This week, thousands of energy executives, thought leaders and analysts will meet in Houston for CERAWeek. One of the many topics they’ll discuss is the International Maritime Organization’s (IMO) 2020 standards, which cap sulfur emissions for marine fuels. But will panelists pay proper lip service to all the benefits the standards will provide?
More than 10 years ago, the IMO developed the 2020 standards to reduce the sulfur content in marine fuels from 3.5 percent to 0.5 percent. These standards provide an unprecedented opportunity to enhance U.S. energy security and to strengthen our economy.
For starters, America is ready. The United States already requires marine fuel that is five times more stringent than the IMO 2020 standards for ships traveling in U.S. coastal areas. Dr. James Corbett of the University of Delaware highlighted this in an op-ed in The Hill: “all U.S. ports have required cleaner ship fuels for ocean-going vessels since 2015.” As a result, the U.S. already has extensive experience supplying low-sulfur marine fuels, because we already use and produce next-generation fuels.
The U.S. refining industry has invested $100 billion over the past 10 years to produce IMO-compliant fuels and is prepared to supply them. Also, places like Texas and North Dakota produce some of the world’s highest volumes of IMO 2020 compliant fuel.
This provides a significant competitive advantage over foreign oil producers that haven’t made the necessary infrastructure investments and don’t produce low-sulfur crude. IHS Markit’s senior research analyst stated that “Russia’s oil segment appears to end up among the biggest losers financially,” with “no chance for them to be 100 percent prepared.” These countries will turn to U.S.-produced or U.S.-refined crude for their supply needs, strengthening our ability to dominate the market and enhancing our energy security and for our allies.
With the world turning to America to meet its low-sulfur fuel needs, we will continue to lead the world in this type of energy production—enhancing our competitiveness worldwide and hardening U.S. energy security. These are worthy benefits.
Implementing IMO 2020 according to schedule also brings economic rewards and job creation benefits. Workers in the U.S. energy sector will benefit from increased capacity at U.S. refineries, as well as refinery expansions or re-openings thanks to increased demand for low-sulfur fuels from the standards. For example, with IMO 2020 standards in place, the previously closed Limetree Bay refinery in the hurricane-ravished U.S. Virgin Islands could re-open, creating more than 2,000 jobs and $600 million in tax revenue over 10 years.
Last year, some analysts spread falsehoods about America’s ability to meet the IMO 2020 standards. However, these claims have been refuted in turn. Commodity experts at Goldman Sachs updated their modeling and determined that “shipping and refining businesses are on track to meet this challenge.” In the February 2019 Short-Term Energy Outlook, the Energy Information Administration found that—with IMO 2020 in force—the cost of gasoline, diesel and heating oil will be lower in 2020 than in 2018. And the International Energy Agency testified in February before a Senate Committee saying that “the situation is far more manageable for shipping and refineries than previous forecasts suggested.”
We knew the shipping, energy and labor sectors were ready for the IMO 2020 standards when we launched the Coalition for American Energy Security. As representatives of those industries, our mission is to help educate policymakers about both our readiness and the benefits that Americans will reap if we stay the course on IMO 2020.
Weakening or delaying the enforcement of IMO 2020 will only increase market uncertainty, cause harm to the U.S. energy industry and its workers, and relinquish an opportunity for America to dominate the market of next-generation, low-sulfur fuel.
– Ken Spain is the spokesperson for the Coalition for American Energy Security, which launched to educate policymakers about the benefits of IMO 2020 for American energy security and competitiveness. The coalition’s members include the Texas Oil & Gas Association (TXOGA), the American Fuel & Petrochemical Manufacturers (AFPM), the World Shipping Council, the United Steelworkers, the American Petroleum Institute (API) and the Center for Liquefied Natural Gas (CLNG), among others.