The rise in bunker price sharply on 24 February after the invasion of Ukraine by Russia on several fronts, increase in the cost of fuel reflects the most immediate impact on shipping of the conflict.
Analysts predict a broad fallout from Russia’s aggression in the coming weeks, which has sparked widespread condemnation and protests from ordinary Russians.
The rise in bunker prices did not match the rise in spot crude prices, which saw Brent breach $105 and West Texas Intermediate flirt with $100 yesterday, both of which were up around 8%. The price of very low sulphur fuel oil (VLSFO) was $774 yesterday, up nearly 3% from the previous day’s $752 figure, according to Ship Bunker’s global average bunker prices across 20 bunkering ports. The 20-port average for conventional heavy fuel oil (HFO) rose by a similar amount, to $597.
However, the averages obscured significant regional differences. VLSFO prices in Rotterdam increased by 4.5 per cent to $731.50, but only by 2.3 per cent to $769 in Singapore. Corresponding HFO prices increased by nearly 6% in Rotterdam, to $559, but only 3.6 per cent in Singapore, to $597.
Meanwhile, as Russia and its NATO adversaries engage in increasingly hostile tit-for-tat manoeuvring, LNG prices are expected to rise significantly, some say dramatically. Russia supplies roughly one-third of Europe’s gas. According to experts, there may be some room to import more gas from the United States and other Middle Eastern producers, but not on a large enough scale to compensate.
The outcome should benefit LNG tanker owners who are not already committed to long-term contracts. Vessels trading on the spot or short term is likely to benefit from very high rates in the coming months, if not years. Furthermore, because specialist builders are fully booked, there is almost no room to increase LNG tanker supply before the middle of the decade.
There’s the contentious issue of food prices as Russia and Ukraine produce roughly 30 per cent of the world’s wheat and one-fifth of its corn. The disruption in the supply chain may result in more tonne-miles for bulk carrier owners, but it will inevitably result in higher food prices.
This development comes after a period in which consumers in many countries have watched with dismay as living costs have skyrocketed. Supply disruptions, higher fuel prices, longer journeys, and more expensive sea transport will only exacerbate inflationary pressures.