You might wonder why oil prices aren’t dropping even as supply recovers. The answer lies in the messy, expensive reality of transporting crude oil safely through dangerous waters.
- To bypass Iranian control in the Strait of Hormuz, Persian Gulf nations are moving oil near the Omani coast under U.S. naval protection.
- This route forces ships to transfer cargo between vessels, which creates a shortage of available tankers for other global routes.
- Because the region remains volatile, tankers face frequent attacks, forcing buyers to pay a steep risk premium.
- These logistical nightmares add up to $35 per barrel in extra transport costs.
Even with supply levels nearing pre-war highs, these massive shipping costs and ongoing security threats are keeping oil prices stuck around $100.