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Is A Diesel Crunch Coming?

Is A Diesel Crunch Coming?

Burnaby oil refinery

The new ship fuel regulations coming into force at the start of 2020 are set to create an initial confusion on the refining market and crude oil and oil product trade flows, analysts and industry experts say.

We are now just 14 months away from January 1, 2020—the start date which the International Maritime Organization (IMO) has set for the new rules on using only 0.5-percent or lower sulfur fuel oil on ships, unless said ships have installed the so-called scrubbers—systems that remove sulfur from exhaust gas emitted by bunkers.

Analysts, experts, and industry representatives are divided as to how great of an impact those new rules will be and whether there will be enough middle distillates—which include diesel and the lower sulfur marine gasoil—to meet demand for both land use, in road transportation, agricultural machinery and industry, and for use on ships at sea.

One way to comply with the IMO rules is to have scrubbers installed, which requires upfront costs, but later these would pay off with the expected much lower price of high-sulfur fuel oil.

The other way is using fuel that contains 0.5 percent sulfur. These fuels are basically in the same middle distillate product category like road diesel or jet fuel.

Some analysts have started to warn that the competition for those middle distillates could lead to shortages of diesel, resulting in price spikes. The other camp says that with diesel demand slowing in Europe and possibly reaching plateau in demand in China, there will be enough middle distillates around.

Amid expectations of fuel prices spikes in a presidential election year, the Trump Administration is seeking to slow down the 2020 introduction of the new ship fuel rules.

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Will the International Shipping Industry Finally Set a Climate Target?

Will the International Shipping Industry Finally Set a Climate Target?

Climate change featured heavily at the opening of the International Maritime Organisation’s (IMO) annual marine environment protection meeting in London today.

IMO Secretary General Kitack Lim called the Paris climate agreement a “landmark achievement” and said that the organisation – which sets shipping regulations, including environmental standards, for UN member states – has “a major role to play in ensuring the Paris agreement translates into a long lasting improvement in people’s lives.”

This is a change of pace for the international shipping industry which, along with aviation, continues to avoid coming under a sector-wide global emissions reduction target.

Contributions from the shipping and aviation industries were notable in their absence from the Paris deal.

This is despite shipping accounting for about three percent of total global carbon emissions (a carbon footprint equal to the size of Germany). And, according to IMO projections, emissions from shipping may increase by 50-250 percent by 2050 from 2012 levels.

But as Lim told the assembled delegates: “The absence of any mention of shipping in the text of the agreement will in no way diminish the strong commitment of the Organisation… to continue its work to address greenhouse gas emissions.”

Lim focused on the Paris agreement throughout his address and reiterated its aspirational goal of limiting global temperature rise below 1.5C.

Emissions Targets

At last year’s meeting, the IMO rejected a call by the Marshall Islands to set specific emissions targets.

Since taking over the secretariat in January of this year, however, Lim has appeared more amenable to setting concrete emissions limits. He told Climate Home that climate change was a “top priority.”

But the industry has its work cut out for it. A study at UCL last year found that the global shipping industry would have to cut its emissions by nearly half by 2030 to stay on track for a 1.5C warming limit.

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Olduvai IV: Courage
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Olduvai II: Exodus
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