A Very Large Reason For Rising Gas Prices

Now, to our list of shortages, here and here, we can add oil tankers.

Oil Tanker Shortages

With limited travel through the Strait of Hormuz for what had been 20 percent of the world’s oil supply, and a debilitated Saudi pipeline that could have been an alternate route, we need more VLCCs (Very Large Crude Carriers). As a result, this year’s orders, so far, are at 217–124 more than the 93 for all of 2025.

Shown in our featured image, the VLCC can be as long as the Eiffel Tower and as wide as a football field. Costing around $130 million each, just one VLCC can haul 2 million barrels of crude oil.

A Vessel Squeeze

The Iran War created what we could call a vessel squeeze. Adjusting to the limited passage through the Strait of Hormuz, VLCCs have longer wait times and routes. Wait times increase with “ship-to-ship” transfers involving smaller vessels loading the VLCCs outside Hormuz. Then, longer routes, avoiding Hormuz and the Red Sea’s Houthi Bab al-Mandeb Strait send vessels around the Cape of Good Hope.

Our Bottom Line: Equilibrium Price

One sale could reflect how the market reacted to the “squeeze.” Previously owned by a Greek shipper, a VLCC called the Pinios was sold to a Dubai trading firm for $200 million, $21 million more than its previous valuation.

As economists, we could say that changes in demand shifted our demand curve to the right. Positioned higher on the supply curve, price theoretically soared.

And indeed it did.

Knowing our one example of rerouting around the Cape of Good Hope cost an extra $1 million, we can see how daily VLCC rates surpassed a whopping $1 million; correspondingly, owners’ daily earnings topped $651,107:

Since the Iran War began, the cost of transporting oil from Texas to Asia skyrocketed by an extra $26 a barrel.

It all means refiners will pay more. And so too will you and I.

My sources and more: Thanks to WSJ for inspiring today’s post and providing many of its facts. From there, iMarine News and NYK Line had the VLCC details.