The Gulf has spent decades building its position as a major energy supplier, investing in the infrastructure needed to get oil and gas from production facilities to customers around the world. But producing energy is only part of the job. It also needs to be transported, often over thousands of kilometres and through complex international supply chains.
When talking energy competitiveness, the focus tends to fall on production costs, commodity prices and demand. The cost of getting energy to market can receive less attention, even though it can make a real difference. Freight rates, insurance, the availability of ships, access to storage and the reliability of transport routes all affect what it costs to deliver a barrel of oil or a shipment of liquefied natural gas.
In stable conditions, these costs can matter less. But when shipping routes are disrupted, insurance premiums rise or vessels have to take longer journeys, the impact becomes harder to ignore. Recent tensions around the Strait of Hormuz have shown how quickly problems along a single transport corridor can affect the wider energy market.
For Gulf energy producers, competitiveness depends on more than production capacity. Getting energy to customers reliably and at a competitive cost is also important, influencing decisions on infrastructure, shipping, storage and supply-chain planning. Logistics therefore needs to be treated as a central part of the region’s long-term energy strategy.
The journey is part of the price
Energy markets tend to focus on production volumes, oil prices and demand forecasts. Logistics can seem like a supporting function, something to be managed once the commercial deal has been done. In reality, the cost and availability of transport can materially change the economics of that deal.
Consider the journey from the Gulf to major Asian markets. A shipment’s economics depend on the availability of a suitable tanker, the prevailing freight rate, the length and safety of the route, and the cost of insuring the cargo and vessel. Delays can mean additional vessel time, storage requirements and working capital tied up in transit. If a route becomes more difficult to use, a longer alternative may keep the cargo moving, but at a higher cost.
These pressures do not necessarily show up in the headline price of oil. They can, however, affect the price a buyer is willing to pay, the margin a producer retains and the attractiveness of one supply source compared with another.
The recent disruption has also exposed the commercial consequences of rising logistics costs. Higher freight rates and insurance premiums are putting pressure on Asian refiners, while threatening the competitiveness of Middle Eastern crude. Buyers face higher costs to get supplies delivered, while producers may have to adjust their prices to remain competitive. The result is a reminder that transport costs can affect both sides of an energy deal, not just the companies moving the cargo.
Geography is an advantage, until it becomes a constraint
The Gulf’s location gives it a natural position in global energy trade, connecting major producing countries with markets across Asia and beyond. Yet geography also creates dependencies. A significant share of the region’s energy exports relies on maritime routes through a relatively small number of strategic passages.
The Strait of Hormuz illustrates the challenge. As one of the world’s most important energy transit routes, its importance is difficult to overstate, but so is the concentration of risk that comes with depending on it.
It’s not just about whether a vessel can pass through the Strait, uncertainty itself has a cost. It can influence insurance premiums, shipping availability, delivery schedules and the willingness of operators to commit vessels to particular routes. Even when trade continues, the terms on which it takes place may change considerably.
Access to a major shipping route is only one part of a competitive supply chain. The other is being able to maintain deliveries when conditions deteriorate matters too. Understanding where dependencies exist, what they cost and which alternatives are commercially viable should always be part of a strategic gameplan.
Resilience has to make commercial sense
One way to reduce supply-chain risk is to have alternatives. For Gulf energy producers, that could mean additional storage, different export routes, more flexible shipping arrangements or better connections between production facilities and ports.
In the UAE, ADNOC’s crude oil pipeline transports oil from Abu Dhabi to Fujairah, on the Gulf of Oman, allowing exports to bypass the Strait of Hormuz. It gives the country another route to market, although the volumes it can carry are limited by pipeline and terminal capacity.
Of course, building and maintaining this kind of infrastructure is expensive. Storage capacity or an alternative route may sit underused for long periods, making the investment difficult to justify on day-to-day economics alone. But when disruption hits, that spare capacity can prove its worth.
The challenge is deciding where the cost is justified. Producers need to weigh the investment against the likely impact of interrupted deliveries and consider how well their infrastructure would perform if a key route became unavailable.
That means looking beyond how much energy a system can move in normal conditions. It also means asking what happens when shipping is delayed, demand shifts or a critical route is suddenly out of action. The aim isn’t to prepare for every possible scenario, but to understand the risks and decide which ones are worth paying to reduce.
The supply chain extends well beyond the port
Energy logistics is not limited to the movement of crude oil, petroleum products and liquefied natural gas. It also encompasses the equipment, materials and services needed to keep production and export operations running.
Offshore support vessels, specialist equipment, maintenance supplies, warehousing and the movement of personnel all contribute to the reliability of energy operations. A delay in delivering a critical component can affect production just as surely as a transport bottleneck can delay a shipment.
In the UAE, ADNOC Logistics & Services, for example, provides vessel operations, material handling, warehousing and other services needed to develop and maintain energy production. These activities may receive less attention than production figures or commodity prices, but they are essential to the performance of the wider system.
The reality is that supply-chain performance should be considered alongside production efficiency, maintenance and capital investment. Procurement, operations, shipping and inventory management need to work towards the same commercial objectives. A saving in one area may create a larger cost elsewhere if it increases the risk of delays or leaves a critical operation without the supplies it needs.
Efficiency needs to be balanced against resilience
The pressure to control costs will not disappear. Energy producers operate in competitive markets, and expensive infrastructure or unnecessary inventory can undermine their returns. At the same time, pursuing the lowest possible logistics cost under normal conditions can leave a supply chain exposed when circumstances change.
The challenge is finding the right balance.
UN Trade and Development’s Review of Maritime Transport 2025 examines how geopolitical tensions, rerouting and changing trade patterns are affecting shipping and maritime supply chains. One of its wider lessons is that disruptions can alter the geography and cost of trade well beyond the immediate location of an incident. Longer routes place additional demands on vessels and increase the resources required to move the same volume of cargo.
For the Gulf’s energy industry, this reinforces the case for looking at the entire delivery system rather than optimising individual links in isolation. A slightly more expensive route may offer greater reliability. Additional storage may provide flexibility when shipments are delayed.
Alternative transport infrastructure may reduce dependence on a single corridor. Each decision needs to be assessed against the costs it introduces and the risks it helps manage. The point is to recognise that the cheapest arrangement on paper is not always the most economical over time.
A competitive advantage that needs to be managed
The Gulf’s position in global energy markets rests on considerable strengths. But production capacity and access to resources do not automatically translate into a lasting competitive advantage. Energy must still be transported, stored, handled and delivered through a system that is exposed to commercial pressures and external disruption.
That makes logistics a strategic consideration, rather than simply an operational cost to be reduced wherever possible.
For energy producers and policymakers, the task is to understand how transport infrastructure, shipping capacity, insurance, storage and supporting services affect the full cost of getting energy to market. It also means recognising where investment in flexibility and resilience can protect the value created elsewhere in the supply chain.
A producer’s cost base will always matter, but so will its ability to get energy to market without delays or spiralling transport costs. As trading conditions become less predictable, the strength of the supply chain will play an increasingly important role in how competitive Gulf energy remains.
