The price paid for a barrel of oil in Asia has reached as high as $286 in at least one case, as a result of the US-Israeli war on Iran, Georges Elhedery, the CEO of HSBC Bank, said at an investment forum in Hong Kong on Tuesday.
Elhedery made the remarks to underscore how the benchmark price of oil in the West does not reflect the actual price buyers in certain parts of the world are paying.
“What worries me is not the headlines. I mean, oil headline is above $100, $110,” he said, according to a transcript of his conversation recorded by Bloomberg and obtained by market news site, Sherwood.
“Realistically, if you are now trying to get oil from the Middle East, you may be paying $140, $150,” he said.
The banker said that the highest price he heard paid for a barrel of oil was $286 in the island nation of Sri Lanka.
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Oil trades at different prices in different parts of the world.
West Texas Intermediate is trading at around $91 per barrel, while Brent, the international benchmark, is trading at $95 per barrel. The Omani benchmark, which is more relevant for buyers in Asia, is trading at roughly $100 per barrel.
The US is far from Asian markets. Iran has taken control of the Strait of Hormuz and blocked Gulf countries’ exports. This week, the US responded to Tehran with its own blockade against Iranian oil exports.
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Oil exports through the Strait of Hormuz have slowed to a trickle.
Saudi Arabia is now the region’s top exporter, with roughly five million barrels per day being exported out of its Red Sea port of Yanbu.
But even the Omani benchmark does not tell the whole story, as shipping rates and insurance costs have soared, driving the final price even higher.
“Realistically, if you are now trying to get oil from the Middle East, you may be paying $140, $150,” Elhedery said.
“If you try to get oil from the Red Sea, you are paying more than $30, $40 for shipping. Insurance costs, which used to be 25 basis points, is more like five percent, and war insurance has been scrapped – you’re paying five percent without even the war insurance component,” he said.
The Iran-aligned Houthis in Yemen have previously closed the Bab el-Mandeb Strait by attacking international shipping. Iran warned on Wednesday that it could close the Red Sea unless the US lifts its blockade against the Islamic Republic.
“Iran’s powerful armed forces will not allow any exports or imports to continue in the Persian Gulf, the Sea of Oman, or the Red Sea,” Major General Ali Abdollahi, who leads Iran’s military joint command, said.