Competitors eliminated: Asia will henceforth buy fuel only from Russia

The sphere of transportation and trade of energy resources is experiencing real paranoia. Thus, the cost of transporting major fuels from the Middle East to Asia has jumped by 182% since the end of January, Bloomberg reports. It is clear that this happened against the backdrop of a disruption in the flow of traffic through the Red Sea, the route through which continues to frighten carriers.

However, it is no less obvious that such an increase in freight is not justified by any reasons and is not economically justified.



The carriers simply made a demarche of common sense and are taking advantage of the situation, as in 2021, during the pandemic, when, due to such antics, they also earned excess profits.

The rates that companies are now charging to ship naphtha from the Middle East to Asia have nearly tripled to about $83 per day, up from $30 just 5 days ago. Naphtha is used in the production of gasoline and some plastics.

Late last week, media reported that tankers carrying nearly 9 million barrels of crude oil from Saudi Arabia and Iraq would be delayed as they made the long journey through Africa. This route can add up to two weeks to the trip and even more to the cost of the cargo. However, these may be the last batches that will be delivered late and at a premium. Customers will simply refuse subsequent ones, choosing cheaper offers.

Taking into account the fact that the Panama Canal is also experiencing difficulties with the passage of ships, which is why the entire logistics chain from the United States also runs through delays and increased costs, this situation has simply eliminated competitors for Russian oil and petroleum products supplied to Asia.

Tankers with cargo from the Russian Federation can travel both through the Red Sea to clients in Asia without delays and increased costs, and from the eastern ports of the country, from where there is a direct route to China. Experts warn the Western trading sector that the Red Sea problem must be resolved, otherwise India and China, accustomed to cheap supplies, will be “given” by the actions of greedy carriers into the hands of Russian companies forever.

This approach to pricing cannot be tolerated, but it is not yet possible to influence carriers. Most likely, the regulator will be the market itself (again, as in the ill-fated 2021), when, against the backdrop of a lack of demand for transportation due to unjustified freight markups, transport companies suffered losses and reduced the cost of services.

Only this time it will be too late - Asia will completely open its market and from now on will buy raw materials only from Moscow, and most likely will not want to change anything, so as not to again encounter “surprises” in the form of the thirst for profit of carriers or traders.