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Hi Investor,
Halfway through FY27, small caps are up 24.6%, mid caps 12.5% — while the Nifty 50 has managed just 1.3%. A gap this wide has happened only 6 times in 21 years, and 4 of the last 5 times, it marked the start of a big rally.
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The Real Cost of Oil Is Rising
Oil prices are close to $100 per barrel, with the market price around $104. But there is a bigger problem that many people may not notice. The price shown on trading screens is the futures price, which is based on contracts traded by buyers and sellers. It does not always show the full cost of getting physical oil delivered to its destination. Right now, the actual cost of buying and shipping oil is rising much faster than the price shown in the market.
Oil Shipping Costs Have Jumped Four Times
One of the biggest changes is happening in oil shipping. Moving oil from Africa to China now costs around $27 per barrel. Just a month or six weeks ago, the same cost was about $6 per barrel. This means the shipping cost has increased by $21 per barrel. Even if oil is trading at $104 per barrel, buyers now face a much higher total cost when they include the extra money needed to move the oil.
Shipping Costs Are Becoming a Major Burden
To understand how serious this is, imagine buying a pizza for ₹500 and paying another ₹300 just for delivery. The price of the pizza has not changed, but the total amount you pay has increased sharply. A similar problem is now affecting the oil market. Higher shipping charges are adding a huge burden to oil buyers. The cost of getting oil from one place to another is becoming a major part of the total bill.
Oil Cargo Costs Have Risen Sharply
The increase becomes even clearer when we look at the cost of a large oil shipment. A cargo carrying 2 million barrels of oil, which earlier cost around $13 million, now costs about $54 million. This is a massive jump in the money needed to secure the same amount of oil. Buyers are now competing to get physical oil and are willing to pay extra money upfront to secure supplies. This shows that getting oil delivered is becoming much more expensive.
Why the Futures Price May Not Tell the Full Story
The main concern is that the rising cost of physical oil is not fully visible in the futures price. The price shown on trading screens may look manageable, but buyers who need actual oil are facing much higher costs. This difference between the futures price and the real cost of getting oil delivered is an important warning sign. It shows why looking only at the oil price can give an incomplete picture of what is happening in the market.
Why India Could Face a Bigger Problem
India is especially vulnerable to rising oil costs because it depends heavily on oil supplies from other countries. Even when oil is available, higher shipping and delivery costs can make it much more expensive to bring it into the country. If these costs remain high, India could face a larger import bill, putting pressure on businesses, fuel prices, and the wider economy. The key point is that the real cost of oil is not just the price per barrel. The cost of getting that oil to its destination matters just as much.
