Soaring Freight Costs Make Japan’s Crude Imports the World’s Most Expensive

Freight costs are increasingly driving how much buyers pay for crude, with shipping now constituting roughly one-fifth of a cargo’s price. The pressure centers on very large crude carriers (VLCCs), which move about 2 million barrels at a time and are being tied up on longer voyages as refiners look beyond traditional Gulf suppliers. Buyers in places such as India are reaching to South American producers, committing VLCCs for 30–40 day round trips that smaller tanker classes cannot economically substitute. The Strait of Hormuz has also reshaped tanker economics. Approximately 60 VLCCs are transiting crude to the Gulf of Oman for ship-to-ship transfers, and those vessels reportedly spend about 10 days waiting in queues. That initial shuttle leg can add roughly $15–20 per barrel to the cost of Gulf-origin crude, the equivalent of around $20 million on a full VLCC; some reported fees to compensate owners and crews for the risk run as high as $16–20/bbl. Some operators refuse the transit entirely or demand elevated rates. VLCC earnings have jumped to more than $1.2 million a day on the Middle East-to-Asia route, up from about $150,000 in February, and rates between the Middle East and China have roughly doubled since late summer. For long-haul buyers, distance is becoming a significant and growing component of delivered cost. A voyage from the U.S. Gulf Coast to Japan is now estimated to cost about $53 million lump sum, or roughly $26–28 per barrel, reflecting routing around the Cape of Good Hope and voyage durations averaging about 50 days. Japan’s import mix has shifted sharply since the closure of Hormuz in March. U.S. crude deliveries to Japan rose to about 860,000 barrels per day in August—around 35% of its 2.45 million b/d total—up from 65,000 b/d in February. Saudi Arabia and the UAE, which together accounted for about 80–90% of Japanese imports before March (with Saudi supply averaging 1 million b/d and the UAE 800,000 b/d in 2025), now supply a combined share nearer 50%. Tokyo’s buyers have also pursued alternate load points and longer Suez/Cape routings, some trips extending 60–65 days when ship-to-ship waiting is included. Those commercial pressures intersect with government stockpile management. Japan entered the crisis with roughly 263 million barrels of government-held crude (about 103 days of cover). The government released about 80 million barrels in March and a further roughly 36.5 million barrels (20 days' worth) in July; by the end of July government-owned reserves were about 182 million barrels. A Ministry of Economy, Trade and Industry committee has approved a program aiming to restore roughly 90 days of cover by fiscal 2027, implying the need to replenish roughly 48 million barrels. State energy agency Jogmec has purchased a single 2-million-barrel Murban cargo for delivery to Shibushi, scheduled to arrive between Oct. 15 and Dec. 14 and sold at a $20/bbl premium to Murban’s OSP inclusive of freight, demurrage and insurance. Compounding the procurement challenge, U.S. strategic petroleum reserve (SPR) withdrawals that helped supply Japan earlier in the crisis have reduced available volumes. The SPR fell to about 285 million barrels in mid-September from 415 million in February, with an EPCA floor of 252.4 million barrels limiting further releases. U.S. export flows have eased from 5.6 million b/d in March-April to about 3.7 million b/d in August, while SPR drawdown rates have declined to around 60,000 b/d recently—reducing the volume available for export-dependent buyers such as Japan.