Global bunker fuel cost could rise by up to US$60 billion annually from 2020, when the International Maritime Organisation’s (IMO) 0.5 wt% sulphur cap regulation for bunker fuels kicks in.
Traditionally, fuel oil is 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 deliberate a switch to alternative fuels such as marine gas oil (MGO). This will enable the sector to meet the regulation’s sulphur specifications. Alternatively, shippers could install scrubbers, a system that removes sulphur from exhaust gas emitted by bunker fuel.
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 costing the entire industry US$60 billion annually.