Kamal Ghorui
The disruption in the Strait of Hormuz amid the Iran conflict has triggered a major disruption in the supply of bunker fuel for Asia, the heavy residual oil that powers most of the world’s cargo ships. It has raised concerns over higher freight costs, supply chain disruptions and rising consumer prices globally.Bunker fuel, a thick low-grade petroleum product left behind after refining crude oil, is widely used by the shipping industry because of its relatively lower cost compared to cleaner fuels. The fuel is critical to global trade, with around 80 per cent of goods worldwide transported by sea.The impact of the disruption is being felt most sharply in Asia, which depends heavily on Middle Eastern crude supplies. Singapore, the world’s largest bunkering hub, is witnessing rapidly rising prices and tightening inventories as supplies from key producers such as Iraq and Kuwait remain constrained.Analysts say bunker fuel prices in Singapore have jumped from roughly USD 500 per metric tonne before the conflict to more than USD 800 in recent weeks.“We just see the price in Singapore going up, up, up,” said Natalia Katona of energy intelligence platform OilPrice.Shipping firms are responding by cutting vessel speeds, adjusting sailing schedules and exploring alternative fuels to reduce operating costs. According to shipping research firm Clarksons Research, the average speed of container ships and bulk carriers worldwide has already slowed by around 2 per cent since the conflict escalated in late February.Industry experts warn that the financial pressure will eventually be passed on to consumers through higher transport and logistics costs.“Bunker fuel shortages tend to feed through to shipping costs more quickly than many other cost pressures,” said Oliver Miloschewsky of risk consultancy firm Aon.He added that while the price increase for individual products may appear limited initially, the broader impact could spread across global supply chains and eventually affect retail prices in multiple sectors.The European Federation for Transport and Environment estimates that the Iran conflict is costing the global shipping industry nearly 340 million euros per day.In Southeast Asia, governments and businesses are increasingly adopting what analysts describe as “energy triage” measures. Countries are boosting coal consumption, increasing imports of Russian crude and reconsidering nuclear energy projects to offset the pressure from constrained oil supplies.The shipping sector is also accelerating investments in vessels capable of operating on alternative fuels such as liquefied natural gas (LNG).Håkan Agnevall, chief executive of marine technology company Wärtsilä, said higher fossil fuel prices are improving the economic viability of greener fuels despite existing infrastructure bottlenecks.“That improves the business case for green fuels,” he said.According to Angad Banga, CEO of The Caravel Group, about one-third of the vessels currently under construction under the company’s management are designed to run on both conventional bunker fuel and alternatives such as LNG.“In a volatile environment optionality has a measurable economic value,” Banga said, referring to shipowners’ growing preference for dual-fuel vessels.However, experts caution that alternative fuel infrastructure remains underdeveloped globally, limiting how quickly the shipping industry can transition away from conventional bunker fuel.
