24th October 2026
When motorists see petrol and diesel prices rising, or households face higher heating and electricity costs, attention usually turns to the price of crude oil. But there is another important factor that receives less attention: the cost of transporting energy around the world.
Oil does not simply appear at a refinery, and petrol does not magically arrive at a filling station. Tankers, cargo ships, ports, pipelines, storage facilities and insurance all form part of a complex international supply chain. When wars threaten shipping routes, the cost of moving oil and petroleum products can rise sharply, adding another burden to energy markets already under pressure.
And these costs can remain high even when the immediate threat appears to have eased.
Shipping is becoming more expensive
The international shipping industry has faced repeated disruption over recent years. Attacks on commercial vessels in and around the Red Sea have forced many ships to avoid the Suez Canal and take the longer journey around the Cape of Good Hope. The war involving the United States, Israel and Iran has added another major source of uncertainty, particularly around the Strait of Hormuz.
According to UN Trade and Development (UNCTAD), the diversion of ships around Africa increased the distance travelled by maritime cargoes and helped push global shipping demand, measured by the distance goods travel, to a record in 2024.
These longer journeys mean more fuel is burned, crews spend more time at sea, and vessels are unavailable for other work for longer periods. Shipping companies must recover those additional expenses through higher freight rates.
The consequences are not confined to oil. Shipping costs affect food, fertiliser, manufactured goods and other commodities, creating the possibility of a wider increase in the cost of living.
The insurance bill can be enormous
War-risk insurance has become one of the most striking additional expenses for ships operating in dangerous waters.
Ordinary marine insurance covers many of the risks associated with transporting cargo. But when a vessel enters a recognised war-risk area, additional cover may be required. Insurers can increase premiums sharply, restrict the cover they offer or decide that a particular voyage is too dangerous.
In July 2026, S&P Global Energy reported that additional war-risk premiums for ships transiting the Strait of Hormuz had risen to between 7.5% and 10% of a vessel's insured value, compared with around 1% to 3% only weeks earlier.
That is a charge against the value of the ship, not simply the value of the oil it carries. The cargo may also require separate insurance, adding another expense.
By September, Reuters reported that an executive from Dubai-based energy company ENOC had described cargo insurance costs reaching 5% to 6% of a shipment's value in some circumstances. Overall transit expenses were estimated at between $10 million and $20 million.
These are exceptional figures, reflecting an exceptionally dangerous situation rather than normal shipping conditions. Nevertheless, they illustrate how quickly the economics of transporting oil can change.
The price of oil is only part of the story
The cost of crude oil is generally quoted at a major trading point or on a benchmark market. A refinery buying oil must also consider the cost of getting it delivered.
That includes the tanker charter, fuel consumed during the voyage, insurance, port charges and any extra handling or transfer operations. Where ships are diverted or supplies become difficult to obtain, the final delivered price can rise even if the underlying oil price moves by less.
The effect can be especially severe when shipping capacity becomes scarce. If many tankers are tied up on longer journeys, or operators refuse to enter dangerous waters, fewer vessels are available to transport other cargoes. Freight rates can then rise further.
Reuters reported in October that some Asian refiners were paying around $40 a barrel to transport US crude to Asia on certain routes, reflecting exceptionally difficult shipping conditions. Such a figure should not be treated as a normal cost for every oil shipment, but it demonstrates how far transport expenses can rise during a crisis.
Buyers may respond by sourcing oil closer to home, changing the size of their cargoes, using existing stocks or asking producers to deliver the oil themselves. These measures can help, but they cannot eliminate the underlying costs.
[/b]How does this reach British motorists?[/b]
Britain imports crude oil and refined petroleum products, while also producing oil and refining fuels domestically. International prices therefore matter even when a particular litre of petrol or diesel has not travelled directly through a dangerous shipping route.
Refineries and fuel suppliers operate in an international market. If imported supplies become more expensive to deliver, buyers may have to pay more to secure replacement cargoes. Domestic producers and refiners are also influenced by international market prices and the alternatives available to their customers.
Higher shipping costs can consequently feed into wholesale petrol and diesel prices. Retail prices may respond with a delay, depending on existing stocks, supply contracts, competition and the time taken for more expensive deliveries to reach the market.
The same applies to heating oil, which is particularly important to households in rural Scotland and other parts of the UK without access to mains gas. The delivered price reflects not only the underlying cost of the petroleum product but also distribution, storage, transport and the margins of suppliers.
For households already struggling with expensive heating, another increase can be particularly unwelcome. Businesses face the same pressure, especially haulage operators, farmers, fishing businesses and companies that depend on fuel-intensive transport.
Electricity and food can also be affected
The link between shipping and electricity prices is less direct, but it can still be important.
Gas is traded internationally, including as liquefied natural gas (LNG), which must be cooled, transported by specialist vessels and regasified at its destination. Higher shipping costs or disruption to LNG supplies can affect the price at which gas is delivered.
In Britain, wholesale gas prices can influence electricity prices because gas-fired power stations often help determine the wholesale electricity price. The effect of shipping disruption on electricity bills will depend on the wider energy market, the timing of contracts and the way suppliers purchase their energy.
There is also a less obvious connection with food. Oil and gas are important to farming, food processing and transport. Natural gas is a key input in the production of nitrogen fertilisers. If energy transport disruption raises fuel and fertiliser costs, farmers and food manufacturers may eventually pass some of those increases on to customers.
Shipping disruption can therefore spread well beyond the forecourt or the domestic heating tank.
The costs can outlast the fighting
One of the difficulties with war-related shipping costs is that they do not necessarily fall as soon as a ceasefire is announced.
Shipowners need confidence that routes are safe. Insurers need evidence that the risk has genuinely diminished. Vessels may have been diverted, cargoes delayed and supply arrangements disrupted. It can take time for normal shipping patterns to return.
Insurance premiums may fall relatively quickly if the perceived risk improves, but there is no guarantee. If attacks resume, costs can rise again. Meanwhile, longer journeys and a shortage of available tankers can continue to affect freight rates.
This creates a danger of repeated price shocks. Even if oil prices temporarily fall, higher transport and insurance expenses can limit the reduction in the price ultimately paid by the customer.
It is important, however, not to blame every rise in fuel prices on shipping. Crude oil supply and demand, exchange rates, refining capacity, taxes, distribution costs and company margins all play their part. The precise contribution of transport costs varies between products and routes.
A warning for households and businesses
The wider lesson is that energy security involves more than having oil and gas available somewhere in the world. Those supplies must also be transported safely, reliably and at an affordable cost.
For Britain, the consequences can be felt through petrol and diesel prices, heating oil deliveries, electricity costs and the price of everyday goods. For rural communities, where journeys are longer and alternatives to private transport or oil heating may be limited, the pressure can be especially difficult to avoid.
Wars and shipping threats create a chain reaction: greater danger leads to higher insurance premiums, more expensive voyages and reduced shipping capacity. These costs are added to the price of moving energy, and some eventually reach the end user.
Consumers cannot control events in the Strait of Hormuz or the Red Sea. But understanding the hidden costs behind fuel prices helps explain why the effects of international conflict can persist long after the initial headlines have faded.
The price displayed on a petrol pump is only the final part of a much longer journey. Increasingly, the cost of that journey is becoming part of the energy problem itself.