Strait of Hormuz tankers are moving again but gas prices remain high

Tankers are moving through the Strait of Hormuz once again, and oil exports from the Middle East have staged a major recovery. Yet drivers at the pump are seeing very little relief.

Oil tracking firm Kpler reported that crude supply from the Gulf, excluding Iran, has returned to its pre-war level. Roughly 40% of the region’s oil is now bypassing the Strait of Hormuz entirely through newly adapted supply chains, while tanker traffic through the narrow waterway itself has risen significantly from its wartime lows.

But globally, gasoline and diesel prices remain painfully high. In the US, a gallon of petrol averages $4.36, according to the AAA. While that is down 21 cents over the past month, it is still 46% higher than before the war began. West Texas Intermediate, the US oil benchmark, sits around $92 a barrel—a 9% drop since mid-September, but still 40% above pre-war levels.

This gap between recovering supply and stubborn retail prices comes down to expensive shipping workarounds, massive danger pay for crews, and deep market anxiety over what might happen next.

The soaring cost of shipping crude

Getting crude out of a war zone is a costly business. To avoid missile attacks, some tankers are resorting to ship-to-ship transfers at sea, handing off crude to safer, foreign-flagged vessels. It is a highly expensive manoeuvre.

Tanker captains are also demanding extraordinary premiums to sail through dangerous waters. The Financial Times reported that some captains are earning base salaries of up to $100,000 a month, plus a $50,000 bonus for each successful run. Normally, a captain’s salary is closer to $15,000 a month.

On top of transit costs, retail fuel stations are slow to lower their prices. "When prices are fluctuating, gas stations want to protect their profit margin," Christopher Tang, a supply chain professor at the University of California, told ABC News. Retailers are reluctant to cut pump prices while they are still selling off petrol bought when oil was at its peak.

Threat of further conflict

Then there is the ever-present threat of renewed fighting. Last month, Saudi Arabia’s East-West pipeline, which bypasses the strait and can carry 7 million barrels a day, was temporarily shut down after an attack by Iran-aligned Houthi rebels. Though flows have since recovered to 5.8 million barrels a day, according to Reuters, the attack proved that alternative routes are not safe.

Oil traders are pricing in this constant threat. With Iranian officials warning that they could soon block "illegal routes" in the Strait of Hormuz, investors are hesitant to bet on a peaceful, stable supply. Until that fear subsides, the cost of filling up is unlikely to return to normal.