On Jan. 1, 2020, a new rule went into effect. The goal of IMO 2020 is to regulate the amount of sulphur a ship may put out through the exhaust. Environmental regulators called it so because IMO or the International Maritime Organization is the UN agency responsible for regulating shipping. Whether it’s trucking companies in Ontario or other locations, IMO 2020 can affect the industry because it is global regulation.
How IMO 2020 Impacts Transport Companies in Ontario
This new regulation can affect both the trucking and the shipping industries. At the beginning of 2020, there were differences in the price of fuel HSFO and alternatives. While the cost of HSFO had fallen by the end of 2019, it did not help the shipping industry. This is because ships cannot use HSFO unless they put expensive scrubbers in. However, by the end of 2019, the price of Very Low Sulphur Fuel Oil (VLSFO) rose by about 30 percent.
Effects on Diesel
There are two main ways of getting IMO 2020-compliant fuel. Both of these will have a significant impact on the price of diesel and transport companies in Ontario. First, companies may use vacuum gas oil, or VGO, to create VLSFO. However, the production of diesel and gas both require VGO. When companies use VGO for ship fuel, there will not be as much left for diesel production.
Another way of getting compliant ship fuel also impacts trucking companies in Ontario. Marine gas oil, or MGO, can meet the requirements of IMO. However, MGO comes from diesel. Again, this can take away diesel from the trucking industry.
Variables for the Trucking Industry
Some shipowners may not follow the IMO 2020 rule and continue using non-compliant fuels. However, for shipowners who do nothing, insurance companies may refuse coverage, and some ports may not receive the ship. There is still uncertainty as to how many ships will not follow the rule. This will significantly impact the availability of diesel for transport companies in Canada. Other factors will influence this as well, including:
- Whether there is enough equipment to produce diesel
- If prices encourage oil refiners to produce enough fuel
- Whether or not oil refiners want to process more crude oil
Many economic forecasters believe that the beginning of 2020 will determine the answers to these and other questions.
Choose the Right Shipping Company
There are many uncertainties when it comes to fuel for the trucking industry. Working with one of the top transport companies in Canada can help you stay on top of these trends. Here at D4 Logistics, we try to stay abreast of these changes. Contact us today to learn more.
