Diesel may jump in price due to new regulations

The regulation will send demand for middle distillates such as diesel and marine gasoil soaring, and refiners will have to shift some of the products they will be processing from crude oil, analysts concur.

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https://finance.yahoo.com/news/biggest-ever-change-oil-markets-230000097.html

They will not allow ships to burn high sulfur fuel oils. So demand for diesel is expected to go up. I wonder how much higher.
At what price point would the increased prices affect your using your boat?
Everyone has their price. And this should affect boat sales, as it is like a tax.

There will be some shift to diesel, but I think refiners will just desulfurize the heavy fuel oil that ships now burn. It will be more expensive certainly. The processing required to desulfurize heavy fuel oil is one of the most expensive in a refinery.

I am sure similar dire warnings were issued when ultra low sulfur diesel regulations went into effect twenty years ago.

But this is all good for the environment.

David

Before I bought a Trawler I had a 28' Center Console and would run 2-3 hundred miles a day catching fish in tournaments. When gas hit $4/gallon that was it for me, sold the boat and bought a Trawler. I can run now about 140miles and sit on the hook for 4 days and burn about 130 gallons, if diesel doubles, no problem. Triples, fewer trips or more people.

Diesel costs here on the Gold Coast of Australia vary from equivalent in US gallons from $5.60 to $6.20, I enjoyed the $2.30 a gallon when I was over in your great country in 2015/2016.

This doesn't surprise me. Big oil companies liked the $5 per gallon prices in 2008. I sure it will be there or higher in the near future. Figured it would only be a matter of time. I get 3.5 MPG @ 7 knots and can slow down to 6 knots for 5.0 MPG. I can stomach $10 per gallon but think the economy will crash long before that.

Ted

If diesel fuel for ships continues to increase it will spur on the movement to develop LNG plants to use for ship fuel.

I'm paying about $6 a US gallon now, but it wouldn't bother me if diesel went up to $20 a gallon. High oil prices do have some advantages. (especially if you work in the industry)

I doubt if it will though, as mentioned by OCDiver, the oil price tends to self regulates itself by slowing the economy when it gets too high.

Don’t lose sleep over this.

Is heavy fuel still a residual, or is it now a distillate?

Can see the cost going up for heavy fuel in either case, but can't see #2 going up that much except briefly as the refineries adapt and ships burn more #2. Cost of heavy fuel definitely will go up.

The oil folks worry that if the price is high , and looks like it will stay high , the banks will be free to loan the Frackers drilling cash , and the price will then crash again.

If the US finally allows drilling in many places that are not well explored , the price may crash anyway.

Interesting;

A lot of crystal balls ...

The big concern for coastal cities with Ports is the ships running their diesel generators when tied up.

now I'm wandering why I didn't fill up Saturday when I was at a dock with fuel.
I'm also wandering how much fuel I have.

I could have went a year without worrying about it.

Ski in NC said:

Is heavy fuel still a residual, or is it now a distillate?

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Heavy fuel oil as is burned in ocean going ships is, well heavy. It is sometimes called #6 fuel oil, bunker C fuel oil or residual oil. Diesel is similar to #2 fuel oil.

This oil is so heavy that it has to be kept in heated tanks on the ship to be able to flow. If not it is like molasses.

It is not a distillate because in the refinery vacuum distillation towers where it is made from crude oil, it comes off the bottom of the tower and never "distills", ie boils up the tower. It is sometimes called residual oil because it is the residue in the bottom of the distillation tower.

David

Instead of Alberta exporting diluted bitumen (currently an “issue” with BC because there are no plausible clean up strategies from the bottom of our cold, fast flowing salmon rivers or marine environments) Alberta should refine more and create some jobs in Canada. Bugs me when the price of diesel goes up here because a refinery in Washington State has a hiccup.

Oil pricing is hard to predict, but one can see trends, and the trend lately has been increasing. There are so many factors, it's hard to figure out.

However, typically oil prices increase in the summer with increased need, and decrease in the fall as need goes down.

There's an argument to just hedge against the swing by buying oil stocks/royalites/options, etc. That's what I did so I don't care what oil does... actually I prefer higher prices.

I had paid 7 cents more a gallon for low sulfur off road diesel than #2 heating oil a year ago.
Greg

For many of us, if the price of diesel doubles we can just slow down a knot or two and our running costs will be the same.

I’m in the process of buying my first diesel trawler. The price of diesel is going to skyrocket shortly after....watch

"I’m in the process of buying my first diesel trawler. The price of diesel is going to skyrocket shortly after....watch"


With a fuel burn of 2 or 3 GPH what difference would that make?

Oil extraction rate is sensitive to price. Higher the price, more effort put into pulling the stuff out of the ground. But there is a time lag. High price, off we go to drill, but that stuff does not make it to market for six months. Then all that oil hits the market and prices collapse.

Result is prices cycling up and down. Not in a six month period, more like every couple of years.

And guess what? Prices now going up and I am leaving on a trip in ten days!! My timing is EXQUISITE.

Dave, as our resident Chem E- In order to get the sulfur out of residual, will that include distilling it? What kind of cost are they looking at?

Another thing I wondered is why ships don't go on some sort of shore power when in port. Even if needing to deal with the 50/60Hz thing. I go by our local port and most ships there are blowing smoke out of the stacks. Their gennies sure are not burning clean!! If this dockside emission is such a big deal, set up shore power, and leave their fuel alone.

Ski in NC said:

Oil extraction rate is sensitive to price. Higher the price, more effort put into pulling the stuff out of the ground. But there is a time lag. High price, off we go to drill, but that stuff does not make it to market for six months. Then all that oil hits the market and prices collapse.

Result is prices cycling up and down. Not in a six month period, more like every couple of years.

And guess what? Prices now going up and I am leaving on a trip in ten days!! My timing is EXQUISITE.

Dave, as our resident Chem E- In order to get the sulfur out of residual, will that include distilling it? What kind of cost are they looking at?

Another thing I wondered is why ships don't go on some sort of shore power when in port. Even if needing to deal with the 50/60Hz thing. I go by our local port and most ships there are blowing smoke out of the stacks. Their gennies sure are not burning clean!! If this dockside emission is such a big deal, set up shore power, and leave their fuel alone.

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What do cruise ship do?

Guessing too much power on ship is needed,
stringing cables are a shock hazard,
no transfer switch tech on board to handle high power need.
No high power dockside power facilities in ports of call,
they all are different types of power in different countries.
too many different voltages on the ship systems to accommodate.
ships not usually in port long enough to justify it.
managers don't want to spend the money

Ski in NC said:

Dave, as our resident Chem E- In order to get the sulfur out of residual, will that include distilling it? What kind of cost are they looking at?

Another thing I wondered is why ships don't go on some sort of shore power when in port. Even if needing to deal with the 50/60Hz thing. I go by our local port and most ships there are blowing smoke out of the stacks. Their gennies sure are not burning clean!! If this dockside emission is such a big deal, set up shore power, and leave their fuel alone.

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No distillation, it is just too heavy to boil. It would be like trying to boil molasses in a kitchen pan- it would turn to carbon and coke the bottom of the pan first.

The process of desulfurizing residual oil is very expensive. It takes large high pressure reactors, compressors, a hydrogen generator, lots of distillation steps after it is desulfurized since much of it is cracked to smaller, kerosene and diesel sized molecules. In this case desulfurizing residual fuel actually makes more diesel available.

I suspect the average refinery making residual oil will spend hundreds of million dollars installing this processing equipment. But it won't add much to the price, maybe 10%.

Ships are required to switch to low sulfur fuel for their boilers as they approach a US port. They are also required to burn low sulfur diesel in their generators while in port.

Ten years ago when I was working at BP's LA refinery we installed an electrical shore power system to power BP's tankers while in port- a substation, electrical distribution system, dockside structure to accommodate reels of 6" diameter cable, cranes to handle the cable. All of the work had to be done with TWIC certified labor.

It is nothing like plugging in a 30A shore power cable to your dockside pedestal. Everything is huge. I couldn't believe the expense- about $20 million to accommodate two tankers and more to modify the ships. Running low sulfur diesel in their generators was much cheaper.


David

Have been out of the ship world for 30 years, so someone can correct me if the following is incorrect ; A) There are very few, if any ships entering US ports using steam boilers so bunker oil is not a factor. B) I read an article the Big so cal ports were looking to provide electrical shore power infrastructure for all ships while docked awhile back but loss track of it.

Fletcher:


You may be right about little or no steam boilers. But ships today burn residual fuel oil in their big "diesel" engines or in some cases in their "gas" turbines. I believe it is a grade or two better than bunker C but it is still bottom of the barrel residual oil.


The BP experiment I discussed above was in response to that desire to supply shore power to all ships in port as you note but I bet it was scrapped due to the high cost.


David

Good point. My sailing experience was only on steam ships so I forgot about that.

Part of the problem with supplying ships with shore power is that they use exhaust heat from the gennies and main to make process steam. The steam is used for cargo heat (tankers) and keeping heavy fuel hot. I think most also have an aux oil fired boiler, but if elec power comes from shore, then what they need to fire the aux boiler? Rather pointless if that is the case. Complicated once you get into the nitty-gritty.

I know ships are supposed to go to distillate in port, but locally I see a good bit of stack smoke from the gennies. Can't imagine the engines are so clapped out that they smoke that much on distillate, I bet they say "F-it" and just keep running residual. At least in our port!! Probably not in Cali...

And yep, not many steam powered ships left. One of the last was El Faro. All modern ships are running big slow two stroke diesels which can run on heavy residual fuel same as an old boiler. More filtration needed, of course.

I was not on ships very long, but two of the last steam tankers I sailed on in the late 80's where towed to Asia to be cut up. Spent several weeks in a ship yard with guys running around with a torch in their hand. Hot Work Permit gained a whole new meaning, especially when you sleep there.

I didn't realize El Faro was steam.

It is amazing the ship and shoreside (land based) gas turbines can use these fuels. Some smart people out there doing amazing things with the heavier fuels.

dhays said:

If diesel fuel for ships continues to increase it will spur on the movement to develop LNG plants to use for ship fuel.

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TOTE (in your neighorhood) is already converting their two RO-ROs to LNG.

Owning a boat is expensive. Everything goes up in price often. Fuel is no exception. Luxury items such as a boat will always need maintenance, fuel, etc. I’m a little surprised that any boat owner would be surprised at rising costs for anything to do with a boat. Like everything else, it needs to be budgeted in.