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How The Gas Shortage is Predicted to Impact the Marine Industry

  • by: Rebecca Fagan
  • On: 24, Oct 2022
3 min read

The energy crisis is having an impact on almost every industry around the world. You can’t have an industry without energy, so the strain will be felt on costs, operations, and ability to meet demand. The marine industry is no exception.

The war in Ukraine has caused widespread disruption to global shipping, and has worsened supply chain disruption, port congestion, and labour shortages initially caused by the Covid-19 pandemic.

How the energy crisis is impacting the marine industry

Cost of fuel

 The most immediate consequence of a scarcity of fuel is that the price of fuel will rise.

The price of very low sulfur fuel oil (VLSFO), the 0.5% sulfur fuel that most commercial ships use, spiked after Russia’s invasion of Ukraine. In June, the price rose to over $1,000 per tonne, double its price the previous year.  

Ships with exhaust gas scrubbers have fared slightly better, able to save around $150-$300 per tonne of fuel, as they are able to use high sulfur fuel oil which isn’t as expensive due to lower demand.

The prolonged conflict in Ukraine has reshaped global trade, in part due to businesses choosing not to use Russian fuel. This has driven up the cost and availability of fuel and pushed some businesses to use alternative, non-compliant fuels, with lower explosive temperature. This obviously increases the danger of shipping, as well as the gradual breakdown of machinery running on low-quality fuel, so businesses face a tough decision either way.

Ability to transport goods

Without fuel, you can’t leave port.

 Between 80-90% of the world’s transport of goods is done via shipping, so when shipping becomes more difficult, the global supply chain feels the impact severely and immediately.

 Looking at Ukraine, when the war began, hundreds of vessels were trapped in ports, unable to leave. This has a huge impact on countries’ economies, unable to trade, as well as the businesses that do the transporting of goods.

Smaller businesses may fail

Without large reserves of funding, years of relationships with fuel suppliers, or the ability to invest in green fuel, smaller businesses are sadly struggling in the face of the energy crisis.

The International Monetary Fund has warned that the war in Ukraine will raise the already high cost of running a shipping business, and these inflated costs are just too high for smaller businesses who can’t absorb them.

The cost of shipping a container increased seven-fold in the year and a half following March 2020, while the cost of shipping bulk commodities rose even further.

As shipping is so vital to the global economy, rising shipping costs have a knock-on effect, increasing inflation. This is felt in some countries more than others. Obviously, countries that import more see larger increases in inflation. Similarly, as one would expect, do those who are more integrated into global supply chains, which as previously mentioned, are already struggling.

 So what can businesses, governments, and the marine industry at large do to solve this problem?

What the marine industry can do about the energy crisis

Invest in renewable fuels

 The easiest, simplest, most effective way to avoid the impact of an energy crisis is to invest in renewable energy and green fuels.

Being able to mass produce fuel that is renewable removes energy scarcity, meaning spikes in prices won’t grind the industry to a standstill.

Besides the logistical argument, there’s also the added benefit of our continued survival. Shipping produces around 3% of all man-made CO2 on earth, millions and millions of tonnes each year. If the industry pivots to a renewable and carbon neutral fuel source, that would go a long way towards reducing our overall carbon footprint and slowing the effects of global warming.

Maersk is already using carbon neutral fuels in some of its container ships, including methanol created from agricultural waste, and renewable generated hydrogen with carbon dioxide. The company even has a head of decarbonisation, hoping their example will spur the rest of industry into action.

It’s clear that the marine industry will have to deal with increased costs and disruption as long as there is an ongoing energy crisis, but renewable fuel can help ease the burden and help keep the industry moving.

Read more about marine sustainability trends, or learn more about why it’s so important that we develop green fuel.

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