Oil Prices and Container Shipping Costs

Oil prices began rising sharply in early 2026 after the Iran war led to a blockade of maritime traffic through the Strait of Hormuz, one of the world’s most important oil choke points. In 2025, before the disruption, total oil flows through the strait averaged about 20.5 million barrels per day, roughly one-fifth of world oil supply.

In this blog post, we study the implications of these developments for container shipping. Shocks to oil prices can affect global trade by making bunker fuel, which is the fuel used by oceangoing vessels, more expensive. Higher bunker fuel prices raise the cost of operating containerships and can put upward pressure on freight rates.

The first figure puts this channel in context by showing oil prices, bunker fuel prices and the Drewry World Container Index through the beginning of June. We normalized all series to their average levels in February 2026, the month before the war. The figure shows that oil and bunker fuel prices rose sharply relative to their February levels, while the Drewry index also increased, albeit more gradually.

Our analysis examined how oil-intensive container shipping is and how fuel consumption varies across ships and voyage lengths. We then used the recent increase in bunker fuel prices to calculate the estimated increase in fuel costs for a standard China-to-U.S. West Coast voyage. Our results show the same fuel-price shock can have very different effects across the global containership fleet. Fuel costs per container are substantially higher for older and smaller ships, and fuel-cost increases are much larger on longer voyages.

Measuring Fuel Costs per Container

Fuel costs depend on the price of bunker fuel and on the amount of fuel a vessel uses to move each container. We measured container capacity in 20-foot equivalent units, or TEUs. For a given voyage, fuel cost per TEU can be written as:

Fuel cost per TEU = Fuel consumption per TEU per day x Voyage days x Bunker fuel price

This formula highlights why fuel-price shocks are not transmitted uniformly across the shipping fleet. A more fuel-efficient ship, or a ship carrying more containers relative to its fuel use, will have a lower fuel cost per TEU. A longer voyage will magnify the effect of any fuel-price increase.

We used data on containership characteristics, including vessel capacity and fuel consumption, for the universe of containerships. Fuel consumption is reported in tons per day for the ship as a whole. We divided fuel consumption by TEU capacity to measure fuel consumption per TEU per day.

We then compared two bunker fuel price benchmarks. The baseline is $518 per ton, the average Very Low Sulfur Fuel Oil (VLSFO) bunker fuel price in February 2026, the month before the start of the Iran war. The post-shock benchmark is $901 per ton, the average VLSFO price from March through May 2026 using U.S. Department of Agriculture/Ship & Bunker data available as of June 5, 2026. This is an increase of $383 per ton, or 74%. For the main exercise, we used a 21-day China-to-U.S. West Coast voyage, a stylized three-week benchmark for trans-Pacific service. We later show how the results scale with voyage length.

Fuel Efficiency Varies across Ships

We begin by examining how fuel efficiency differs by ship age. Younger ships are substantially more fuel efficient. In the data, ships up to five years old use about 0.014 tons of fuel per TEU per day, while ships older than 20 years use about 0.033 tons per TEU per day.

These efficiency differences translate into large differences in fuel costs, as shown in the next figure. On a typical 21-day China-to-U.S. West Coast voyage, the baseline fuel cost is about $155 per TEU for ships up to five years old. After the bunker fuel price increase, this cost rises to about $269 per TEU. For ships older than 20 years, the baseline fuel cost is about $360 per TEU, which rises to a post-shock cost of about $626 per TEU.

Ship size also matters, as shown in the figure below. Larger containerships can spread fuel use over more containers, lowering fuel costs per TEU. Post-Panamax ships have estimated baseline fuel costs of about $98 per TEU on the illustrative voyage, rising to about $171 after the shock. Feeder ships have much higher fuel costs, rising from about $365 to about $635 per TEU.

From Fuel Costs to Shipping Costs

The calculations above measure the direct fuel-cost channel. They do not estimate how much of the higher fuel cost is passed through to shippers or consumers. Actual pass-through depends on contracts, market conditions, carrier capacity, demand and competition.

In a competitive benchmark in which firms earn zero profits, the increase in fuel cost per TEU is equal to the increase in shipping prices needed to cover the fuel shock. Under that benchmark, the fuel-cost increase for ships older than 20 years on the illustrative China-to-U.S. West Coast voyage would imply about $266 more per TEU, compared with about $114 more per TEU for ships up to five years old.

These magnitudes are large relative to pre-Iran war freight rates. The Drewry World Container Index averaged about $1,930 per 40-foot container in February 2026. Doubling the per-TEU fuel-cost increases to express them per 40-foot container gives about $228 for ships up to five years old and about $532 for ships older than 20 years. These amounts are equal to about 12% and 28% of the February values, respectively. This comparison is illustrative, but it shows that fuel can account for a meaningful share of shipping costs.

Longer Voyages Magnify the Fuel Shock

The previous exercise holds the voyage length fixed at 21 days. Another way to see why route exposure matters is to hold ship fuel efficiency fixed and vary the number of days at sea. The next figure applies the same bunker fuel price increase to voyages of seven, 14 and 21 days for newer and older ships.

Because the calculation multiplies daily fuel use by days at sea, the implied fuel-cost increase rises with voyage length. For ships up to five years old, the additional fuel cost rises from about $38 per TEU on a seven-day voyage to about $114 per TEU on a 21-day voyage. For ships older than 20 years, it rises from about $89 to about $266 per TEU.

Concluding Remarks

Oil-price shocks are also shipping-cost shocks, but they are not uniform shipping-cost shocks. The effect depends on which vessels are deployed and how long they spend at sea. Older ships, smaller vessels and longer voyages are more exposed to higher bunker fuel prices, while newer ships are more fuel efficient and larger vessels can spread fuel costs across more containers.

This heterogeneity matters for interpreting movements in freight rates and import prices. Aggregate shipping-cost indexes are useful indicators of broad market conditions, but they can hide important differences in exposure across ships and shipments. The exercise in this blog post shows why ship characteristics and voyage length matter for the way energy shocks move through global supply chains.