“Circle January 2020 on your calendar for what could be a major disruption to the energy market and a jolt to the global economy” was the lead sentence in the Wall Street Journal.
“Circle January 2020 on your calendar for what could be a major disruption to the energy market and a jolt to the global economy” was the lead sentence in the Wall Street Journal. The cause – the International Maritime Organization (a group I had never heard of – a branch of the U.N.) has mandated that ships reduce the sulphur content in “bunker” fuel by a factor of seven. Current bunker fuel is the “bottom of the barrel” that is dirty, thick (often needs to be heated to flow), and has 3.5% sulphur by weight. It is a mixture of residual oils – the long-chain hydrocarbons remaining after lighter and shorter hydrocarbon fractions such as gasoline and diesel have been separated from crude oil.
The new standard for sulphur content in bunker fuel is 0.5% generally and 0.1% in so called “emissions control areas”. This is nowhere near as “clean” as the diesel we buy at the pump.
Here is the problem: how can refiners meet these standards? There are options – none of them cheap:
- Divert more low-sulfur distillates into the bunker fuel market (“steal” truck fuel pushing up the price of diesel) – and then what do they do with all the “bottom of the barrel” stuff that is left over in the refining process?
- Clean the sulphur – but that requires very big investments
- Use only crude that is low sulphur – which excludes crude from the Gulf of Mexico, Saudi Arabia, Iran, Kuwait, Mexico, and Venezuela
Steam ships can react too:
- Install scrubbers – but that too is an expensive option
- Switch to liquefied natural gas (LNG)
- Switch back to coal (just kidding) but the attached photo is of a coal-burning lake steamer in New Zealand
You can certainly see the disruption that this can cause.