While debate continues as to how shipping can best meet the requirements of the 2020 sulphur cap, a new uncertainty factor has been thrown into the mix following publication earlier this week of a report by independent think tank Carbon Tracker. The report titled Margin Call: Refining Capacity in a 2°C world looks at the demand for oil if the CO2 emissions from all sources are limited to prevent global warming reaching the 2°C ceiling that the Paris agreement calls for. It says that to achieve the 2°C limit, global oil demand could decline by 23% over a 15-year period. Historically, falling or weak demand has often been accompanied by weak refining margins. With demand falling, refinery output would need to fall commensurately. Market forces would drive margins down in order to force the least competitive refiners out of the market. The report also says that diesel, gasoline and jet fuel products offer the highest margins across the product mix from refineries, and they also constitute around 70% of global product yield. The rate of technological change in road transport may surprise the industry and erode demand for these fuels faster than currently anticipated. Road diesel is one of the distillates that competes with lighter marine fuels so a fall in demand from land use could mean more available for shipping. On the other hand, if the refiners decide instead of switching to close refineries, then not only would that fuel not be available but neither would the residuals that remain after production of more valuable fuels. Under the circumstances, the reports authors’ suggest that ‘prospective investors should be wary of all new refinery investments, whether the build out of greenfield capacity or upgrades and expansions to existing facilities’. From shipping’s viewpoint, a lack of investment in upgrading existing facilities would likely mean that any de-sulphurisation plans that the refiners have been thinking about may not happen. No low sulphur residual fuel combined with a cutback in overall refining capacity could see shipping starved of any 2020 compliant fuel. The uncertainty about what strategy to develop to meet the IMO’s 2020 cap is not becoming easier as the deadline draws closer but some decisions will need to be made soon if things are not to descend into chaos in a little over two years from now.