International regulations limiting sulfur in fuels for ocean-going vessels, set to take effect in January 2020, have implications for vessel operators, refiners, and global oil markets. Stakeholders will respond to these regulations in different ways, increasing uncertainty for crude oil and petroleum product price formation in both the short and long term.

When burned, the sulfur in marine fuel produces sulfur dioxide, a precursor to acid rain. The sulfur content of transportation fuels has been declining for many years because of increasingly stringent regulations implemented by individual countries or groups of countries. In the United States, federal and state regulations limit the amount of sulfur present in motor gasoline, diesel fuel, and heating oil.

The upcoming 2020 rules apply across multiple countries’ jurisdictions to fuels used in the open ocean, representing the largest portion of the approximately 3.9 million barrel per day global marine fuel market, according to the International Energy Agency.

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