India’s crude oil import bill has climbed sharply since the outbreak of conflict in the Middle East disrupted supply routes through the Strait of Hormuz, pushing up both oil prices and shipping costs.
Freight rates on the key route from Saudi Arabia’s Ras Tanura to India have surged by 411% since February 28, when the war began and Iran restricted access to the chokepoint. The cost to ship crude on a very large crude carrier (VLCC) rose to $4.34 per barrel in August, up from $0.85 per barrel before the conflict, according to data compiled by Financial Express.
Non-Middle Eastern routes have also seen steep increases in shipping costs as India seeks alternative supply sources. Freight rates from Corpus Christi in the U.S. to India jumped 150% to $15.86 per barrel, while the cost to transport crude from Russia’s Ust-Luga port on the Baltic Sea more than doubled to $19.90 per barrel.
War-risk insurance premiums for voyages through the Strait of Hormuz have surged from $250,000 per passage before the war to as high as $10 million, further inflating import costs.
Oil prices have also risen by about 25% since the conflict began, with benchmark prices briefly exceeding $100 per barrel on multiple occasions. Despite slightly lower import volumes, India’s crude import bill rose 60% in the April-June quarter compared with the same period last year.
The upward trend persisted into the third quarter, with India’s crude import bill in July up 41% from a year earlier, reflecting the combined impact of higher oil prices and elevated shipping and insurance expenses.
