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 pro-
duce fuel that meets the new
regulation.”
He predicts a rerun of the his-
toric 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
However, a report from Columbia Uni-
versity’s Center on Global Energy Pol-
icy from earlier this year disputes this
conclusion. Shippers switching over
to low-sulfur fuels puts “the burden of
innovation onto the refining indus-
try,” 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 refin-
ing.” Ultimately, the report concludes,
“speculation about a product supply
crunch underestimates the industry’s
flexibility,” and ignores the po-
tential 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 con-
clusions. We have 18 months
before we find out which is
more accurate.
By Nick Cunningham of Oil-
price.com
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
VOLUME
costs will climb as farmers, unable to
pay for fuel, reduce plantings. Deliver-
ies 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.”
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