Declining demand for residual fuel oil?

Global demand for residual fuel oil is expected to decline, according to the U.S. Energy Information Administration.

A Maine State Ferry Service boat near Vinalhaven, Maine.

Residual fuel oil is basically what's left after gasoline and other lighter hydrocarbons are distilled from crude oil.  Industry recognizes several grades of residual fuel oil, including No. 5 (used in steam-powered vessels in government service and inshore powerplants) and No. 6 (used for the production of electric power, space heating, vessel bunkering, and various industrial purposes.) 

Because residual fuel oil is composed of the residue left after distillation, it can contain large amounts of contaminants such as sulfur, nitrogen, or heavy metals.  As environmental regulations limit emissions of pollution, residual fuel oil can become less attractive (or more expensive) as a fuel source for electric power generation or marine transportation.

The EIA notes declining global demand for residual fuel oil since the mid-1980s.  In a brief report, EIA projects that the electric power and heating sectors will likely be responsible for continuedlarge reductions in residual fuel oil demand.

EIA also points to tighter international emissions regulations for the marine transport sector.  Rules under Annex VI of the International Maritime Organization through the International Convention of Pollution from Ships (MARPOL, or Marine Pollution) require global controls on emissions of sulfur and nitrogen oxides.  While residual fuel oil with a sulfur level no more than 3.5% can be used to meet the MARPOL requirements throughout most of the oceans, stricter limits apply to designated emission control areas like the North Sea, the Baltic Sea, and coastal areas in North America and the Caribbean Sea.  These strict limits effectively require 0.1% sulfur content residual fuel oil or lower in the covered emission control areas.  EIA suggests that strategies for MARPOL compliance will likely include low-sulfur fuels (marine gasoil or intermediate fuel oil, or even liquefied natural gas or LNG), or using scrubbers or other technology to remove sulfur post-combustion from the exhaust.

At the same time, EIA notes that some developing countries' power sectors may rely on residual fuel oil as a "transitional fuel" if they are "more sensitive to price and less sensitive to environmental and health implications."

Oil, from crude to fuels and chemicals

Petroleum - what we often think of as oil - powers a large sector of the world economy.  Crude oil, a naturally-occurring mix of substances produced by ancient life and transformed by time and geological forces, lies trapped beneath soil, rock, and the sea floor.  When captured and refined, the crude oil can be transformed into gasoline and diesel, but also into a wide variety of other fuels and chemicals.

In the U.S., crude oil is typically quantified in a 42-gallon unit known as the barrel.  While this bears some historic tie to actual barrels of oil, crude oil today is seldom packed in actual 42-gallon barrels, more typically being shipped in large seagoing oil tankers or pipelines.

At a refinery, each of the components of the crude oil mix is separated.  Some are converted from heavy, low-valued chemicals into lighter, higher-valued products like gasoline.  Processes like cracking, coking, and alkylation allow the production of more exotic petroleum derivatives.

From 42 gallons of crude oils, refineries can produce about 45 gallons of refined petroleum products. Typically, these might include:

• 19 gallons of gasoline
• 10 gallons of diesel
• 4 gallons of jet fuel
• 2 gallons of liquefied petroleum gases (propane, butane, etc.)
• 1 gallon of other distillates (heating oil)
• 2 gallons of residual fuel oil
• 7 gallons of other products

Most of this increase in total product volume comes as different fractions of the petroleum mix are distilled and transformed; the U.S. Energy Information Administration has described the increased volume after refining as "similar to what happens to popcorn, which gets bigger after it's popped".

Because each source of crude oil contains a different mix of hydrocarbons and other chemicals, the refining process yields different mixes of products for each type of crude. The demand for these products drives oil producers' decisions about where to drill and produce oil.