https://www.agbi.com/ :Soaring marine fuel prices are adding to the costs facing shipping companies in the Iran war, with some fuels roughly doubling in price since the start of the year.

The surge is forcing shipping companies to rethink how and when they refuel, buying smaller quantities and delaying purchases where possible as they try to contain another rapidly rising cost of moving goods around the world, experts have said.

Ship operators are already contending with spikes in war insurance and ship prices that are pushing up the price of getting products, including oil, to the global market.

There are several global centres for bunkering – the process of refuelling ships with marine fuel – such as Singapore, Rotterdam in the Netherlands and Fujairah in the United Arab Emirates.

Most ships use very-low-sulphur fuel oil (VLSFO), which was widely adopted after tougher international sulphur limits came into force in 2020.

The price of VLSFO in Singapore has risen from $433 per tonne in January to about $824, according to Dalila Laskar, head of oil research at interdealer company Oil Brokerage.

VLSFO from Fujairah has risen 62 percent to $957 a tonne from $590 on March 2, according to price tracker Argus Media.

Marine gasoil, an even cleaner and more processed type of fuel, rose 78 percent over the same period to $1,670.

Prices have been volatile since the start of the US-Iran war, but are down from highs reached in September.

The increases have been driven in part by the disruption of oil shipments from the Gulf, but the pool has shrunk for other structural reasons, Laskar said, including attacks from Ukrainian forces on Russia’s energy infrastructure.

“On top of that, refiners chasing record diesel margins are producing fewer of the blending components needed for compliant VLSFO,” she says.

Diesel prices have surged amid shortages caused by Hormuz disruption and compounded by attacks on Russian refineries.

Marine and road vehicle fuels are often blended at the same factories and compete for resources.

Siew Hua Seah, global editor for marine fuels at Argus Media, said price volatility for marine fuels was “hurting demand”.

“Buyers are trying to stay away from the market if they can, buying in smaller quantities or on a needs-only basis.”

Higher prices are also changing which type of ships are the most competitive to use. Ships are buying more HSFO, a heavier fuel that can only be used by vessels fitted with scrubbers – an exhaust-cleaning system that removes sulphur from emissions.

Maritime intelligence service Lloyd’s List said the spread between VLSFO and HSFO during the war reached almost $200 per tonne in August, around twice its pre-crisis level.

About 67 percent of existing very large crude carriers are fitted with scrubbers, according to Lloyd’s List, while 93 percent of VLCC new builds are due to have them installed.

The three main types of marine fuel
Very-low-sulphur fuel oil (VLSFO) The default fuel for most cargo ships. It came into widespread use as a result of the International Maritime Organization’s 2020 environmental mandate

High-sulphur fuel oil (HSFO) A traditional “heavy” fuel that is a byproduct of crude refining. It requires ships to heat it constantly so it will burn. Vessels must use what’s known as a scrubber to reduce air pollution

Marine gas oil or marine diesel oil (MGO/MDO) Very clean burning fuels with an even lower sulphur content than VLSFO. They require no pre-heating. They are required by law in strict emission control areas such as coastal North America and the North Sea

Source: International Maritime Organization, Martool