29 Mar 2019: For most regulatory changes the optimal solutions are typically becoming clearer as the deadline is nearing. IMO 2020 does not (yet) appear to be conforming to that rule. Nine months before the oil and shipping industry is implementing one of the most dramatic changes in product specification the world has ever seen, many uncertainties around fuel availability, product specifications and compliance remain. According to the IEA, IMO’s sulphur rules impact around 4.5 million barrels per day of bunker fuel, equivalent to 4.5% of global oil demand. The reduction in maximum sulphur content from 3.5% to 0.5% will take place on January 1st, 2020. The regulation allows for multiple compliance options, which has made it very difficult to forecast how the industry will handle the change and what the impact on product flows will be. It created a situation that limited the first-mover advantage towards compliance. It has kept market participants on the fence for a long time, increasing market uncertainty. The U.S. Energy Information Administration (EIA) highlights this uncertainty in a recent report on this topic. “Many policy and technical complications, as well as potential market participant responses, are creating numerous interrelated factors that will have a significant influence on the eventual outcome. These factors are highly interdependent on one another, making cause and effect difficult to disentangle” it says.
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