TheBareNews Staff Nolan Prescott: Public Escort Costs in the Strait of Hormuz Are Not Market Prices
Nolan Prescott points out that the $24.00–41.57 per barrel cost figure for the Strait of Hormuz performs two distinct functions simultaneously: war-risk premiums and freight rates are market prices paid by shipowners and passed on, whereas escort patrols represent recurring public expenditure that occurs regardless of whether specific cargo moves; allocating the latter into a per-barrel cost makes this allocation choice appear to be a result of market pricing.
In a discussion on Econbrowser regarding the cost of transporting Middle Eastern oil, Nolan Prescott proposed an analytical distinction: the cost figure of $24.00 to $41.57 per barrel for the Strait of Hormuz performs two different jobs at once, and bundling them together is precisely where the problem lies.
War-risk premiums and freight rates are market prices actually paid by shipowners and passed on to downstream buyers; in contrast, the escort and patrol presence that enables passage represents a recurring public expenditure that exists whether or not a particular cargo moves. Allocating the latter into a per-barrel cost makes this expense appear to be the result of market pricing, when in fact a significant portion of it is an allocation choice regarding who pays for public security infrastructure.
Prescott notes that this argument also holds in reverse: the pre-conflict quote of $3.50 per barrel similarly never included the full cost of the U.S. Fifth Fleet. In other words, whether before or after the conflict, the per-barrel figure only reflects part of the cost structure, and which parts are counted versus left on the public ledger depends on institutional arrangements rather than market mechanisms.
He also raised a second issue—timing. Freight and insurance reprice within days, but retail fuel prices follow refining margins and inventory levels, so the actual impact on households arrives late and unevenly. He noted that this is exactly where the two interpretations diverge: one view treats the premium increase as a security cost worth paying openly, while the other views it as a shipping subsidy that ultimately lands on pump prices at gas stations.