Could attacks on oil tankers disrupt the flow of oil by raising the cost of insurance, even if the attacks themselves failed to physically stop the flow of tankers?
First of all, considering that VLCCs each carry around two million barrels of oil, amortizing the additional war risk premium across the vessel’s cargo would produce a very small change in the overall cost of supplying oil to world markets. An incremental increase in the war risk premium of two percent would average out to roughly $1.20 per barrel, a small fraction of the current price oil, which is approximately $100 per barrel. One leading private insurer of VLCCs described commercial shipping as an “economist’s dream,” as “there will always be people willing to transit the Strait for the right price.” Secondly, at no time during the Tanker War did insurance rates rise to the point where shippers chose not to purchase insurance. Experts at Lloyd’s Marine Intelligence Unit (MIU) do not recall any instances of shipping companies deciding against attempting transits due to high insurance rates. For these reasons, it is highly unlikely that insurance rates will rise enough to stop the tr
Related Questions
- Could attacks on oil tankers disrupt the flow of oil by raising the cost of insurance, even if the attacks themselves failed to physically stop the flow of tankers?
- What specific techniques might Iran employ to try to disrupt the oil flow in the Strait of Hormuz?
- Does an effort to disrupt oil flow through the Strait of Hormuz need to hit tankers?
