IMO 2020 and its Impact on Distillate Markets

When the International Maritime Organization (IMO) lowers the maximum allowable sulfur content of marine fuel from 3.5% mass/mass to 0.5% mass/mass on January 1, 2020, distillate markets are likely to become more expensive. However, the impact is likely to be restricted to less than three years, according to a newly released literature review by the Fuels Institute.

This analysis represents a summary of more than 30 reports evaluating the impact of IMO 2020 and covers the rule’s impact on the composition of marine fuel, refinery operations and capacity, price of and demand for refined petroleum products, and projected compliance strategies.

The Fuels Institute undertook this review to try and make sense of headlines and provide an objective overview of the potential market impacts of the rule.

In a statement to media, John Eichberger, executive director of the Fuels Institute, said that some reports about the impacts of IMO 2020 suggest that price impacts to crude oil and refined petroleum products will be enormous and world-wide shortages will emerge, while other reports suggest that price and global supply could spike but quickly rebound and rebalance within a few years. said. “When comparing and contrasting multiple reports, the information becomes much more robust and valuable,” Eichberger said.

“Fuels Institute Literature Review Summary - IMO 2020: International Maritime Organization's 2020 Sulfur Reduction Rule,” reviews the rule’s impact on the composition and demand for marine fuel, refinery operations and capacity, price and demand for crude oil and refined petroleum products and projected compliance strategies.

Overall, the consensus is that while enforcing the rule will be challenging, compliance rates will likely be high. The expectation is that global refineries will be able to produce enough low-sulfur fuel to supply both the marine fuel market and other transportation sectors, while crude supplies and distribution of refined products could experience some global shifting. Price impacts to gasoline and diesel are expected to range from about 25 cents to 75 cents with the impact limited to a 2-3-year window.

The report is now available for download free of charge at http://www.fuelsinstitute.org/research.

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