Posted by OilVoice Press - OilVoice
26-Oct-2018
S&P Global Platts Analytics Spotlight
IMO 2020 now on U.S. administration's radar but that is unlikely to delay implementation
Despite recent reports that the Trump administration is seeking to delay/ease the rollout of tighter global bunker fuel specifications set to go into effect on January 1st, 2020, we do not think that the implementation timing will change. Consequently, much wider crude and product price differentials and disruptive operational changes are still very likely to occur as discussed in our recent studies and seminars.
The underlying reason for limited U.S. influence in this situation is that the specs apply outside of U.S. jurisdiction and enforcement is largely outside of U.S. control. Furthermore, the specs were agreed to by the roughly 100 nations who are members of the International Marine Organization (IMO) over 10 years ago and to change that agreement would require a 2/3 majority vote – and each country has only one vote. The test of this will come at the October 22-26 meeting of the IMO's Marine Environment Protection Committee (MEPC). At that meeting, there is a proposal to include an “experience building” phase as part of the implementation schedule. Effectively, it is a plea for lax enforcement initially. But how could that work, who would decide which ship-owner gets to use inexpensive fuel and who would be forced to use expensive low sulfur grades? As a practical matter, it would seem difficult to implement. Preliminary indications are that the proposal was not approved.
In addition, the rules under which the IMO operates require a significant comment/review period – a minimum of 22 months after submitting a proposal – before it could go into force. So it is too late to enact a change that would affect the January 1st 2020 date. The only exception to this appears to be if there is a finding of unsafe operations, not economics, and that case has not been effectively made.
In public and in private, IMO officials have said there is essentially zero chance for a delay.
Given all that, what could the Trump administration do that would help balance markets or reduce pump prices (something that is likely of concern in an election year)?
What could the U.S. Administration do in reaction to IMO 2020 that would be unhelpful, difficult or counterproductive?
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