IMO 2020 is Coming to Town Part 2: Will spiking cost of fuel cause you pain?

This is an excerpt of the original article. It was written for the December 2019 edition of Supply Chain Management Review. The full article is available to current subscribers.

December 2019

If it’s December, it must be time for our annual Executive Guide to Supply Chain Resources. This is a comprehensive guide to services, products and educational opportunities targeted specifically to supply chain professionals. As with years past, we’re also featuring several articles we trust will offer food for thought in your supply chain in the coming year.

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Editors Note: This is Part 2 of a two-part series by Brooks Bentz on the impact of new fuel regulations that take effect on January 2020. Part I ran in the November 2019 issue of Supply Chain Management Review.

When the new IMO fuel regulations take effect on January 1, 2020, one of the challenges will be producing compliant blends in sufficient quantities that are consistent enough to function in an vessel seeking to refuel.

As we noted last month in Part 1, there are key indicators that a shift is already underway, and that there is at least some recognition fuel availability may be problematic as the deadline approaches and implementation commences.

A reasonable hypothesis is this: All responsible marine vessel operators will be compliant with the IMO-2020 regulations. Some will convert (as some already have) to distillate fuels. Some (estimates say less than 5%) will install scrubbers. Some will resort to HFO/low sulfur blends. Some will replace aging vessels with LNG-fueled ships. The net effect will be a surge in demand for distillate fuels as both a source for burning directly and for blending. Refining capacity will not keep up with demand, leading to rising prices for diesel fuel in major markets, like North America.

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