The Dark Side of Shipping: Why Oil Prices Aren’t Rising
A growing “dark fleet” of tankers is quietly rerouting sanctioned oil across global markets—softening price shocks and reshaping supply chains. Explore how this hidden trade is keeping prices surprisingly stable.
Oil markets have been puzzling observers for a while. Despite sweeping sanctions on Russia, Iran, and Venezuela—and continued geopolitical stress from the war in Ukraine—global oil prices have remained surprisingly stable. Many expected sustained supply shortages and renewed inflationary pressure. That has not happened.
The reason is hidden. Or intends to be.
A growing share of the world’s oil is transported by dark ships: tankers that deliberately disable their Automatic Identification System (AIS) transponders to evade detection while moving sanctioned crude.
Dark shipping is not a fringe activity. It has become a core mechanism of global oil markets, particularly for those countries under international sanctions and very willing to pay a premium to secure oil. While seaborne transport accounts for over three-quarters of global crude oil trade, dark shipping is a significant part of that trade.
Using global AIS data and a machine-learning ship clustering model, our recent research shows just how large this phenomenon has become. Between 2017 and 2023, dark ships transported roughly 9.3 million metric tons of crude oil per month—close to half of officially recorded global seaborne oil exports, as measured in UN Comtrade data. These flows expanded sharply following major sanction episodes, including the U.S. withdrawal from the Iran nuclear deal in 2018 and the G7/EU price cap on Russian oil introduced in late 2022.
The key point is not simply that sanctioned oil keeps moving. It is how markets adapt once sanctions get in the way. Oil markets are segmented by geography, quality, and regulation. When sanctions raise the cost of selling into one market, producers redirect supply elsewhere—often at a discount and at higher transport and insurance costs.
Russia, Iran, and Venezuela primarily reallocate their oil exports to China. They rely on older tankers, obscure ownership structures, and ship-to-ship transfers in loosely regulated waters—practices extensively documented by Lloyd’s List Intelligence (2023).
This reallocation has two macroeconomic consequences.
First, it dampens the global oil price response to sanctions. Official export volumes fall, but discounted dark-shipped oil enters non-sanctioning markets, especially China. Empirically, when dark shipping is accounted for, oil sanctions have a much smaller effect on global benchmark prices than standard models would predict. In counterfactual scenarios without dark shipping, prices would rise substantially more—precisely the outcome sanctions are often intended to produce.
Second, these oil flows propagate through global supply chains, with effects far beyond the energy sector. China—the largest importer of dark-shipped oil—benefits from lower energy costs, which boosts the country’s industrial production. Because China is central to global manufacturing networks, lower production costs there translate into cheaper intermediate inputs for the United States and Europe.
For the United States, a net oil exporter, this mechanism generates an unusual combination: lower oil prices compress domestic producer revenues, but cheaper Chinese inputs support supply-driven, deflationary growth. For the European Union, higher energy costs are partially offset by stronger Chinese demand for European exports and lower prices for imported intermediates. Output rises, and inflation is more muted than a simple sanctions-only narrative would suggest.
These dynamics help explain why oil prices today look surprisingly calm. They also point to a broader lesson for policymakers. We often see sanctions in bilateral terms—Russia versus Europe, Iran versus the United States. But their effects emerge in general equilibrium, shaped by market segmentation, supply-chain linkages, and strategic adaptation.
Dark shipping is not a loophole at the margins of the global energy system. It is a market response to binding constraints. Ignoring its presence risks misunderstanding both why sanctions sometimes fail—and why unintended consequences can be as powerful as intended ones.
Jesús Fernández-Villaverde
Howard Marks Presidential Professor of EconomicsJesús Fernández-Villaverde is the Howard Marks Presidential Professor of Economics in the Department of Economics at the University of Pennsylvania. He serves as director of the Penn Initiative for the Study of the Markets at Penn.
