Could IMO 2020 sulfur cap be subject to law of unintended consequences?

The International Maritime Organization’s 2020 global 0.5% marine sulfur cap is an act of stewardship to protect the planet and human health for generations to come, but the supply and demand imbalances created by the cap encapsulate the law of unintended consequences. The new sulfur cap is expected to displace around 3 million b/d of high sulfur fuel oil, according to S&P Global Platts Analytics. While the 2020 sulfur cap will endeavor to protect the marine environment and human health in an act of stewardship, the excess cheap high sulfur fuel oil sidelined from the bunker industry could prove attractive to nations trying to save on costs for power generation, such as Pakistan, Bangladesh and other East Asian countries. The use of high sulfur fuel oil in power generation is unlikely to be anywhere close to the 300 million mt a year that the bunker industry currently chews through, but a significant price drop could make it attractive for Middle Eastern consumers to use heavy fuel oil to churn out air-conditioning at lower costs. This potential increase in heavy fuel oil consumption for power generation would likely be at the expense cleaner products such as LNG. “I think cost is… continue reading

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