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.
CHAGOS ISLANDS: Recently elected Mauritian Prime Minister Navin Ramgoolam told lawmakers that the contents of negotiations are ‘unknown’ to the government Mauritius’ new prime minister ordered an independent review of a deal with the UK involving a strategically important US-UK military base in the Indian Ocean, placing the agreement under fresh scrutiny. Under a pact signed last month, the UK ceded sovereignty of the Chagos archipelago to Mauritius, while retaining control of Diego Garcia — the island where the base is situated. The deal was signed by then-Mauritian prime minister Pravind Jugnauth and British Prime Minister Keir Starmer on Oct. 3 — a month before elections in Mauritius in which Navin Ramgoolam became premier. “I have asked for an independent review of the
France on Friday showed off to the world the gleaming restored interior of Notre-Dame cathedral, a week before the 850-year-old medieval edifice reopens following painstaking restoration after the devastating 2019 fire. French President Emmanuel Macron conducted an inspection of the restoration, broadcast live on television, saying workers had done the “impossible” by healing a “national wound” after the fire on April 19, 2019. While every effort has been made to remain faithful to the original look of the cathedral, an international team of designers and architects have created a luminous space that has an immediate impact on the visitor. The floor shimmers and
THIRD IN A ROW? An expert said if the report of a probe into the defense official is true, people would naturally ask if it would erode morale in the military Chinese Minister of National Defense Dong Jun (董軍) has been placed under investigation for corruption, a report said yesterday, the latest official implicated in a crackdown on graft in the country’s military. Citing current and former US officials familiar with the situation, British newspaper the Financial Times said that the investigation into Dong was part of a broader probe into military corruption. Neither the Chinese Ministry of Foreign Affairs nor the Chinese embassy in Washington replied to a request for confirmation yesterday. If confirmed, Dong would be the third Chinese defense minister in a row to fall under investigation for corruption. A former navy
‘VIOLATIONS OF DISCIPLINE’: Miao Hua has come up through the political department in the military and he was already fairly senior before Xi Jinping came to power in 2012 A member of China’s powerful Central Military Commission has been suspended and put under investigation, the Chinese Ministry of National Defense said on Thursday. Miao Hua (苗華) was director of the political work department on the commission, which oversees the People’s Liberation Army (PLA), the world’s largest standing military. He was one of five members of the commission in addition to its leader, Chinese President Xi Jinping (習近平). Ministry spokesman Colonel Wu Qian (吳謙) said Miao is under investigation for “serious violations of discipline,” which usually alludes to corruption. It is the third recent major shakeup for China’s defense establishment. China in June
RSS