LONDON: Global bunker fuel costs could rise by up to US$60 billion annually from 2020, in a full compliance scenario, when the International Maritime Organization’s (IMO) 0.5 wt% sulphur cap for bunker fuels kicks in.
Fuel oil, which is high in sulphur content, has traditionally been used by the shipping industry as bunker fuel. In 2016, global demand for high-sulphur fuel oil stood at almost 70% of overall bunker fuels.
With the implementation of the IMO regulation in 2020, the shipping industry will have to consider a switch to alternative fuels, such as marine gas oil (MGO), or install scrubbers, a system that removes sulphur from exhaust gas emitted by bunkers.
A combination of higher crude prices and tight availability of MGO could take the price of MGO up to almost four times that of fuel oil in 2016, and eventually cost the entire industry additional US$60 billion annually.