00:00Oman and Iran have been speaking about ways to resume talks on safe navigation through the Strait of Hormuz
00:06during a phone call with the two countries' foreign ministers.
00:09The key waterway has been largely blocked since the conflict in the Middle East started pushing up oil prices.
00:16The cost of moving oil is also soaring, with some tanker rates now reaching around $550,000 a day.
00:24Oil producers are paying huge premiums to secure ships as shipping routes remain disrupted.
00:30But how long can these prices last and who ultimately pays?
00:34Stavros Karan Peridis is an Associate Professor of Maritime Economics at the University of Plymouth.
00:40Hi there, Stavros.
00:41So what is actually driving buyers to pay these kinds of premiums right now?
00:47Hi, Juliet. Thank you very much for hosting me.
00:50That's a very good question.
00:52It's the lack of oil in the market, as you may remember from the first analysis that we had.
00:58Oil that comes from the region is 20% of the global oil production.
01:02So as you can imagine, there is a kind of a deficit at the moment.
01:05If you see the news, the U.S. stock, for example, of oil is at the lowest rate.
01:11It's less than 300 million barrels.
01:13That's a historical law, as far as I remember, of 1985.
01:17So as long as there is demand for something, of course, the price will go up.
01:23So it's a matter of the equilibrium of demand supply.
01:26Very simple for an economist to explain that.
01:28The UAE's state oil company, Adnok, chose to buy its own fleet outright rather than charter.
01:34What do you think about that?
01:35Is owning your own ships becoming the only way you can guarantee your oil gets to market?
01:43It's a bit more complicated, you know, because in shipping we are operating in a truly global environment.
01:48Even if, for example, the ship owner wants to pass from a risky area, right, as at the moment, the
01:55Strait of Hormuz,
01:57then, of course, it's the crew that has to convince, because you see what is happening around there.
02:01Unfortunately, a lot of sailors have been killed since the war in Iran has started,
02:05and that's a very sad situation, because there's a lot of seafarers in the region that are facing that kind
02:11of atrocious events.
02:12And, of course, it's the crew that has to be willing to pass from that.
02:15But even if the crew wants to pass from that region, then it's also the insurance company that has to
02:20give the green light.
02:22So it's a bit more complicated.
02:23Of course, if the vessel is owned from a state company, it makes the situation a bit more secure.
02:31Why am I saying that?
02:32So, for example, if you're saying that the UAE wants to build their own sovereign fleet,
02:38then if Iran attacks those vessels, it's going to be kind of a casus belli.
02:43And, of course, I'm not a maritime lawyer, but it means that this kind of actually is attacking the UAE.
02:49And, of course, that's going to be a very tricky situation that has to be resolved between the two nations.
02:55And it seems at the moment that that could be kind of a solution going forward.
02:59But history has proven that if a company is owning some vessels, it doesn't mean that they can manage it
03:06better.
03:07And that's why, of course, a lot of shipping companies have evolved.
03:09And, of course, we have to be clear about what we're talking about, if it's a state company or it's
03:13a private company who owns those assets.
03:15Now, two of the world's most important shipping choke points, the Strait of Hormuz and the Panama Canal, are under
03:23pressure at the same time.
03:25How much of the cost do you think eventually lands on ordinary consumers?
03:32Based on some calculations that we have done with my team a few years ago, because you may recall that
03:37back in 2023, we had the same situation.
03:40Again, El Nino was pushing the Panama Canal.
03:42The overall drop has dropped approximately for three meters.
03:46So, again, we had the same restriction of how many vessels can pass on a daily base.
03:52And we had back then the Red Sea crisis that, you know, it was the Houthis that at that time
03:56were hitting the vessels.
03:58So that's why a lot of vessels were doing the D routes and they were going to a longer distance.
04:02It was 35 percent longer from Asia to Europe and also America, because a lot of the American markets as
04:08well, especially on the East Coast,
04:10were served through the vessels that were passing through the Cape of Good Hope.
04:12So all those costs, and we calculate that that cost was approximately 20 to 30 percent higher,
04:17because it was 20 to 30 percent higher the overall distance that the vessels had to cover.
04:21So those costs, of course, end up to the final consumer, because when the freight rates goes up, the final
04:27consumer has to pay for them.
04:29Stavros, Cameron Paridis, thank you very much.
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