Geopolitical conflicts and refinery profit-seeking are driving a global shortage of bunker fuel, threatening to disrupt international supply chains and raise freight costs.
The global shipping industry is currently grappling with a severe shortage of bunker fuel, the critical substance used to power the vast majority of the world's commercial fleet. This energy crisis is primarily rooted in ongoing geopolitical conflicts that have disrupted traditional oil supply routes and hampered refinery outputs. As hostilities continue in West Asia and Eastern Europe, the flow of crude oil—the raw material for ship fuel—has become increasingly erratic, leading to a significant tightening of available supplies.
Key maritime chokepoints have become focal points of this instability. The Strait of Hormuz, a vital artery for global energy, has seen its functionality compromised due to the US-Israel conflict with Iran. Historically, this narrow passage facilitated the movement of approximately 20 percent of the world's oil and gas. Furthermore, the Bab al-Mandeb Strait has faced repeated disruptions, forcing shipping companies to navigate longer, more expensive routes, which in turn places additional strain on fuel reserves.
In Eastern Europe, the prolonged war between Russia and Ukraine has compounded these supply chain challenges. Russian refineries, which play a major role in global oil exports, have been targeted 's refining capacity. Consequently, Russian fuel oil exports plummeted to a record low of 591,000 barrels per day in August, a sharp decline from the 2025 average of over 860,000 barrels per day.
Beyond the direct impact of war, the current fuel shortage is exacerbated sed, it yields various products, including petrol, diesel, jet fuel, and the heavy residues used for bunker fuel. Refiners operate on a profit-driven model, meaning they prioritize the production of high-value fuels like diesel over the heavier, less lucrative fuel oils required
Market analysts have noted that the current economic climate has created an extraordinary profit margin for diesel. To capitalize on these margins, refiners are utilizing secondary processing units to upgrade heavier oil fractions—which would typically remain as bunker fuel—into higher-value products such as diesel and petrol. This practice effectively diverts essential resources away from the shipping industry, leaving bunker fuel stocks depleted.
This systemic shift is visible in major production hubs, such as Nigeria’s Dangote refinery, which has actively ramped up exports of diesel and jet fuel while reducing its output of heavy fuel oil. As refiners continue to optimize for diesel, the supply of available bunker fuel will likely remain constrained, forcing shipping companies to compete for limited resources in a high-cost environment.
The impact of this fuel deficit is not distributed evenly, with Asia emerging as a particularly vulnerable region due to its heavy reliance on energy imports from the Gulf. Singapore, which serves as the world’s largest bunker fuel hub, imports more than half of its million-barrel-per-day consumption. The resulting scarcity has driven prices for Very Low Sulphur Fuel Oil (VLSFO) to approximately $825 per metric tonne, marking a staggering 76 percent increase since the onset of the conflict with Iran.
Inventory levels in other critical logistical nodes, including Amsterdam-Rotterdam-Antwerp and Fujairah, are similarly strained, with stocks currently hovering 30 percent below their three-year seasonal averages. These low levels create a fragile environment where any further disruption in production or logistics could lead to rapid price spikes, making it increasingly difficult for carriers to maintain predictable operational costs.