during the refining process. Despite its poor quality, bunker fuel powers ships responsible for transporting around 80% of globally traded goods by sea.

Shortages could drive up shipping costs according to industry reports. The impact is expected to be felt first in Asia, which depends heavily on Middle Eastern oil supplies. In Singapore, the world’s largest bunker fuel refuelling hub, reserves are tightening while prices continue to rise.

Shipping companies are attempting to adapt by slowing vessels and revising schedules to reduce fuel consumption. The average speed of bulk carriers and container ships has slowed globally by around 2% since the war began on Feb. 28, industry group Clarksons Research reported.

Before the conflict, bunker fuel in Singapore cost about $500 per metric tonne.

Consumers in Singapore are seeing higher transport costs, with ferry operators raising fares and cruise companies adding fuel surcharges. Ship operators face limited options. They can pay more for fuel or implement fuel-saving measures like slowing shipping or suspending voyages.

High prices are also driving more interest in green fuels. The technology to create lower-emitting fuels exists. Alternative fuel systems still lack the flexibility and infrastructure available for conventional bunker fuel. More than 890 LNG-powered vessels are currently operating worldwide, though limited infrastructure has created bottlenecks.

The industry is gradually adapting and restrictions on bunker fuel are increasing interest in LNG-capable ships.