Open Warfare: Hidden Costs

 National security and economics are closely linked, especially as rising fuel prices significantly impact various sectors, including the U.S. defense department. A significant part of this increase is due to rising global shipping costs, which have been affecting the price of oil and its byproducts.

1. Impact of Rising Fuel Prices:

The U.S. defense department has already lost over one billion dollars due to increased fuel costs.

Shipping costs contribute significantly to the price of oil and gas products, with insufficient attention paid to their arbitrary determination.

2. Legal Actions:

Mercuria Energy Group, a major commodity trader, has filed a lawsuit against the Baltic Exchange for losses related to freight contracts tied to the TD3C shipping benchmark.

TotalEnergies is also considering a similar legal action.

3. Issues with the TD3C Benchmark:

The TD3C benchmark is used to set shipping rates for transporting crude oil from the Middle East to China.

Due to geopolitical tensions, actual transactions have decreased, leading the Baltic Exchange to use subjective estimates to set rates, resulting in pricing discrepancies.

4. Consequences of Benchmark Distortion:

Significant variation in estimates could lead to erroneous pricing models, likely affecting fuel costs for consumers.

Elevated freight costs permeate through to gasoline and other oil-based products, potentially impacting consumers' expenses.

5. Regulatory Oversight:

The Commodities Futures Trading Commission (CFTC) has the authority to intervene but has yet to act on this issue.

There is a call for the CFTC to adapt the benchmark to more reliable routes to prevent further economic distortion affecting consumers.

The connection between geopolitical factors and fuel prices requires urgent attention from regulators to ensure consumers are not unfairly burdened. The CFTC has the necessary tools to address these challenges before they escalate, ensuring more stable pricing for everyday individuals.

https://www.realcleardefense.com/articles/2026/09/01/open_warfare_hidden_costs_1203500.html