Soaring tanker freight rates are narrowing crude oil sourcing options for Indian refiners, pushing them towards Middle Eastern supplies and putting pressure on refining margins amid heightened geopolitical tensions and disruptions to global shipping routes.
According to industry executives cited by The Economic Times, crude oil in the physical market is trading at around $20 per barrel above Brent futures, while transportation costs are adding another $10–20 per barrel, depending on the source. The combined increase in procurement and shipping expenses is making crude imports significantly more expensive for Indian refiners.
Freight costs have emerged as a critical factor in determining the commercial viability of crude supplies from different regions. Shipments from distant suppliers such as the United States, Venezuela and Russia are becoming less competitive compared with Gulf crude, as elevated tanker rates erode the benefits of alternative sourcing options.
Tanker freight for crude shipments from the Gulf to Indian ports has reportedly climbed to $10–11 per barrel, compared with around $1–1.50 before the Iran conflict. Shipping costs for US crude delivered to India have risen to approximately $20–25 per barrel, against $3–3.50 previously.
The disruption has also affected vessel availability and operating efficiency. Congestion around the Strait of Hormuz, rerouted trade flows, increased ship-to-ship transfers and heightened security risks have lengthened delivery times and pushed freight rates higher.
The International Energy Agency (IEA) has reported that, by mid-October, the cost of transporting crude from the Middle East Gulf to Asia on a large tanker had exceeded $37 per barrel, more than five times its pre-conflict level. The surge in delivered crude costs had also pushed margins for some Asian refiners processing Middle Eastern crude into negative territory in September.
Indian state-owned refiners face particular pressure because much of their fuel is sold in the domestic market, where retail prices may not adjust immediately to changes in international crude prices and transportation costs.
The changing economics of crude procurement are forcing refiners to reassess supply origins and evaluate crude grades based on landed costs, availability and the value of the refined products they can produce.
The situation underscores the growing influence of maritime transport costs on India’s energy security and import economics. With tanker availability, freight rates and geopolitical risks increasingly shaping global oil flows, strengthening shipping capacity and improving supply-chain resilience will remain important considerations for India’s crude oil procurement strategy.