Shipping chaos, soaring insurance, and geopolitical tensions push real oil costs far above market prices
A growing disconnect between global oil prices and what end buyers actually pay is raising alarm bells for vulnerable economies, with Georges Elhedery warning that countries like Sri Lanka are already bearing the brunt.
Speaking during a fireside chat with David Ingles at the HSBC Global Investment Summit, the HSBC CEO said his “biggest worry about the global economy” is the disruption linked to the Strait of Hormuz.
Although a ceasefire between the United States and Iran was expected to stabilize flows through the critical waterway, subsequent moves — including a reported U.S. blockade — have instead deepened uncertainty and supply strain.
Elhedery noted that while headline oil prices hover around $100–$110 per barrel, the actual cost for importers is significantly higher once logistics are factored in.
“What worries me is not the headlines,” he said. “Realistically, if you are now trying to get oil from the Middle East, you may be paying $140, $150.”
He explained that shipping crude via the Red Sea now carries an additional $30–$40 per barrel, while insurance costs have surged dramatically—from around 0.25% previously to nearly 5%, even without full war-risk coverage.
This combination of freight and insurance premiums means that the true “door-to-door” cost of oil is far above benchmark prices. In one extreme case, Elhedery revealed that a shipment reaching Sri Lanka cost as much as $286 per barrel.
“This is not a country and an economy that can easily afford these kind of prices sustainably,” he cautioned.
In a separate interview with Bloomberg News, Elhedery warned that prolonged disruptions in key shipping lanes could affect not only prices but also the availability of energy supplies globally.
Meanwhile, the International Energy Agency has revised its oil market outlook, forecasting a slowdown. The agency now expects an 80,000 barrels-per-day drop in demand growth this year—a sharp downgrade from the 640,000 bpd increase projected in March, according to Reuters.
The evolving crisis highlights how geopolitical tensions and supply chain disruptions are reshaping the global energy market — with smaller, import-dependent economies facing the harshest consequences.
Source: Bloomberg TV interview; Bloomberg News; Reuters; International Energy Agency
