New Shipping Rule to Support Europe's Faltering Diesel Demand

A new regulation targeting pollution from maritime shipping in the Mediterranean Sea will provide support to Europe's declining diesel demand. According to Eugene Lindell, head of the refined products division at consulting firm FGE, the regulation will trigger a daily increase of 44,000 barrels in demand for a type of diesel fuel known as "marine gas-oil" next year.

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From May 2025 onwards, the maximum sulfur content in fuels used on ships crossing the Mediterranean will drop from 0.5% to 0.1%. Although "marine gas-oil" is significantly less polluting than the fuels ships are currently permitted to use, it remains considerably dirtier than diesel used in European automobiles.

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Europe's overall diesel consumption faces long-term pressure due to the declining share of diesel vehicles in the EU fleet. A mild winter this year and weakness in the manufacturing sector have also dampened fuel demand.

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While the new rule will support Europe's overall diesel demand, it will not be sufficient to reverse the declining trend. Lindell noted that FGE expects total consumption across Europe to decline by an average of 30,000 barrels per day in 2025, following this year's decline of 140,000 barrels per day.

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FGE's projected additional daily demand of 44,000 barrels for 2025 represents the annual average increase in 0.1% sulfur "marine gas-oil" consumption in OECD Mediterranean countries and the Strait of Gibraltar.

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Key Points:

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• The sulfur content in fuels used for maritime shipping in the Mediterranean will be reduced from 0.5% to 0.1%.

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• The regulation will result in a daily increase of 44,000 barrels in "marine gas-oil" demand.

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• Europe's diesel demand will continue to face downward pressure overall.

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• FGE expects diesel consumption in Europe to decline by a further 30,000 barrels per day in 2025.

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• Although the new regulation will not be sufficient to reverse the declining trend, it will provide some support to demand.

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News Link: https://www.supplychainbrain.com/articles/40599-new-shipping-pollution-rule-to-aid-europes-ailing-diesel-demand

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