IMO changes and IMO Standards meant to reduce maritime and atmospheric pollution. The shift from HSFO to low Sulphur oils will be mandatory for everyone in the maritime sector.As of January 2020, as much as 4 million barrels of oil a day will be affected by the changes in the IMO standard. The transition from HSFO (High Sulfur Fuel Oils), such as No. 6 Oil or Bunker.
How will the transition from HSFO affect the petroleum market?
C, to VLSFO (Very Low Sulfur Fuel Oil) will affect every corner of the petroleum market. International Maritime Organization, IMO, specialized agency of the UN, tasked with the responsibility of the shipping security. It also deals with the prevention of pollution to bot. Maritime and atmospheric by the ships. As from January 2020, the body has proposed the slashing of marine sector emissions.
This will be done by switching to fuels with low Sulphur content, which is estimated to reduce Sulphur pollution by 80%. These regulations will cause one of the highest reduction in Sulphur content made at a go, in transportation fuel. Estimated to reduce from 3.5% weight, whichis currently the maximum fuel oil Sulphur limit to about 0.5% weight. Implications of the new IMO standards on the shipping industry.
IMO standards
The changes in IMO standards, which aims to achieve clean fuel usage to protect the environment, will be mandatory for all ocean carriers. Although these changes will positively impact on the environment, fuel prices are likely to increase and affect airlines as well as consumers at the pump, driving the freight and sea transport rates high.These changes will increase competition for diesel fuel, which will directly affect farm and construction machinery, truckers, and diesel cars.
Airlines are most likely to suffer the same fate since refineries will produce more diesel instead of jet kerosene fuel.Effects of the shift from HSFO to the petroleum market.
Major effects
The IMO standards changes are most likely to create a resurgence in the diesel fuel. Some of the major effects of this shift include:
- An oversupply of HSFO and high demand for IMO compliant fuels
- Due to the high demand of IMO-compliant fuels, the refining industry will experience unsurmountable pressure, which may cause them to produce substantial fuels.
- Although green shipping market is expected to grow due to changes implementing them may be difficult due to uncertainties in timing, regulatory enforcement.
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Sources:
- https://www.cnbc.com/2018/08/22/imo-2020-oil-market-could-see-a-diesel-fuel-resurgence-analysts-say.html
- https://www.morethanshipping.com/what-you-need-to-know-about-upcoming-imo-2020-sulphur-standards/
- https://energypolicy.columbia.edu/sites/default/files/pictures/1-s2.0-S0301421518307626-main.pdf