Scrubbers

The planned implementation date for IMO 2020 is still more than a year away, but this much already seems clear: even assuming some degree of non-compliance, a combination of fuel-oil blending, crude-slate shifts, refinery upgrades and ship-mounted “scrubbers” won’t be enough to achieve full, Day 1 compliance with the international mandate to slash the shipping sector’s sulfur emissions. Increased global refinery runs would help, but there are limits to what that could do. So, what’s ahead for global crude oil and bunker-fuel markets — and for refiners in the U.S. and elsewhere — in the coming months? Today, we discuss Baker & O’Brien’s analysis of how sharply rising demand for low-sulfur marine fuel might affect crude flows, crude slates and a whole lot more.

In January 2015 new international regulations came into force that reduced the permitted sulfur content in ships “bunker” fuel in Northern European and North American coastal regions. The change has required vessels travelling in those zones to use more expensive fuels or install scrubbers to remove sulfur. The changeover was expected to cause a sharp increase in shipping costs but as we discuss in today’s blog, so far the impact has been far less painful than expected, at least so far.