A looming change to rules for maritime fuel in January could cause a splash, making goods and travel of every type more expensive. The International Maritime Organization is about to reduce the limit on sulfur in fuel oil to 0.5% from 3.5%. While ships make up just 5% to 7% of global transport oil demand according to Goldman Sachs, they emit about half of sulfur from transport because they use the dirtiest fuel—literally the bottom of the barrel. The move will prevent over half a million premature deaths from pollution globally in the next five years according to a study cited by the IMO.
But saving those lives may not come without significant cost and disruption, according to many in the industry. Refineries, as they are currently configured, can’t simply refine out more sulfur. In addition, there just isn’t enough very-low-sulfur fuel oil to go around. Tor Svelland, a London-based shipping expert who is actively betting on the dislocations through two investment funds, estimates that about 62,000 vessels world-wide that haven’t installed scrubbers to reduce sulfur will be impacted.
That, in turn, will drive the cost of cleaner alternatives including maritime diesel oil—similar to diesel used by trucks and trains—much higher. Right now there is a $350-per-metric-ton gap between the prices of that and high-sulfur fuel oil in use by most vessels. It could widen to as much as $1,000 next year, reckons Mr. Svelland, adding tens of billions of dollars to shipping costs.