Red alert to all you farmers and truckers out there -- Shipping PLC is thinking hard about making a raid on the global village and siphoning off all your diesel.
It is almost unimaginable -- in fact it is almost certainly impossible -- but delegates at the Sustainable Shipping Forum in Singapore Friday were talking about a long-term strategy for coping with emissions that involves switching all world shipping away from fuel oil-based bunker fuel to gasoil-based bunker fuel.
It is a staggering thought. In fact, it's enough to make you want to grab your pitchfork, and circle the wagons. Well, if you're a farmer or a trucker.
Imagine this scenario: faced with legislation from all sides -- the EU, the United Nations's International Maritime Organization, the EPA in the US and national government -- shippers look likely to face an effective global cap of 3.5% on the sulfur in the fuel they use by 2011. As things stand, that cap will fall dramatically to 0.5% sulfur by 2025, if not before.
Now while shippers will tell you, rightly, that container ships are the cleanest way to move cargo over land, sea or air on a "pollution per mile" basis, there is no getting around the fact that the fuel of choice -- high sulfur bunker fuel oil -- is a pretty dirty fuel. At around 4.5% of sulfur content, most bunker fuel is both a relatively cheap source of energy and a relatively easy way to get sulfur out of the energy chain and, well, into the atmosphere.
But in today's very real scenario, the only way for shippers to meet the new 2020 global cap without retrofitting the entire world shipping fleet with "fuel scrubbers" will be to replace fuel oil with diesel in shipping tanks.
All of it.
Currently a conservative estimate would suggest that 240 million tonnes a year (about 1.57 billion barrels a year, or 4.3 million barrels a day) a year of fuel oil is consumed as bunker fuel on ships. 80 million tonnes a year of diesel is already being used by ships.
Robin Meech, from Marine and Energy Consulting Ltd, estimates that by 2025 the shipping industry will be consuming around 500 million tonnes of fuel. If all of that comes in the form of diesel, Shipping PLC would be lifting a hefty 3.75 billion barrels a year, or more than 10 million barrels a day, of diesel.
Already OECD gasoil and diesel demand stands at 13 million barrels a day, and by 2025 it seems a safe bet to put that figure at closer to 18 million barrels a day. And those numbers don't even start to factor in India and China.
Simply put, someone is going to go out of business if the world's shipping fleets start to convert en masse to diesel, because clearly the 10 million barrels a day of diesel that shippers are looking has already been accounted for.
And with the constrained buying power of the world's farmers, truckers and shipping companies, it would probably be a short fight before governments step in and calm things down.
As this one plays itself out, it looks likely that shippers are going to have to start installing those relatively expensive "scrubbers," hope that enforcement of the new regulations is weak, or that low sulfur standards are ditched completely.
Meanwhile, this does raise the issue of what to do with the all that fuel oil...
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