Ready or not, the New Year is bringing sweeping changes globally to the ocean transport industry. The International Maritime Organization (IMO) will implement the new Sulfur regulation rule on January 1, 2020. The regulation reduces the amount of Sulfur contents allowed in a ships’ fuel oil to .50%. The current amount allowed is 3.50%.
Why the Change?
The decision to globally reduce Sulfur in fuel was originally made in 2008 and confirmed in 2016. The change was made to benefit not only the environment but also people who live along coastlines. An excerpt from the IMO reads:
As a result, reductions in stroke, asthma, lung cancer, cardiovascular and pulmonary diseases are expected. Cutting sulfur emissions from ships will also help prevent acid rain and ocean acidification, benefitting crops, forests and aquatic species.
What does this mean for the shipping industry?
The shipping industry basically has three choices in order to become compliant with the new regulation.
- Use compliant fuels (Many refineries are blending fuels with a higher and lower Sulfur content in order to become compliant under the new rule. This is the most popular option).
- Ships may use different fuels such as natural gas or bio-fuels.
- Install scrubbers on ships in order to remove Sulfur oxides from the ship’s engine and exhaust—allowing them to continue to use heavy fuel oil.
What does this mean for end consumers?
For end consumers, this ultimately means we can expect a price increase. The amount of the increase will be almost completely dependent on fuel costs. Although we’ve known about the sweeping new regulations for years, some experts believe that the industry is not adequately prepared for the changes. As the demand for new low Sulfur fuel rises, the amount of the supply will ultimately be the biggest factor in increasing rates.