Western bans on Russian cargoes have altered global energy transportation patterns, forcing global fuel providers to relocate their diesel and other goods over longer, more expensive routes that emit more carbon dioxide.
According to two shipping sources, tankers transporting clean oil products like gasoline, diesel, jet fuel, and naphtha are taking between 16 and 18 days to transport Russian supplies to Brazil or American cargoes to Europe as a result of the European Union’s ban on Russian fuel that went into effect on February 5.
The two individuals, a broker at a significant shipbroking company and a charterer active in the Russian trade of naphtha, which is used to create plastics and petrochemicals, said that this is longer than the four to six days that a ship used to sail from Russia to Europe.
The embargo comes after Western price controls and the suspension of Russian oil supplies into the union in late last year.
The Clean Tanker Index, compiled by the Baltic Exchange, analyzes typical freight costs for transporting fuels like gasoline and diesel on some of the busiest international routes. Since the ban’s implementation, these costs have more than quadrupled.
While policymakers fret about inflation and the possibility of a worldwide economic slump, the redrawing of the maritime map highlights the ripple consequences of Western attempts to penalize Russia for its invasion of Ukraine last year.
According to Dylan Simpson, freight analyst at the oil analytics company Vortexa, “voyages are not just substantially longer, but vessel behavior has also altered, preventing boats from operating in other CPP (clean petroleum product) markets.”
According to shipping statistics from Refinitiv and Kpler, Russia is recouping lost European business by exporting gasoline cargoes to distant clients in Brazil, Turkey, Nigeria, and Morocco, while Europe is buying additional fuels like diesel from Asia and the Middle East.
According to two sources from northeast Asian refineries, Asian cargoes are being replaced by Russian fuels in Africa and the eastern Mediterranean and are being diverted to Singapore’s blending center for short-term storage.
Before to Russia’s invasion of Ukraine, naphtha shipments from Russian ports to Antwerp took four days to transit. As a result, European importers now have to wait 18 days for alternative supply from the United States.
Amid the EU prohibition, the United States is also becoming a major supplier of heavy naphtha to Europe, and the Group of Seven, the EU, and Australia have set price caps on Russian naphtha at $45 per barrel and on diesel and gasoline at $100 per barrel for deals involving Western ships and insurance. Brazil, a longtime importer of American naphtha, is increasing its imports from Russia at more appealing costs.
But, the trip from Russia to Brazil might take 18 days or more, and it can cost up to $7 million each voyage, which is roughly twice as much as a cargo from the United States, according to the ship charterer active in the Russian market.
According to Benedict George, head of diesel pricing at energy and commodity data provider Argus, Brazil imported about 240,000 tonnes of Russian diesel and gasoil in the first three weeks of March, making up 25% of Brazilian imports, up from Russia’s 12% share in February and less than 1% last year.
According to a recent study by tanker broker E A Gibson, “a substantial reversal has been noticed in the space of a month.” Up until February, Europe had continued to be Russia’s top export destination for refined products.
MORE POLLUTION AT GREATER DISTANCES
According to information from valuation firm VesselsValue, the amount of Russian oil product shipments to Brazil in March increased to 3.07 billion metric tonne-nautical miles (MT-NM) from 941 million MT-NM in November when measured in terms of cargo miles, which multiply the cargo quantity in metric tonnes by the distance travelled in nautical miles. According to estimates from VesselsValue, shipments from Russia to Nigeria increased to 1.88 billion MT-NM in March from zero in November.
According to the statistics, exports of clean products to Saudi Arabia increased to 1.75 billion MT-NM in March from 31 million MT-NM in November, while shipments to the United Arab Emirates increased to 4.43 billion MT-NM in March from 2.85 billion MT-NM in November.
Also, in March, Russia delivered 973 million MT-NM of clean goods to Togo, an increase from zero in November. According to statistics from VesselsValue, Brazil imported nearly 284,000 metric tonnes of oil products from Russia in February, up from 73,300 tonnes in September. In contrast, Russian shipments to the Netherlands decreased from 1.15 million tonnes in September to 238,200 tonnes in February.
Russian goods are transported across such greater distances at a higher cost than ordinary exports from Europe.
Market estimates place freight charges for a product tanker carrying a typical 37,000-tonne cargo from the UK/European continent to West Africa at $55.77 per tonne. Comparatively, exports from Russia’s Baltic ports to Nigeria cost an estimated $174.24 per tonne, while those bound for Morocco cost $103.84, and those bound for Egypt cost around $150.
It is also expected that longer voyages for ships will result in higher smokestack emissions.
Using pre-pandemic data, Valentin Simon, a data analyst with the Transport and Environment think tank in Brussels, calculated that a 10% increase in mileage for all tankers traveling to and from the European Economic Area would result in an increase in emissions of roughly 1.5 million tonnes of carbon dioxide, which is equivalent to the emissions of about 750,000 cars each year in Europe.