The Regulation That Could Push Oil To $200

Yves here. Yesterday, in passing, I listed some financial and economic risks that individually might seem manageable on a macro level but if they materialized in close succession, could produce nasty results. A reader in comments added a rise in energy prices to the tally of dangers. This post describes why that could be more imminent than it seems.

The reason for taking this dire warning seriously is that Phil Verleger is a very highly regarded oil analyst. It is also worth noting that Iran and Venezuela produce heavy, sour crude. Their pariah status means any push to roll back the proposed regulations could encounter opposition  for geopolitical reasons.

By Nick Cunningham, a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics based in Pittsburgh, PA. Follow him on Twitter: @nickcunningham1. Originally published at OilPrice

Oil prices could spike as high as $200 per barrel over the next 18 months, which would cause an “economic crash of horrible proportions,” according to a new report.

A research paper from economist and oil market watcher Philip K. Verleger predicts there could be a shortage of low-sulfur diesel fuel in 2020 as a result of regulations from the International Maritime Organization (IMO) aimed at cutting sulfur emissions. The regulations, due to take effect at the start of 2020, lowers the allowed concentration of sulfur in maritime fuels from 3.5 percent to just 0.5 percent.

Those rules have already sparked a scramble for low-sulfur options. But the current global refining capacity may not be able to churn out enough low-sulfur fuels to allow a smooth transition from high-sulfur fuels by the world’s shipping fleet.

The shipping industry accounts for about 5 percent of total global oil demand, and most ships burn heavy fuel oil that is high in sulfur. Switching over 5 percent of total demand to low-sulfur diesel and gasoil – a distillate similar to diesel – is a massive shift.

Ship-owners will have a few options: install expensive scrubbers to remove sulfur, switch to low-sulfur fuels such as diesel or gasoil, or switch over to LNG. Scrubbers and LNG are generally thought to be the most expensive options, requiring capital outlays to overhaul entire fleets.

That will put the onus on low-sulfur fuels. But the problem is that not all crude oil is the same – heavier and sour varieties hold more sulfur and are unable to produce lower sulfur diesel without extra processing. And not all refineries are equipped to handle that processing.

Up until now, the maritime industry has been burning the residual fuel oil left over after the refining process. Fuel oil is the bottom of the barrel – it’s the cheapest, most viscous and dirtiest part of the barrel.

By 2020, diesel production will need to rise by at least seven percent, according to Philip K. Verleger, on top of the three percent increase needed for road transport and other uses. All of it will need to be low-sulfur. “It is not clear that the greater volumes can be produced,” Verleger wrote in his paper. “Instead…very large price hikes may be required to suppress non-maritime use.”

On top of that, the banishment of fuel oil from the maritime sector will lead to a crash in high-sulfur fuel oil prices. Power plants onshore that burn oil might switch over to high-sulfur fuels because of the steep crash in prices. “Ironically, the maritime fuel switch may do nothing to improve the global commons given that the pollution sources can just be moved from the high seas to land,” Verleger concludes.

But the big problem will be the shortage of diesel and gasoil because “as many as half of world refineries cannot produce fuel that meets the new regulation.”

He predicts a rerun of the historic price spike in 2007-2008, which was in part the result of a shortage of low-sulfur oils. Refiners found themselves in a bidding war for low-sulfur oil, pushing oil prices to well over $100 per barrel. “This situation will reoccur in 2020,” Verleger wrote, except that the price spike could be even more dramatic because “the fuel shift is greater and the refining industry is less prepared.”

Verleger does not mince words. As the rules take effect in 2020, oil prices will spike to $160 per barrel or higher. “Economic activity will slow and, in some places, grind to a halt. Food costs will climb as farmers, unable to pay for fuel, reduce plantings. Deliveries of goods and materials to factories and stores will slow or stop,” he argues. “Vehicle sales will plummet, especially those of gas-guzzling sport utility vehicles (SUVs). One or more major U.S. automakers will face bankruptcy, even closure. Housing foreclosures will surge in the United States, Europe, and other parts of the world. Millions will join the ranks of the unemployed as they did in 2008.”

However, a report from Columbia University’s Center on Global Energy Policy from earlier this year disputes this conclusion. Shippers switching over to low-sulfur fuels puts “the burden of innovation onto the refining industry,” the report says, “but it will likely prove a lesser challenge for refiners than is commonly understood.” That is because the fuels will be “fuel hybrids, the production of which will entail as much blending as actual refining.” Ultimately, the report concludes, “speculation about a product supply crunch underestimates the industry’s flexibility,” and ignores the potential for a reconfiguration of demand and the emergence of new types of blended fuel hybrids.

There is quite a lot of space between those two conclusions. We have 18 months before we find out which is more accurate.

Print Friendly, PDF & Email


  1. Altandmain

    I suspect that if this happens, the Trump administration will push back against the low sulfur requirements in shipping. Given his willingness to break international agreements (not always a bad thing when it comes to trade), this would be a very likely outcome.

    Trump has already started relenting on some of his Iran Sanctions becuase of the increase in the price of oil. I suspect that he would be quite determined to fight this with another Scott Pruitt-like figure.

    This may also have other effects. The Canadian tar sands for example are likely going to have difficulty in selling their product. Heavy oil tends to be high in sulfur.

    Another example of why having Dutch Disease could expose the Canadian economy.

    The brutal answer is that maybe we should be shipping less, considering the amount of sulfur we are currently putting into the environment.

    We need to follow up with regulations ensuring that as the article speculates, that we do not have an increase in land based high sulfur fuels. That could be even worse for the health of the general public than any high sulfur fuel use in marine propulsion applications. At the very least, scrubbers should be mandatory on land.

    1. bronco

      It seems like you are suggesting that if we stopped importing poorly made garbage from China and other countries and instead put Americans back to work manufacturing things here we could lower the amount of dirty oil needed in the first place.

      seems like a win for oil prices a win for people that need jobs and a win for the environment as well

      1. Altandmain

        Precisely that. We need to rein in our corporations, the oil and shipping industry included, and work on improving our standard of living for the common citizen, not just the rich.

  2. John Zelnicker

    Yves – Thanks for posting this. I have started a collection of posts that make reasonable predictions of future events. Verleger’s predictions of the effects of $160+ oil seem reasonable to me.

    The economy is becoming more fragile by the day, with no small thanks to our president, and I am sure that something big and bad is going to happen pretty soon.

    The integrity of our upcoming elections is my most immediate concern. I think Trump is starting to set up the propaganda to claim the election results are invalid if he doesn’t like them. Far too many survey respondents wouldn’t have a problem with suspending the 2020 elections and those same people would most likely accept Trump’s claim of Russian influence that invalidates the 2018 election results.

    1. voteforno6

      If we can have an election in the middle of the Civil War, we should be able to have one during an economic downturn.

      1. ambrit

        Yes, but, can we guarantee the integrity of the outcome? As it is now, the public’s perceptions of the election process are skewing towards cynicism.
        I see Mr Zelnicker’s point. All the Establishment Dems need do is run a large, integrated campaign in early 2019 calling for the nullification of the 2018 election results because of, whatever the political crime du jour is. Coups do not have to be sudden squalls of high drama events. They can also be slow grinds.

        1. Amfortas the Hippie

          ^^”…public’s perceptions of the election process are skewing towards cynicism…”^^
          and well they should, for almost 20 years, at least.
          perhaps having the option of declaring an election invalid is why so little has been done about the election machinery, in spite of the long term and growing evidence of how porous ,and just bad, it is.
          makes my tinfoil itch.

  3. PlutoniumKun

    Interesting. Another thing to throw into this mix is that there has been a very significant drop in demand for diesel cars in Europe due to the VW scandal. But I don’t know how long this will take to feed through to demand on a global level. It should be noted that one reason why European car makers were so enthusiastic about diesel was that there was a surplus of diesel in the European fraction from refiners at the time. Of course, if the change in these regulations kills off diesel cars for good, thats a fine thing (they are already going over the cliff, most Euro car makers are going all in for hybrids and EV’s and have killed off their new diesel lines).

    The other big demand for diesel comes from the construction sector. A slowdown in China, for example, might take pressure off diesel demand. And as the article notes at the end, refiners have long been able to finesse supply/demand issues for fractions by imaginative use of post refining mixes. So I’m not convinced that demand for low surfer fuels alone would drive a big spike, but its certainly something worth looking out for.

    1. bronco

      The diesel scandal is another example of complete bullshit “This is a crime because some bureaucrat said so”

      The VW diesels perform well get good mileage and were loved by those that owned them. The whole thing stinks of some grudge or soft power exercise amongst the 1%.

      One subject that doesn’t get talked about id the bogus emission laws around large trucks here in the US these regen systems are bogus and are linked to truck fires all over , literally the trucks under certain circumstances can burn in ways that would make a Tesla blush. A guy I know almost lost his truck because it set a nearby tree on fire.

      1. cnchal

        I call bullshit on your bullshit call. This was a crime because some bureaucrats set an emission standard that every car maker is required to meet. VW chose to cheap out and not fit their cars with the proper controls to meet those standards, used deception to circumvent those standards, got caught red handed when the truth was exposed while continuing to deny what they were doing.

        That VW diesels were loved by those that owned them is immaterial.

          1. cnchal

            Good question that I don’t have a good answer to, only a guess, and my guess is that they were the most egregious unrepentant offender of a car company possible.

            That episode really pissed me off. I like cars and VWs and diesels, thinking they were a reasonably good alternative to gasoline because they are a little more efficient, so overall a good choice for some motorists to make. VW destroyed that choice all by itself with the criminal actions of it’s engineers, accountants and executives’ decision to not legitimately clean the cars up, and not spend the couple of hundred bucks per car it would have cost to make them legit.

          2. drumlin woodchuckles

            We did not know that others were doing it. Actually, we didn’t know that anyone was doing it until Volkswagen got itself caught.

            Now . . . if the others are let off more lightly as more and more of them are discovered to have been doing it all along, then we have to ask why that is.

          3. John Wright

            The underlying problem of cheating occurred because the EPA constructed a test that was easy to detect was occurring.

            VW would then detect the EPA test was active, switch in pollution controls that would hurt mileage, but only during the EPA test, and the test was passed.

            I suspect that the entire diesel industry knew what VW was doing.

            VW apparently had a cost advantage that others, who did not program for test cheating, did not.

            It the automotive industry is anything like the electronics industry that I work in, when a competitor announces a better/lower cost technique, the higher ups want to know what was done, patents will be searched, industry papers will be searched for AND an actual product (in this case, a car) will be bought and tested at the manufacturer’s laboratory. Spending 30 to 40k for a test product to be analyzed can be easily justified if the potential cost savings are large.

            If the “improved” technique makes sense, a licensing deal may even be pursued.

            That is why I suspect all diesel automobile manufacturers knew VW was cheating.

            Remember, the EPA did not detect the problem, it was West Virginia University who did an actual drive test with collected results that raised the flag to the EPA

            Not all industry members gamed the test, as I believe BMW and Mercedes were not suspected.

            Here is a quote from

            “The three vehicles were all certified at a California Air Resources Board facility before the tests as falling below the emissions limits when using the standard laboratory testing protocols. They put 2,400 kilometres (1,500 mi) on the Jetta and BMW. For their final test, they wanted to put even more mileage on the Passat and drove it from Los Angeles to Seattle and back again, virtually the entire West Coast of the United States, over 3,200 kilometres (2,000 mi). The BMW was “at or below the standard … with exception of rural-up/downhill driving conditions”. But the researchers found that under real-world driving conditions the Jetta exceeded US emissions limits “by a factor of 15 to 35” while the Passat exceeded the limit “by a factor of 5 to 20″”

            In my opinion, VW deserves no sympathy for what they did.

        1. freeloader

          “some bureaucrats set an emission standard that every car maker is required to meet.”

          Who elected them and why did these bureaucrats set those particular standards?

            1. freeloader

              Which has what to do with
              a) who elected said bureaucrats in the EU – the ones who are changing “allowed concentration of sulfur in maritime fuels from 3.5 percent to just 0.5 percent.” nor
              b) why the standard should change by more than 1000% rather than some other target, say a 100% reduction in allowable sulfur concentration in maritime fuels.

              1. cnchal

                a) – doesn’t matter. They weren’t elected, but appointed by elected politicians to come up with a standard that won’t kill as many of us as no standards would.

                b) – why not? Cutting sulfur emissions in half would not do the jawb.

                Besides, my comment to Bronco was about cars.

                Lets talk boats.

                The shippers are on the horns of a dilemma. The first one to install sulfur scrubbers would look like a genius if oil hits $200 a barrel in 18 months, being able to use the “cheap stuff” while competitors choked on expensive oil. However, it was in none of their interests to do so, because stepping out and taking a risk your competitors are not taking could sink you if you installed scrubbers and oil didn’t spike in price.

                What we have is a twisted system where raw materials from all over the world are shipped to China, processed into finished goods and then shipped all over the world again, in the most polluting way possible, on the ocean there, in China, then on the ocean again. At least the ocean trips will be marginally cleaner.

                Globalization is a disaster no matter where you care to look.

  4. Ignacio

    I don’t claim to be an expert, bus at the very same time regulation pushes for a shift in fuel for ships the EU is pushing to reduce diesel consumption in cities. Regarding, for instance, Spain, sales of diesel vehicles has plunged. Diesel vehicles will be banned in cities -at least old diesel vehicles- and this cold compensaré the increase of diesel consumption in maritime transport.

  5. ambrit

    I see Altandmains suggestion that we will have to ship less to be the long term solution to the fuel problem. Long supply chains are always at the mercy of the shipping component. An indirect example of this is the naval wars during the World Wars against ‘enemy’ shipping. The U-boat campaigns in the Atlantic against Allied shipping almost won the Second World War for Germany. A lesser known but as strategically important naval war was the American ‘Total War’ submarine campaign against Japanese shipping in the Pacific during the Second World War. It arguably shortened the Pacific War by years due to shortages of strategic materials for the Japanese war effort.
    Imagine an America where all sorts of ‘cheap’ oriental goods are no longer cheap. The American economy would have to reintroduce small and medium sized manufacturing in the homeland. This could actually be a long term plus for local and regional economies.

    1. Synapsid


      Supply chains for manufacturing will certainly feel effects from the fuel regs, but it’s worth thinking of the bulk shipping of iron ore, wheat, crude oil, refined petroleum products, timber, gravel (needed for much construction), coal, steel, foods (soybeans are very much in the news right now, and Argentina is famous for its beef and…)–you get the idea. There’s no simple, quick response on the part of global dry- and wet-bulk shipping of commodities and those commodities underpin economies from the global scale right down to the home.

      1. ambrit

        A lot of that international bulk shipping depends on international arbitrage to be feasible. The break even point would be when the ‘anticipated price of local production’ beats the offshore price of production plus shipping. Show that local, or even regional sources can be cheaper, and someone will do the investment needed to bring it online. A small premium to recoup the original investment and we have a viable local economy again. It was done before. The lessons are waiting patiently for new entrepreneurs to relearn and apply them.
        Globalism has met its limit, and shipping costs are the defining factors.

  6. The Rev Kev

    Sounds like China was behind a lot of these new regulations. They have been cracking down on pollution, especially with the pollution that has been effecting China’s coastal cities caused by polluting ships. More on this at-
    The smarter way would have been to phase this cutback in but now they are going to cutback about 86% in only the next year and a half. This may be to follow China’s program more than anything else. Those refineries that can meet this standards should make out like bandits. Apparently this new law is already having an effect and-
    ‘In Europe, the premium that low-sulfur fuel oil will attract over its dirtier counterpart in January 2020 has grown by 66 percent since the start of the year, according to fair value data compiled by Bloomberg. In Singapore, one of the world’s primary hubs for ship refueling, the premium of gasoil to crude in January 2020 has risen by 25 percent during the same time frame.’ There is also an excellent article that came out last October called “The Hottest Topic In Shipping” at that has a lot of good solid data in it.

    1. Synapsid

      Rev Kev,

      This isn’t new, so I don’t know how much China was involved to begin with.

      The IMO has been working on this regulatory change since 2010 at least. China would be facing the same things the US is, in that the environmental side is a positive (not to the current US administration, no) but the shipping industry is looking at hard choices, and both China and the US do a lot of exporting.

  7. anon48

    The author’s conclusions seem realistic. But it seems possible there could be other factors that reduce the severity of the effect of the new regulations such as:

    1. Level and uniformity of enforcement. It appears there is no single enforcement agency to these regulations. My understanding is that ships will have to have the product sample-tested in order to obtain a certificate that validates the Sulphur content is below the maximum limit. Apparently, this will have to be enforced, not by an international organization that’s been provided an appropriate level of authority. Rather, it will have to be enforced by individual ports of call upon which the cargo ships will call. My further understanding is that there is significant competition for business between ports. And as Yves has said many times in the past about how the law of the jungle drives markets to the lowest common denominator. It seems that market competition might cause enforcement efforts to be mitigated.

    2. If shipping costs do increase, might this not also increase the opportunity for onshoring production. Shippers will eventually have to pass any cost increase onto the customer. This, with trade war possibility as a backdrop, might encourage more production to be established back onshore. (In addition, I seem to recall Yves also saying a number of times that the labor-saving excuse as a reason given to offshore in the first place has been greatly exaggerated). Taken together, along with the possibility that the relative difference between US wages with those of the rest of the world has declined, since the offshoring process began decades ago. It seems these regulations might actually help kick start an onshoring process.

  8. Darius

    I used to write about this topic but it’s been a long time. Burning sulfur in fossil fuels leads to fine particle production, which leads to thousands of premature deaths in the US alone. IIRC, truck diesel used to have a 0.5 percent sulfur content but EPA dropped it to 0.015 percent. When I heard shipping fuel, or “bunker oil,” had 3.5 percent, or higher at one time, my eyes got wide. This regulation isn’t for nothing. Shipping also is a major contributor to global warming. A carbon tax would act like a giant tariff on goods from China. Hello. Trump. Anyone home? But that’s a hippie idea and everyone—Trump, the libs—hates those people.

    1. Zachary Smith

      You spoke of deaths from the crap bunker fuel, and so did the Verleger paper.

      According to a Nature article cited by Goldman Sachs, sulfur dioxide pollution from fuel-oil-burning ships is a contributing factor in approximately four hundred thousand deaths from lung cancer and cardiovascular diseases and fourteen million childhood asthma cases every year.

      That’s a lot of dead and badly ill people every single year just so we can import cheap trinkets from China.

      I found it interesting author Nick Cunningham wrote an article only two months earlier than the one under discussion titled “The Regulations That Could Push Oil Up To $90”. But now we’re to believe the cost of crude will more than double that?

      Speaking strictly as an uninformed layman, I suspect there are some serious issues being kept out of the discussion. It’s not like this low-sulfur oil requirement was a surprise, for it was agreed upon back in 2005 with only the “start” timing in question. Also notable is that there seems to be no penalties for those choosing to ignore the ‘regulation’. Verleger again:

      US consumers could pay as much as $6 per gallon for gasoline and $8 or $9 per gallon for diesel fuel. I offer details backing this cataclysmic view below.

      Might this be a motive for the refiners holding off investing in making low-sulfur fuel? If all my refinery output was going to double in price even if I sat on my hands, why bother doing anything? The shippers have had the option of nailing down their future fuel prices. Have they done this? They may be expecting the Trumpies to destroy this and most other regulations for them if things get bad. Yet another reason to wait.

  9. Larry

    That would certainly be bad news for people in the Northeastern united states, where we rely on diesel oil to heat our homes and water. We already have heating assistance programs for people that can’t afford costs as they stand now. A price increase of that magnitude is going to be a serious strain to household and town/city budgets. If a recession is piled on top of that, it will be a recipe for disaster in this region.

    1. mle detroit

      What are the people in the northeastern United States doing about this dependency on heating oil?

      1. sharonsj

        I heat with propane, but it is still costly. Electric heat is prohibitive. When you live in a rural area, there aren’t a lot of affordable choices.

      2. Grumpy Engineer

        Indeed, there’s not much people up there can do. Resistance-based electric furnaces are hideously expensive to operate. Heat pumps are normally more efficient, but they they become less efficient in extreme cold. Which, of course, people in the northeast see lots of. [“Geothermal” heat pumps can overcome this particular difficulty, but they’re very expensive (and sometimes deeply impractical) to install.]

        Switching to natural gas is probably the cheapest solution, but it presumes that gas lines are available. And don’t forget that the gas coming down those lines will likely have come out of fracking operations.

        And heating homes with renewable energy? That’s not a viable solution, as people will need heat even when winds are calm and it’s dark outside. Only if we had 100+ TWh of energy storage available would renewables-based wintertime heat be reliable, and we’re short of that goal by three orders of magnitude.

        1. Zachary Smith

          [“Geothermal” heat pumps can overcome this particular difficulty, but they’re very expensive (and sometimes deeply impractical) to install.]

          I believe you’re exaggerating the costs and difficulties.

          And you forgot to mention insulation. It’s possible to construct houses which are virtual thermos bottles in terms of heat retention.

          And heating homes with renewable energy? That’s not a viable solution, as people will need heat even when winds are calm and it’s dark outside.

          The entire nation is unlikely to be becalmed. Think “power lines”. As for the “100+ TWh” number, I’d like to see the source of that one and the assumptions made by the creator.

          1. HotFlash

            And there are all kinds of renewable and you don’t have to go off-grid. I have insulated heavily and plan to do more this summer as well as to continue replacing my storm windows with new (homemade) double-insulated ones. I don’t air condition (OK, I’m in Canada, but it’s *southern* Canada). We heat (house and H2O) and cook with gas. Thermostat is set to 16C — that’s 61F. We Bullfrog for both gas and electricity.

            1. Zachary Smith

              And there are all kinds of renewable and you don’t have to go off-grid.

              Here in Indiana all the ash trees are dying from climate change. I’ve already spent a heap of money on the things, and am not done yet. A guy from down the road is going to drop two more of the huge things when the crops are gone, chop them up, and haul the wood home for his stove. Lots cheaper for me than the $900-$2000 quotes from the traveling tree-work gypsies.

              Most of the modern work on home insulation seems to be coming out of Canada these days. I could handle a 61 degree house so long as the bathrooms have an extra heater.

  10. Felix_47

    They can do very slow sailing which cuts the fuel use substantially. They can double prices for a container from China. The current prices are unbelievably low. Transportation is just not a significant number. Shipping a sweater from Bangladesh to Europe, I read, costs a cent. It makes sense since an entire container can be shipped for $2000 and often less. Apparently, a lot of containers are not full. I still cannot figure out how a shipowner makes money with a 500 million dollar ship carrying 15,000 containers from Asia to the US and back. Maybe a reader can explain. Until there is some sort of political will in the US we are going to continue to waste oil and grossly overuse it. I just don’t see much hope with our current party landscape.

    1. rd

      I agree. Everybody always talks about cheaper labor costs as driving offshoring but offshoring pollution and safety problems is another major driver. One of the reasons things are manufactured overseas is NIMBY where it is ok if the other country pollutes itself at levels that we don’t want where we live. Low sulfur shipping fuel is an example of reducing the NIMBY impact by starting to level the playing field pollution-wise around the world.

      This is the type of environmental regulation that Trump should be on board with because it is effectively a tariff that actually accomplishes something beneficial – less air pollution. If it resulted in more manufacturing inside the developed world instead of overseas, it would be hard for the the other countries to push back and retaliate unless that want to say they have the freedom to pollute the planet’s air at will.

      1. drumlin woodchuckles

        Before we became entrapped into Free Trade Agreements, we would have been able to exclude goods from various pollution havens . . . or tariff them enough to raise their price to the level of American pollution-restricted goods.

        But after we became entrapped in these agreements, I believe tariffing pollution-haven goods would be difficult. And banning them for protection against undercutting from pollution-haven goods would be called ” non-Tariff Barriers to Trade”. The Free Trade Agreements were designed to MAKE American production uncompetitive in a pollution-haven costs-avoidance arbitrage world. Not wanting a pollution-haven-style mass-polluter upstream from one’s own water or upwind from one’s own air gets called NIMBY by bussiness spokesfolk who want to extort American pollution standards down to the Chinese level.

        The answer is protectionism for a hard ban on goods from pollution havens.

    2. Roberto

      Figure a 16 day round trip twice a month
      revenue = 2X2000X15000 = $60,000,000
      Of course back haul rates may be less.
      Several millions for bunker fuel, crew, maintenance
      Meh, 50MM profit

  11. John k

    Generally, alarmist views don’t come to pass, particularly when there is a fairly long lead time. China already imposes similar restrictions affecting their biggest ports, so far not much effect. And diesel use will be crashing in Europe, higher price will accelerate that.
    For all it’s faults, capitalism adjusts supply and demand pretty well, assuming again it has time to adjust.

  12. chuck roast

    It would be entirely unconscionable of me not to mention that former Grifter in Chief Clinton threw $1.5 billion (with a B) at Detroit to develop “clean diesel technology”. From what I can make out, this silk purse bonanza resulted in the meager sow’s ear of an ingenious VW emissions inspection defeat device…finally exposed by CARB as I recall. Ya’ gotta’ love those CARB guys.

    Anyway, here are a number of fun and informative world shipping route maps for the visually inclined:

  13. Bill

    Does anyone know why new don’t have nuclear powered freighters? I’m guessing the US Navy has a tight grip on the technology. Or, am I missing something? Is it just not economical?

  14. Jeff N

    Diesel is so much better than gasoline. However, all crude oil cracking creates both gasoline & diesel. So they sell the less efficient gasoline to the working class, and sell the more efficient diesel to corporations. Funny how that works out.

  15. HotFlash

    Spending *so much* of our finite accumulated capital (I am referring here to our stores of never-to-be-repeated, irreplaceable stocks of petroleum in the ground) on trivial pursuits, it just makes me crazy. Six lanes of traffic in both directions, bumper to bumper, one person in each car. Potato chip trucks hurtling across the 401 at 120 kliks. We are trust-fund babies burning through an inheritance it took millions upon millions of years to amass.

    Maybe there’s oil on Mars?

  16. Ken

    Almost all ships have diesel engines for propulsion (up to more than 100,000 hp for a straight 14 two-stroke). Diesel ships all burn heavy fuel oil, both the main engine and the generator engines (locomotive sized). The heavy fuel for diesel powered ships is slightly cleaner than the heavy fuel for boilers, but it’s still back gooey residual fuel oil of about 3% sulfur. It’s called residual fuel because all the cleaner, higher value products have been taken out with many of the impurities left in. The next steps in the refining process would be road paving asphalt, then petroleum coke. The heavy fuel oil is generically called bunker fuel, technically Intermediate fuel oil (IFO) 380 or 700 which are the viscosities.

    This heavy fuel oil has about 10% greater heating value than distillate fuel. This means that a ship using distillate fuel, maybe marine gas oil (MGO) (not quite up to spec as #2 diesel fuel used in cars & trucks) will burn more fuel to travel the same distance as well as paying twice as much for the fuel. Marine diesel oil (MDO) is dirty MGO containing some bunker fuel, lower cost, about the same heat value as MGO.

    The real crunch would be if the lack of low sulfur fuel causes ships to miss sailings. The ships can’t get the fuel they need to make their voyage. No matter how high the price, until the refiners put the equipment into the refineries to produce the fuel, there’s nothing to be bought.

    Liquidified natural gas (LNG) will be great for short runs. The tankage requires pressure tanks which will take up too much space for the supply for long voyages. Availability is also a major concern. LNG tankships keep the LNG refrigerated, not in pressure tanks, not possible except maybe in the very distant future for other types of ships. LNG is also a low heat value fuel, so more will be required for the voyage.

    Greater volumes of fuel needed for the voyage both take up space on the ship that would otherwise be used to carry cargo, and adds weight at the beginning of the voyage that would otherwise be used for cargo. Both reductions of the ship’s cargo carrying capacity will also add to freight cost increases.

Comments are closed.