Ship owners have several choices in order to comply with the new rules, but the easiest is to burn middle distillates, which are lower in sulfur, but far more expensive. FGE analysts estimate that in 2020, the new rules could shift 700,000 barrels per day of demand from fuel oil to distillates, though the International Energy Agency has put it as high as 2 million bpd.
Refineries like PBF's produce very little fuel oil, and brand new complexes such as Saudi Aramco's Jubail or Reliance's Jamnagar in India produce virtually none. That is because they have equipment that transforms high-sulfur products into asphalt for roads, or enable them to simply make less fuel oil and more of the more valuable fuels such as diesel and gasoline.
Wood Mackenzie estimates that by 2020, middle distillate margins could average as much as $25 per barrel, nearly triple this year's average of just over $9 per barrel. But this will come mostly at the expense of fuel oil profits, which will slide dramatically as the barrels seek a new outlet.