Tens of thousands of cargo ships will have to start using less polluting fuels in January next year, a boon for the environment that could lead to higher bills for consumers.
The International Maritime Organization (IMO) in 2016 decided that the sulfur levels in fuels for ships would have to fall to 0.5 percent next year, compared with 3.5 percent currently.
The idea is to reduce emissions of sulfur dioxide — a health hazard also responsible for acid rain — by the nearly 80,000 cargo ships that ply the seas delivering raw materials and merchandise.
The shipping industry is critical to the global economy, but the pollution it generates is estimated to cause 400,000 premature deaths and 14 million cases of asthma among children per year, according to an article published last year in Nature.
Shipowners have several options to meet the new regulations.
One is to continue with heavy fuel oil, but install scrubbers that remove sulfur from the exhaust fumes, but these can be expensive and some models dump the water used to clean the exhaust into the ocean, a practice that some say could get them banned.
A second option is for shipowners to convert their vessels to run on liquefied natural gas (LNG), a fuel that is much less polluting.
So far few have chosen this option as LNG fueling infrastructure does not exist in all ports.
The easiest option for many is to switch to new fuels with low sulfur content or marine diesel oil.
About 3.6 million barrels of oil per day are used to produce the fuels used by the shipping industry. About one-sixth of the total is expected to remain dedicated to production of high-sulfur heavy fuel oil for vessels equipped with scrubbers or those that do not immediately comply with the new regulations.
“That leaves about 3 millions barrels a day that needs to adjust to the 0.5 percent fuel regulation” S&P Global Platts head of analytics Chris Midgley said.
The International Energy Agency said that the oil products market is heading for its “largest ever transformation” as refiners “will need to adapt to a new demand landscape.”
The first effects on shipowners would likely be an increase in costs. Fuels that meet the new regulations are more complicated to produce and are “two times more expensive, but we could see an even larger increase with higher demand,” said Nelly Grassin of Armateurs de France.
Even those whose ships remain on heavy fuel oil could face higher prices as refineries need to recoup costs on smaller volumes.
Cargo firms might then be tempted to raise their rates to ship goods, which could eventually lead to higher prices for consumers.
The higher demand for compliant fuels would mean higher demand for low-sulfur crude oil that is used to produce gas and jet fuel, thus it might also have a knock-on effect for consumers with higher prices to drive or fly.
Brent and WTI, two benchmark grades of crude oil that are heavily traded on the markets, are “sweet” in industry parlance, meaning they have low sulfur content.
However, crude pumped from many other areas is “sour,” meaning it has more sulfur, including hydrogen sulphide, which is responsible for causing the “rotten egg” smell and more costly to process.
“Brent could rise and test US$70, maybe break through US$70 at the end of the year,” Midgley said, compared with less than US$60 per barrel currently.
The new fuel regulations “will have a knock-on impact on all consumers who are buying gasoline or diesel,” he added.
“The general public will be impacted by the IMO regulation in two major ways — the cost of flights and the retail prices of road diesel,” said Alan Gelder, a vice president at the energy research and consultancy group Wood Mackenzie.
Any increases in airfares are likely to be more gradual as airlines usually lock in prices for several months in advance.
CONFRONTATION: The water cannon attack was the second this month on the Philippine supply boat ‘Unaizah May 4,’ after an incident on March 5 The China Coast Guard yesterday morning blocked a Philippine supply vessel and damaged it with water cannons near a reef off the Southeast Asian country, the Philippines said. The Philippine military released video of what it said was a nearly hour-long attack off the Second Thomas Shoal (Renai Shoal, 仁愛暗沙) in the contested South China Sea, where Chinese ships have unleashed water cannons and collided with Philippine vessels in similar standoffs in the past few months. The China Coast Guard and other vessels “once again harassed, blocked, deployed water cannons, and executed dangerous maneuvers” against a routine rotation and resupply mission to
GLOBAL COMBAT AIR PROGRAM: The potential purchasers would be limited to the 15 nations with which Tokyo has signed defense partnership and equipment transfer deals Japan’s Cabinet yesterday approved a plan to sell future next-generation fighter jets that it is developing with the UK and Italy to other nations, in the latest move away from the country’s post-World War II pacifist principles. The contentious decision to allow international arms sales is expected to help secure Japan’s role in the joint fighter jet project, and is part of a move to build up the Japanese arms industry and bolster its role in global security. The Cabinet also endorsed a revision to Japan’s arms equipment and technology transfer guidelines to allow coproduced lethal weapons to be sold to nations
‘POLITICAL EARTHQUAKE’: Leo Varadkar said he was ‘no longer the best person’ to lead the nation and was stepping down for political, as well as personal, reasons Leo Varadkar on Wednesday announced that he was stepping down as Ireland’s prime minister and leader of the Fine Gael party in the governing coalition, citing “personal and political” reasons. Pundits called the surprise move, just 10 weeks before Ireland holds European Parliament and local elections, a “political earthquake.” A general election has to be held within a year. Irish Deputy Prime Minister Micheal Martin, leader of Fianna Fail, the main coalition partner, said Varadkar’s announcement was “unexpected,” but added that he expected the government to run its full term. An emotional Varadkar, who is in his second stint as prime minister and at
Thousands of devotees, some in a state of trance, gathered at a Buddhist temple on the outskirts of Bangkok renowned for sacred tattoos known as Sak Yant, paying their respects to a revered monk who mastered the practice and seeking purification. The gathering at Wat Bang Phra Buddhist temple is part of a Thai Wai Khru ritual in which devotees pay homage to Luang Phor Pern, the temple’s formal abbot, who died in 2002. He had a reputation for refining and popularizing the temple’s Sak Yant tattoo style. The idea that tattoos confer magical powers has existed in many parts of Asia