The IMO may sound boring, but its consequences are anything but 

You may be pleased to know that after today I will be taking a sabbatical from today’s, “let’s-get-em-excited” topic — the International Maritime Organization (IMO) 2020.

One of the reasons I’m making this move is because the self-forecasted jump in distillate or diesel prices has made the same decision. It’s going away but will come back later.

The word, “later” is a word to describe the, “we’re not exactly sure,” decision by this country and one of our Arctic neighbors, about whether or not to abide by what I thought (and am correct in thinking) is a global law concerning the reduction of the sulfur content in marine fuels.

Media publications indicate that Canada is “expected” to support this legislation, but the decision has been delayed, awaiting the outcome of a meeting convened by the IMO on how to implement the new rule.

If you ask me, they’ve had four years to decide on whether to decide on having a meeting!

Six of the eight Arctic countries currently support the proposed ban on heavy fuel oil (HFO), meaning a high viscosity, 3.5% sulfur product. That sounds like a healthy majority.

Not so fast.

Russia, the biggest player in the game, is opposed to the rule, and Canada, with the second-largest Arctic coastline, has drawn its line in the snow and will await the outcome of the above mentioned meeting — this, or wait for the snow to melt — whichever comes sooner.

What will come sooner and what northern communities and politicians fear is that the IMO 2020 will dramatically increase the cost of transportation of all goods required for them on a day-to-day basis.

The elimination of HFO as the power source for marine shipping will mean the use of a lower sulfur, higher priced fuel, which will add $1,000 to the cost of a six-meter shipping container. This has got the attention of not only the Inuit population of the north, but also the Ottawa-based politicians in the south.

The Inuit were in favor of the HFO ban for well-deserved environmental reasons, but the potential for increased prices for day-to-day essential commodities has given cause for them to ask Ottawa for support to ease these additional fuel costs.

The rest of us in this country should take note of this dilemma: The increased cost of getting food to the table is not isolated to our northern neighbors. The international marine shipping industry won’t absorb these increases of IMO mandated fuel — and our federal government can’t afford it either in the form of regionalized rebates.

This means the increased transportation costs by sea will, by the slow diffusion process of pricing osmosis, seep into the costs of all refined products including diesel, the product that gets goods off the ship and onto the truck and to our tables.

No detours allowed on this one.

~ The Grouch

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Roger McKnight is the Chief Petroleum Analyst with En-Pro International Inc.
Roger has over 25 years experience in the oil industry, and has held senior marketing management positions responsible for national and international accounts. He is the originator of the card lock concept of marketing on-road diesel that is now the predominant purchase method of diesel in Canada. Roger's knowledge of the oil industry in North America, and pricing structures has resulted in his expertise being sought as a commentator by local, national, and international media. Roger is a regular guest on radio and television programs, and he is quoted regularly in newspapers and magazines across Canada.

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