If approved, an impending mandate forcing sea vessels to burn cleaner fuel is expected to increase diesel prices next year. However, transportation experts are more worried about how this surge will affect the supply of diesel fuel for trucks.
According to a report from the U.S. Energy Information Administration, diesel prices could rise as much as 20 cents a gallon in 2020. The reason for the increase is due to an order set forth by the International Maritime Organization requiring cargo and cruise ships to switch from bunker fuel to cleaner-burning diesel fuel.
However, for truckers and companies in the industry, the concern is how the change will impact the marketplace for diesel fuel. While an increase in diesel prices will affect many, the key concern seems to be in the availably rather than the pricing.
Currently, global bunker fuel comprises approximately 5% of total oil demand. With ships switching fuel in 2020, there will be major disruptions in some product markets. As stated by the Council of Economic Advisors, there could be a shortage between 200,000-600,000 barrels in compliant fuels. As a result, the shortage will likely prompt higher prices.
On the other hand, some energy analysts see no signs in the production of domestic U.S. oil slowing down. Therefore, they do not believe there will be a significant increase in diesel prices.
Furthermore, a survey conducted in 2017 revealed that 74% of shipping companies would switch to diesel fuel. Whereas, others either plan to install sulfur-removing equipment or transform their ships to liquefied natural gas.
However, bunker fuel is derived from the same concentrate as diesel. Therefore, the change could increase prices, especially near many of the major ports along the Atlantic and Pacific coasts. Additionally, this could cause major shortages for trucks as ships will be fueled with the diesel gas.