EIA: IMO regulations drive up US, global refinery runs

By January 16, 2019March 20th, 2019Marine Fuel

HOUSTON, Jan. 16 | 01/16/2019 By OGJ editors

Beginning on Jan. 1, 2020, the International Maritime Organization (IMO) is set to enact the Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL Convention), which lowers the maximum sulfur content of marine fuel oil used in ocean-going vessels from 3.5% to 0.5%.

In its most recent Short-Term Energy Outlook, the US Energy Information Administration expects that, starting in this year’s fourth quarter, this regulation will encourage global refiners to increase refinery runs and maximize upgrading of high-sulfur heavy fuel oil into low-sulfur distillate fuel to create compliant bunker fuels.

EIA expects total US refinery runs to increase by 4% from 2019 to reach a record level of 17.9 million b/d on average in 2020, resulting in refinery utilization rates that average 96%. EIA forecasts that one of the most significant impacts from the regulations will be on diesel wholesale margins, which increase from an average of 43¢/gal in 2018 to 48¢/gal in 2019 and then to 65¢/gal in 2020.

The IMO 2020 standards may also provide an enormous economic opportunity for the US energy industry and its workers to supply low-sulfur fuels to the global market, according to Ken Spain, spokesperson for the Coalition for American Energy Security.

“These standards give the US a significant advantage over foreign oil producers whose nations haven’t made necessary infrastructure investments,” Spain said.

“The US refining sector is prepared to meet demand for low-sulfur fuel. The investments made by US energy producers will ensure that timely implementation of the IMO standards will provide greater energy security and increased geopolitical advantage for the US,” he said.