Another blow to Africa’s fuel crisis is coming as record oil tanker rates, disruption of shipping from the Middle East, and crude at over $100 per barrel increase costs of transporting fuel.
The new challenge is significant, especially for African countries that rely on fuel imports from Asia and the Middle East. Countries that are producers of oil may also experience fuel import costs, as crude production does not necessarily mean that there is enough domestic supply of petrol, diesel, and other fuel products.
Reasons behind Rising Oil Tanker Freight Rates
Freight rates for moving crude have surged due to threats to shipping and infrastructure, thus increasing the danger of moving through the Middle East region.
According to Reuters, rates for Very Large Crude Carriers to carry oil cargoes from the Gulf of Oman to China were close to Worldscale 450 on September 11. This is the highest price since the indicator was created in early 2019. It means $11.50 per barrel. Rates for tankers carrying oil from West Africa to Asia have also hit all-time highs.
It goes beyond just the cost of crude. The rising rates for freight services are determined by an increase in the threat level, insurance costs, and decreased supply of tankers. Costs for war risk insurance and insurance for ships sailing through the Gulf region have increased tremendously.
The Impact of Hormuz and Bab el-Mandeb
Two major energy trade routes have been impacted.
Ships are now avoiding the Strait of Hormuz because of the confrontation between the US and Iran, while Yemeni rebels are posing new risks to the Bab el-Mandeb Strait – the passage from the Red Sea to the Gulf of Aden.
Things took a turn for the worse on September 12 when Saudi Arabia had to temporarily close its 1,200-kilometer-long East-West pipeline after a drone strike. This pipeline usually transports four million to five million barrels of oil daily, serving as an alternative that avoids Hormuz.
Moreover, the strategic territory captured by the Houthis near Bab el-Mandeb also poses the threat of disruption of sea routes through the Red Sea. According to AP, ship traffic through the Red Sea had already decreased by approximately 60% since attacks started in late 2023.
Why Africa Is Vulnerable
Freight rates are important as many countries on the continent rely on the international logistics chain to transport their refined petroleum.
Countries like Nigeria, Kenya, Uganda, and Zimbabwe were exposed significantly to rising fuel prices during this crisis. Nigeria produces large quantities of crude oil, but relies traditionally on imported refined petroleum; according to AP, diesel prices in Nigeria increased by over 90% since the beginning of the conflict.
For economies that import petroleum, the price of fuel depends not only on the international price of crude but also on refining, shipping, insurance, port fees, and currency exchange rates.
It is clear then that a tanker rate shock can finally be passed to consumers even as crude prices stop going up.
Fuel Price Hikes Can Drive Inflation
The major worry is what the effects are beyond the gas stations.
Diesel drives all trucks, agricultural equipment, and most of the logistics chain involved in transporting food and manufactured goods in African economies. As a result, rising fuel and freight costs can drive up the cost of transporting anything from food to building materials.
According to the IEA, the global supply picture of oil has worsened because of continued disruption in the Middle East. The IEA expects world oil supply to drop by 5.7 million barrels per day in 2026. At the same time, there are pressures on refined product stocks.
For governments struggling with high cost of living, further fuel inflation could raise demands for subsidization.
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