The US' proposal to purchase and employ so-called "shadow fleet" vessels to transport mainstream crude to counter high freight costs may struggle to overcome obstacles, including sanctions from outside the US and insurance risks.
The plan to use older, often uninsured tankers that move sanctioned oil was described by US energy secretary Chris Wright in speech on 19 October as moving ships from the "bad guy fleet" to the "good guy fleet." Wright suggested that shadow fleet ships could be sold to non-sanctioned owners "to carry legitimate oil in a legitimate fashion".
The proposal comes as crude freight rates surged to record highs in October, with the rate for a US Gulf coast-China very large crude carrier hitting an all-time high that was nearly four times higher than its pre-Iran war high. Refined oil products freight rates are also rising after clean tankers were enlisted into the crude trade chasing those same surging freight rates, tightening refined oil products tanker supply overall.
But the vessels in the shadow fleet that Wright said the US may tap are often under sanctions not just by the US but also by the EU and UK. They are also typically older, less well-maintained and not properly insured, which limits where they can operate.
"The shadow fleet is characterized by limited transparency, opaque insurance arrangements and operation outside well-established industry standards, regulatory oversight and commercial inspection regimes," the International Association of Independent Tanker Owners said last week.
Lifting sanctions does not make the vessels safer, and only adds risks to safety at sea, the marine environment and coastal states, the group said.
Easing US sanctions on shadow fleet tankers is unlikely to have a significant and immediate impact on tanker freight, as the number of ships which it could impact is "too small to move the needle", shipbroker BRS said on 19 October. There are fewer than 150 tankers that are only sanctioned by the US, equal to about 2.5pc of the global fleet, according to BRS.
Vessel tracking firm Vortexa holds a similar assessment of the limited reach of such a move by the US.
"Overall, the limited pool of potentially returning vessels suggests that fleet redistribution will remain modest, with limited implications for freight rates," Vortexa said.
