Two weeks ago, the vast majority of the world’s ships were forced to change the fuel they use. Some big winners—and potential losers—are starting to emerge from what was a historic switch for the world’s oil refining and maritime industries, Bloomberg reports.
Regulations began on Jan. 1 forcing vessels to sharply reduce emissions of sulfur oxides from burning so-called bunker fuel. If successful, the rules could turn out to be the single-biggest, globally mandated improvement to air quality ever. The pollutant is blamed for worsening human health conditions and causing acid rain.
But the cost of the new fuel has skyrocketed to the point where it recently surpassed diesel and gasoline in Singapore, Asia’s oil-trading hub. The dynamic adds to the cost of transporting goods and raw materials—a potential impediment to global supply chains since fuel represents the maritime industry’s single-biggest expense. Even if the hike will be largely invisible to end consumers, it’s important to owners, some of whom may end up in financial difficulty if fuel prices stay high.
IMO 2020, as the rule is known, is a global sulfur cap on marine fuel of 0.5%, down from 3.5% in most parts of the world. The Jan. 1 start date was set in October 2016.
The price surge points to significant support for those refineries that make the new product. Likewise, some shipowners are making fortunes because they invested in kits allowing them to burn the old sulfur-rich variety, which is several hundred dollars a ton cheaper. Read the full story.
