OPEC oil producers, bunker fuel sellers and shipping companies will have to comply with the new rules to curb pollution produced by the world’s ships. The U.N. International Maritime Organization (IMO) has mandated that, as of January 1st, 2020 the sulphur content of fuels used by ships will have to be reduced from 3.5 % to 0.5% to limit emissions associated with asthma and acid rain. The global shipping fleet will be reliant on refiners to supply IMO-compliant propellant. Prices for low-sulphur products are already climbing, while those for high-sulphur grades are collapsing. The brunt of the regulatory shift is likely to be felt in refined-product markets, as shippers abandon high-sulphur fuel oil in favour of cleaner IMO-compliant fuels. The change will be seismic on the shipping industry and on refinery profits. ExxonMobil has increased production of ultra-low sulphur fuels at its Beaumont refinery using exclusive and efficient proprietary catalysts and processes. BP Southern Africa is upgrading the SAPREF refinery to produce lower sulphur diesel. Total is investing €400 million to upgrade its Donges refinery in France to capture profitable new markets with low-sulphur fuels. The ExxonMobil refinery at Antwerp already processes different grades of crude oil varying from light low-sulphur to heavy high-sulphur oil. Gunvor has halted upgrades to its Rotterdam refinery. In Trinidad and Tobago, the proposed Ultra-Low Sulphur Diesel plant requires a US$300 million capital injection to circumvent the risk of not being able to sell local fuel on international markets. Refining oil that’s low in sulphur and boasts of low specific gravity can yield a good amount of gasoline and middle distillates, which are the main profit-making products for the world’s refiners. Specifically, crude oils with a specific gravity of more than 31.10 and a sulphur content of less than 0.5% are considered light and sweet. This shift is likely to cause global shipping costs to rise by a quarter, or $24 billion, in 2020 when the new rules limiting sulphur kick in. The associated transport costs will trickle down naturally to the store shelves from Charlotteville to Charlotte Street. Consider a large container ship with a container capacity of 7,750 TEUs (twenty foot equivalents) or 3,875 FEUs (forty foot equivalents). With the average cost of bunker fuel at $552 per ton, and with fuel consumption of 217 tons per day, a single 28-day round-trip voyage could cost $3,353,952. To reduce costs, ships are now installing scrubbers to extract sulphur dioxide from their exhaust emissions to meet the 2020 standard. This will allow them to burn the old fossil fuels after 2020 and control costs to merchants shipping cargo. But scrubbers can’t simultaneously scrub out the CO2 emissions that contribute to global warming. The IMO has set a 2050 target to cut all CO2 emissions in the shipping industry by 50%. So sooner or later ships outfitted with scrubbers in 2018 will have to meet the 2050 CO2 emissions targets and will eventually have to refocus on technology that: (1) saves fuel, (2) brings the cost of freight down and (3) reduces emissions. Renault and Neoline are responding. They aim to build two sail-powered ships by 2020-2021 to service a pilot route joining Saint-Nazaire, the Eastern seaboard of the U.S. and Saint-Pierre and Miquelon off the coast of Newfoundland. Rotating sails and air lubrication are two innovations reshaping ship building. The Energy Efficiency Design Index (EEDI) is a compliance guide for building energy efficient ships. Maersk and other container cargo and supply vessel operators are shying away from ship yards that are unconcerned with energy efficiency. Miu Miu, Prada and Armani are all manufacturing goods in China which must be shipped to New York, Paris, Los Angeles and London to satisfy the lust for what is in Vogue. But if fabless manufacturing takes your production to China, the cost of the fuel to get the goods transported along the New Silk Roads becomes a huge consideration. This is where the EEDI becomes an indispensable guide as it allows merchants and manufacturers to compare how efficient one vessel is against another. The hope is that manufacturers will now shop around for ships that consume less fuel and so enable them to reduce the price of merchandise and overheads. The International Windship Association noted that each year, the shipping industry uses heavy fuel oil which pumps out a billion tons of CO2 emissions. With the right ship hull design, Mitsubishi’s air lubrication system achieves up to 10-15% reduction of CO2 emissions, along with significant savings of fuel. Lloyd’s Register verified that sea trials using air lubrication achieved energy efficiency savings of 4.3% (ballast) and 3.8% (laden) during sea trials on the 4,000dwt tanker ‘MT Amalienborg’. Car manufacturers are ditching fossil fuels but ships on the high seas can’t stop to get a charge like an electric car. The Viking Grace surges through the Baltic Sea with a 24m tall mechanical sail that provides clean, auxiliary power, just like canvas during the age of sail. The sail reduces the main engine load saving fuel costs and reducing emissions. The ‘Estrada’ sails between England and the Netherlands with two rotor sails saving 400,000 tons of fuel a year. Buyer-driven greening of shipping has forced refining and retail to intersect and influence the future.