Maritime Fuel Regulations Page: 2 of 2
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Maritime Fuel Regulations
Administration (EIA) provided an example to suggest the
possible magnitude of the cost increase associated with low
sulfur bunker fuels. The EIA examined the relative cost of
low-sulfur gasoil (a distillate with 0.1% sulfur content) and
high-sulfur residual fuel (3.5% maximum sulfur content) at
the Amsterdam-Rotterdam-Antwerp trading and refining
hub in 2016. The EIA found that low-sulfur gasoil was
persistently priced over $20 per barrel more than the high-
sulfur residual. If the two fuels were mixed to meet the
2020 international sulfur standards, the cost increase for the
resulting compliant fuel would reflect the proportions of the
two mixed fuels.
Meeting the 2020 sulfur standards through the use of
scrubbers is an alternative that offers the possibility of more
fuel choice flexibility to vessel operators. Four main types
of scrubbers are available. Seawater scrubbers (open loop)
use untreated seawater that possesses a natural alkalinity to
neutralize the sulfur in the vessel's exhaust gas. Seawater is
drawn from, and replaced to, the ocean. Freshwater
scrubbers (closed loop) use caustic sodas mixed with water.
The circulating water is re-processed for further use. The
closed loop system uses about one-half the water, by flow
volume, of the open loop system. Hybrid scrubbers allow
for either open or closed loop operation. Open loop
operation is typically used when the vessel is in the open
ocean, while closed loop operation is typically used in
harbors or other areas where discharge is prohibited. Dry
scrubbers use no liquids, but clean exhaust gases by passing
them through hydrated lime-treated granulates. This system
produces no discharges from the vessel and the process
produces a residual which can be used in the production of
As a result of the small number of installed marine
scrubbers in operation, detailed cost studies are not
available. However, it is likely that retrofits will be more
expensive than new systems and closed systems are more
expensive than open systems.
Vessel operators, especially if their vessels are relatively
new, might convert them to use LNG. Also, newly
constructed vessels might utilize LNG or biodiesel
The results of a survey concerning ship owner's intentions
for meeting the 2020 sulfur requirements indicated that
74% intend to purchase low-sulfur fuel, 19% intend to
purchase a scrubber, 5% intend to switch fuels to LNG,
while 2% had other, unspecified plans. These survey results
are likely to be provisional in that the precise relative costs
of meeting the sulfur standards are not known.
While global marine fuel demand is only about 4% of total
world oil demand at 3.9 million barrels per day in 2018, it is
expected that important effects may exist for many sectors
of the oil and petroleum products industry, as well as other
Because of the expected shift in relative prices, with high
sulfur product prices falling and low sulfur products rising,
it is likely that simple refineries that specialize in producing
high-sulfur fuels will experience lower profitability, while
complex refineries that can produce larger product streams
of low-sulfur products may experience higher profits.
Capital investment in the refining sector is likely to increase
to allow refiners to maximize their returns to reflect the
evolving relative prices of high and low-sulfur petroleum
Crude oil prices, which reflect sulfur content, are likely to
adjust in favor of low sulfur grades while penalizing high-
sulfur grades, making the heavy, high-sulfur crude oils
produced by Venezuela and Canada, for example, less
profitable in the face of declining demand. However, the
light, low-sulfur crude oil grades produced in the Bakken
fields of North Dakota and the Eagle Ford and Permian
fields in Texas may become more profitable as their
demand increases. Some pessimistic observers see the IMO
regulations, in conjunction with other factors, affecting the
oil market in 2020 resulting in a price of $200 per barrel for
crude oil and $6 to $10 per gallon for gasoline.
Costs to the shipping industry are likely to rise, but the
magnitude of the increases might vary widely. The cost
results depend on what the size of the price premium for
low-sulfur fuel over heavy-sulfur fuel settles at and whether
fuel access is unconstrained, or whether fuel shortages
develop. Published annual cost estimates range from $5.8
billion to $52.6 billion, depending on the chosen values for
cost variables. Neither of these estimates include the cost of
scrubbers; they only reflect the cost increases for those
vessel operators that choose to use low-sulfur fuels.
Increased shipping costs are likely to be passed through as
higher shipping rates that are likely to affect consumer
prices for all goods shipped by sea.
A wide variety of non-oil sector industries might also be
affected by the shifting product mixes of refiners that face
differing economic incentives for high and low-sulfur
petroleum products and alter their product slates in
On-road transportation costs are likely to rise due to the
IMO regulations, with diesel fuel prices increasing. Again,
land shipping cost increases are likely to occur which will
be passed on to consumers. If refineries, at least initially,
respond to the IMO regulations by changing the gasoline
and diesel fuel mix in favor of more diesel, gasoline prices
may escalate sharply.
Issues for Congress
The IMO regulations for cleaner maritime fuels will go into
effect on January 1, 2020. Considerable uncertainty exists
as to the availability of the required clean fuels as well as
the price effects of the fuel conversion. If diesel, gasoline
and maritime fuel prices increase sharply, shipping costs
may rise, leading to price increases in many industries.
Robert Pirog, email@example.com, 7-6847
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Pirog, Robert. Maritime Fuel Regulations, report, August 6, 2018; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1281673/m1/2/?q=air%20pollution&rotate=90: accessed May 23, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.