Captains shipping oil in the Strait of Hormuz are making more than $100K a month — over $80K above their typical rates

That’s a steep hike from the $15,000 per month they typically rake in — and stratospherically higher than the $1,500 a month that sailors make for non-Strait of Hormuz journeys. Both receive double pay when traveling through the southern Red Sea, where Houthi attacks have been aimed at Saudi ships, and the Gulf of Oman. During each Hormuz transit, they get a further bump in pay, which can come out to around four to six times the typical rate for ordinary sailors, per the FT.

More than salary bumps for owners

Rate increases aren’t the only thing shipowners are having to pay more for these days. Insurance costs are on the rise due to the war and can reach as high as 10% of the ship’s value, which works out to nearly $20 million in some cases. Freight rates, meanwhile, have increased from last year’s daily rate of $20,000 to $50,000 to as much as $1.3 million per day currently.

All of those expenses are cutting into margin rates, sometimes significantly. Repsol, a European refiner, saw its margin drop to $15 this month, after reporting $36 for the third quarter. Financial analysts warn numbers like that could eventually cause shipping companies to wonder if it’s worth it to continue moving oil through the Strait.

“At a certain point, refineries can easily take a breather. When you go from 5% of the value of a cargo to 50%, trade flows will stop,” said Tor Svelland, founder of Svelland Capital, per a report in Transit Topics.

The consumer impact

While sailors risking attack are seeing financial rewards for risking transport in the Strait of Hormuz, consumers may be paying the price for that. As crude oil prices continue to rise, several household costs will be impacted.

The pain at the gas pump has been quite clear for months. The national average for a gallon of gas stands at $4.35 now, compared to $3.08 a year ago. Crude oil price increases have also resulted in higher prices for air travel and groceries (which have to absorb shipping and fertilizer costs).

And with winter looming, homeowners who use heating oil could see a sharp surge this winter. The U.S. Energy Information Administration predicted that households using oil for heating could see their bills increase by 21% this winter, with the average bill hitting $2,115.