ILMA Compoundings - May 2020 - 38

WASHINGTON LANDSCAPE

Used Oil and Re-refining
Changes Coming?
By Matthew Levetown

U

sed engine and industrial
oils are typically collected by
re-refiners, who recycle them
into new products, such as re-refining
into quality base oils or blending into
marine (bunker) fuels. However, the
implementation of IMO 2020, which
reduces the allowable sulfur content
of marine fuels from 3.5 to 0.5 parts
per million, is driving changes to
re-refining practices. Already, Clean
Harbors-Safety Kleen announced
increased prices for its waste oil
collection, citing IMO 2020, as well as
the COVID-19 pandemic, for driving
down re-refined product prices. Is
there a long-term shift coming? Could
price reductions over a longer time
horizon result in higher collection fees
for certain used oil products, or even a
refusal to accept high-sulfur waste oils
from generators that include sulfur or
overbased sulfonate extreme-pressure
lubricant additives?
IMO 2020 & COVID-19 IMPACTS
The International Maritime Organization (IMO) is a specialized agency
within the United Nations tasked
with regulating global marine shipping. Because of concerns with the
environmental and health effects of
sulfur emissions, especially in the
maritime industry, where high-sulfur
bunker fuels were common, IMO 2020
required either a switch to very low-sulfur (VLS) fuels or scrubber installation
on ships. As of Jan. 1, ships were
required to abide by the regulations.

38

MAY 2020

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There were concerns raised about
refinery capacity for VLS fuels and
scrubber installation time in 2019,
but so far there has been little negative
reporting on IMO 2020 slowdowns.
Many companies preferred to build
or retrofit for VLS fuels, as scrubbers
are expensive and require a longer
installation period, offsetting the price
savings garnered from continuing the
use of high-sulfur fuels. As a result,
production of high-sulfur bunker
fuels is expected to decrease, causing
ripple effects through the downstream
petroleum industry.
Alongside IMO 2020, the impact
of the COVID-19 pandemic is, at
the time I write this article, gathering
momentum. Three stimulus bills have
been enacted thus far, and oil prices
are at their lowest point in decades,

prompted by a combination of an
OPEC price fight between Russia and
Saudi Arabia and reduced travel due
to the novel coronavirus. If COVID19 continues to spread, the normal
upswing in fuel pricing in the summer
is likely to be affected as well. So far,
there has been a reduction of over 1
million barrels per day of U.S. crude oil
production, and oil rigs are shuttering
at the fastest rate in 35 years. While it is
difficult to determine whether re-refiners' slumping product pricing is due
to IMO 2020 versus COVID-19, the
effects on the used oil market likely will
continue over the long run.
CONSEQUENCES
The cost of high-sulfur fuel drives the
price of used motor and industrial oils.
Despite curtailment of the high-sulfur
bunker fuels market, there are some
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