Shell disclosed on October 29, 2026, that soaring freight rates had added $5.4 billion to its shipping lease costs in the third quarter compared with the previous three months, feeding directly into its net debt position . The figure reflects a non-cash accounting adjustment tied to the variable component of Shell's long-term shipping leases, which must be revalued using prevailing spot rates when the market moves sharply. Shell stressed that the increase does not represent immediate cash expenditure, but it does carry real forward consequences: higher charter rates are a genuine future cash claim on the company .
The mechanism behind the adjustment is straightforward. Spot rates for oil tankers hit an all-time high in early October 2026 as Middle East producers ramped up exports using shuttle services and ship-to-ship transfers to move oil out of the Strait of Hormuz, tying up vessels for far longer than normal and tightening the global supply of available tonnage . Shell's Chief Financial Officer Sinead Gorman quantified the shift on the company's earnings call: the route between anywhere in the Middle East and China was "some 10 times what it was from even just 12 months ago," and she confirmed that the pressure was "starting to come into margins," including Shell's own refining margins .
The accounting treatment matters for how the $5.4 billion figure should be interpreted. Shell now reports net debt two ways: including leases, net debt stood at $39.7 billion; excluding leases, it was just $5.6 billion. Gearing read 16.6% including leases versus 2.7% excluding them . Roughly $34 billion of the reported debt pile sits in leases, and the freight market is what moves it quarter to quarter. Gorman said she expected the lease figure to come down again once shipping through Hormuz normalizes, framing the increase as a cyclical, reversible effect rather than a structural deterioration of the balance sheet .
Over the first nine months of 2026, cumulative increases in Shell's shipping leases ran $8 billion higher than in the same stretch of 2025 . This trajectory tracks the escalation of the Middle East conflict and its effect on tanker routing. Before the disruption, crude from the Gulf could move through Hormuz on standard voyage charters. With the strait effectively constrained, producers turned to shuttle services and ship-to-ship transfers that absorb far more vessel-days per barrel delivered, driving freight rates to levels that would have been difficult to anticipate at the start of the year.
At TotalEnergies, the same freight shock manifested differently—not as a balance sheet liability but as a direct hit to revenue realization. CEO Patrick Pouyanné revealed that the French major's freight costs had climbed from roughly $2–3 per barrel to approximately $25 per barrel . He attributed around $6 per barrel of pressure on the company's liquids price realizations to additional freight costs, making shipping the main reason for the quarter-over-quarter decline . TotalEnergies has some protection through its chartering strategy, with fixed-rate medium- and long-term agreements covering approximately 40% of the equity crude it lifts, and Pouyanné noted that having tankers available at agreed rates had also allowed the company's traders to profit from moving Iraqi crude through the Strait of Hormuz .
The divergence between Shell and TotalEnergies illustrates how the same freight shock can land on different parts of the financial statements depending on chartering arrangements and accounting treatment. Shell's version of the freight bill shows up as a liability on the balance sheet; TotalEnergies' shows up as lower realized prices on the income statement. Both reflect the same underlying reality: the cost of moving crude oil from the Middle East to global markets has risen to levels that materially affect the economics of the world's largest energy companies . Other majors have reported similar pressures. Eni acknowledged that rising shipping costs were eating into its refining earnings, and Equinor's crude and liquids business swung to an adjusted operating loss of $96 million, attributed to losses on derivative positions in the exceptionally tight shipping market .
For India and other major crude importers, the implications are direct. India sources a substantial share of its crude from the Persian Gulf, and the freight rate escalation documented in Shell's and TotalEnergies' results represents the same cost pressure that Indian refiners face when chartering vessels to bring crude to Indian ports. IOC Chairman A S Sahney's warning that "freight is a killing factor" captures the same dynamic: discounted crude is only beneficial if the transportation cost does not consume the savings . The quarterly disclosures from Shell and TotalEnergies provide a quantified benchmark for how severe that pressure has become, and a reminder that freight market conditions in the Middle East affect the landed cost of energy for every importing nation, regardless of whether the cargo is destined for Rotterdam, Mumbai, or Singapore.