8th October 2026
When we hear that oil is above $100 a barrel, most people understand what that means.
But there is another price rising rapidly which is much less visible.
The cost of transporting the oil.
Hiring one of the world's giant oil tankers has become extraordinarily expensive. The daily cost of hiring a Very Large Crude Carrier, or VLCC, on some Middle East-to-Asia routes has passed $1.2 million a day, compared with around $80,000 a year ago.
That matters because the price of oil quoted on financial markets isn't necessarily the price that a refinery actually pays for oil delivered to its door.
The refinery has to get the oil there.
And right now, getting it there is becoming much more expensive.
The hidden cost of a barrel of oil
Imagine buying a product for £100 but then discovering it costs another £30 to get it delivered.
The £100 is the headline price.
The £30 is the cost of getting the product to you.
Something similar is happening with oil.
The oil may be produced in Saudi Arabia, Iraq or another Gulf country, but much of it has to travel considerable distances by tanker before reaching the refinery that turns it into petrol, diesel, aviation fuel or other products.
When tanker rates soar, the delivered cost of that oil rises.
The US Energy Information Administration says high tanker rates, increased insurance costs and longer routes around conflict zones are putting additional upward pressure on the price of crude delivered to refiners.
That creates a problem which is easy to miss when looking only at the Brent oil price.
The price on the screen isn't necessarily the price at the refinery gate.
Why have tanker prices exploded?
The main reason is the disruption around the Strait of Hormuz.
The waterway is one of the world's most important energy routes. Under normal circumstances it carries a huge proportion of global oil and LNG shipments.
But attacks and security risks have made shipping through the region much more dangerous.
On October 6, only seven commodity vessels passed through the Strait of Hormuz, the lowest daily number recorded since July 23. Crude flows through the strait were down to about 10.1 million barrels a day, roughly 74% of pre-war levels.
The result is not simply that fewer ships are sailing.
Ships are also taking longer and more complicated journeys.
Some are avoiding dangerous areas. Others are involved in ship-to-ship transfers outside the Strait.
A tanker that spends longer completing one journey cannot immediately start another.
That effectively reduces the number of tankers available to carry the world's oil.
And when something becomes scarce, its price tends to rise.
Insurance adds another bill
The tanker company isn't just paying for the ship and its crew.
There is now a substantial insurance risk.
War-risk insurance premiums for ships operating in dangerous waters have risen dramatically. S&P Global reported earlier this year that additional war-risk premiums had reached around 10% of a vessel's insured value for some tankers.
There are also reports of extraordinary payments being offered to crews willing to make dangerous journeys through the Strait.
The Financial Times has reported that tanker captains have been offered as much as $100,000 a month, with additional bonuses for individual transits.
All of these costs ultimately have to be paid by somebody.
Saudi Arabia is already responding
There is an interesting illustration of what this means in practice.
Saudi Arabia has cut the selling price of some of its crude to Asian customers.
That might sound like good news.
But Reuters reported that the cuts were partly designed to compensate buyers for the extraordinarily high cost of transporting the oil. Saudi Aramco's November price for Arab Light crude to Asia was cut by $3 a barrel, while tanker costs from the Gulf to China had risen to around $1.2 million a day.
So the producer can reduce the price of the oil itself while the cost of getting that oil to the customer continues to rise.
This is one reason simply watching Brent isn't enough to understand what is happening in the physical oil market.
And then there is diesel
For Britain, this is particularly important.
We are not only dealing with expensive crude oil.
There is also a serious shortage of refined products, particularly diesel.
The International Energy Agency has reported that diesel and gasoil prices have risen much more sharply than crude prices, with Gulf and Russian diesel exports severely reduced.
That creates a nasty combination.
Expensive crude + expensive tankers + expensive insurance + fewer available ships + reduced refinery output + shortages of diesel.
The result can be much more severe than simply saying "oil has gone up".
Why could this affect petrol and diesel prices?
A refinery has to buy its raw material.
If the delivered cost of crude rises, that increases the refinery's costs.
If diesel itself is in short supply, its market price can rise even faster.
The IEA says refined-product exports from the Gulf and Russia have fallen sharply, while diesel markets have become particularly tight.
That helps explain why motorists can sometimes see diesel prices rising much faster than the headline movement in Brent crude.
The supply chain is under pressure at several different points.
But it doesn't stop at the petrol station
This is where the story gets much bigger.
Oil is not just used to make petrol, diesel and heating oil.
Petroleum and gas are important feedstocks for the petrochemical industry.
Petrochemicals are used in the manufacture of plastics, packaging, synthetic fibres, solvents, paints, chemicals and many other products.
So there can be a chain reaction.
Higher tanker costs
↓
Higher delivered oil costs
↓
Higher refinery and fuel costs
↓
Higher transport costs
↓
Higher manufacturing costs
↓
Higher distribution and delivery costs
↓
Pressure on shop prices
Not every increase will be passed directly to consumers.
Businesses can absorb some costs, reduce profits, change suppliers or find alternative transport routes.
But if the increase lasts for months, it becomes much harder to absorb everything.
Food is particularly exposed
Think about what happens before a packet of food reaches a supermarket shelf.
The farmer needs machinery.
The farm needs fertiliser, chemicals and other inputs.
The crop or livestock has to be transported.
Food may need refrigeration.
It needs packaging.
It then has to be transported again to a distribution centre and eventually to a shop.
Almost every stage uses energy or transport.
That doesn't mean a 50% rise in tanker rates automatically produces a 50% rise in food prices.
It doesn't.
But it does mean that an energy and transport shock can gradually spread through the economy.
Even products made in Britain can be affected
There is sometimes an assumption that buying something manufactured in Britain protects consumers from international shipping problems.
Not necessarily.
A British manufacturer may use imported oil, chemicals, plastics, components or raw materials.
It may use diesel-powered transport.
Its suppliers may face higher freight costs.
Its packaging may be made using petrochemical products.
So the final product can be affected even if the finished item never crosses the sea.
This is why energy shocks can be surprisingly persistent.
There is another danger: the tanker shortage feeds on itself
The longer ships spend travelling around dangerous areas, the fewer ships are available elsewhere.
That can force companies to bid even more aggressively for the tankers that are available.
Higher rates then make the delivered cost of oil more expensive.
And if some buyers decide they cannot afford the freight, they may reduce purchases or look for oil from alternative suppliers.
The IEA says high tanker costs have already been weighing on refining economics in some markets, while longer journeys are tying up ships.
This is why the current problem is increasingly being described as a logistics crisis as well as an oil crisis.
Could this push inflation higher?
Yes, potentially.
The danger is that an oil shock can spread beyond energy.
First comes petrol and diesel.
Then transport costs.
Then production and distribution costs.
Then potentially food, manufactured goods and services.
At the same time, households have less money available for other spending because more is going on fuel and energy.
That creates a difficult situation for central banks.
They want inflation to fall, but an external energy shock can push prices upwards even when the economy itself isn't particularly strong.
The Bank of England therefore has to watch not just the price of crude oil but what the energy shock is doing to wider inflation.
Britain is particularly exposed
Britain imports substantial quantities of energy and relies heavily on international markets.
So even if Britain produces some oil and gas of its own, that does not insulate British consumers from global prices.
The same international market determines the value of much of the oil being produced.
And if transporting oil around the world becomes much more expensive, British refiners and fuel suppliers cannot simply ignore the global market.
This is why a problem thousands of miles away can eventually show up on a forecourt in Wick or Thurso.
The price on the screen isn't the whole story
This may be the most important point for consumers.
When somebody says:
"Brent is $105 a barrel."
That tells us something important.
But it doesn't tell us the whole cost of getting energy to Britain.
We also need to think about:
Crude price + tanker freight + insurance + refinery costs + refining margins + storage + distribution + taxation.
And with diesel, there is the additional problem that the refined product itself is currently in tight supply.
The tanker is therefore no longer just a means of transporting oil.
The tanker has become part of the price of oil.
The warning for households and businesses
If tanker rates fall quickly as the security situation improves, some of this pressure could unwind.
But if shipping remains disrupted, the higher freight costs can become embedded in the price of physical oil and fuel.
That matters for everybody.
For motorists, it could mean higher petrol and diesel prices.
For households using heating oil, it could mean higher heating costs.
For farmers, it can mean more expensive diesel, fertiliser and transport.
For hauliers, it can mean higher operating costs and potentially larger fuel surcharges.
For manufacturers, it can mean higher energy, chemical and transport costs.
And eventually, some of those costs can reach the prices we see in shops.
The big lesson is that the world doesn't have to run out of oil for oil to become much more expensive.
It can simply become harder, riskier and more expensive to move it.
And right now, that is exactly what the tanker market is telling us.
The hidden cost of oil is no longer so hidden.