Abstract

Our modern economies depend on physical goods moving across borders with around 80% of world trade (by volume), and an estimated 70% (by value) that travels by sea [1]. Shipping keeps global trade moving and is therefore the lifeblood of trade as much as currencies are.

We argue that shipping is much more than just a cost to the factories buying goods for processing and manufacturing. Shipping is a key cost driver for the every day consumer and understanding the market will help financiers, insurance, industrial consumers and large companies supplying consumer goods companies to better understand what moves the world.

Without regulatory clarity and stability, the maritime industry can’t invest with confidence, and the result is more expensive, less reliable transport for the goods we all depend on. We argue for clarity and realistic global regulation in the interest of global economies, while continuing to reduce the environmental impact of marine transport.

The estimated electricity required to produce “green” alternative fuels at scale, such as ammonia or hydrogen, is far beyond the current global power system capabilities and therefore not a recommended path as economic and environmental consequences are not favourable.

Contents

1. Thousands of vessels moving billions of tons……………………………………………………………2

2. A summary on the energy required for sea transportation…………………………………………..2

3. One industry, competing rulebooks………………………………………………………………………….3

4. Deciding which ship to order…………………………………………………………………………………..3

5. Future regulation drives economic and environmental cost………………………………………..5

6. Give shipowners a reason to invest!………………………………………………………………………..5

Links and Resources…………………………………………………………………………………………………6

1. Thousands of vessels moving billions of tons

An estimated 115,000 vessels with a total deadweight (DWT) capacity of ~2.5 billion tons (Bln) carries more than 80% of world goods trade volume. These are vessels above 100GT (gross tonnage) [2] and exclude fishing boats, yachts, and military vessels. If you include fishing boats the figure will run into the millions, if you include yachts the total reaches 8-digits.

The actual breakdown by type and size of vessel usually measured in dead weight tonnage (DWT) gives a clearer picture. DWT is how much weight a ship can carry in the form of cargo, fuel, water, crew and provisions, excluding the weight of the ship itself. In this case we consider larger vessels that carry cargo and consume a substantial amount of fuel.

We focus on the ~60,000 ships of 1,000 GT and above, both cargo and non-cargo, holding nearly all of the fleet’s 2.5 billion DWT and burn the vast majority of marine fuel.

Humanity extracts roughly 110 billion tons (Bt) of resources and materials [3] from planet Earth, everything from iron ore to sand to timber for daily consumption. Out of this amount of resources, almost 13 Bt are shipped across oceans annually [4].

Energy commodities account for more than 5 billion tons, or over 40% of seaborne trade. Dry bulk cargo accounts for almost half the total, at around 6 billion tons. Here is a more complete breakdown of the shipped commodities making up ~11 Bt of the ~13 Bt ocean transport [3, 5, 6] ~2 Bt crude oil ~2 Bt containerized goods ~1.7 Bt iron ore ~1.5 Bt coal products ~1 Bt refined oil products ~0.8 Bt fertilizers and agricultural products ~0.6 Bt gas products ~0.5 Bt steel and scrap ~0.4 Bt cement and cementitious products ~0.4 Bt other ore products including bauxite and concentrates

Recently, partially driven by geopolitical turmoil, the ton miles, which is how far each ton travels on average, has grown faster at about 6% than the tonnage shipped, growing at about 2% [7].

2. A summary on the energy required for sea transportation

The total primary energy (also referred to as total energy supply TES) we as humans consume every year, amounts to approximately ~170,000 TWh. Approx. 25% or close to 40,000 TWh is consumed for global transportation (see Figure 1).

The marine fuels or the bunker fuels market spans across two families, conventional and alternative:

Conventional – Currently 90+% (Figure 2) (a) residual fuels (mainly used in main engines): High Sulphur Fuel Oil (HSFO, for scrubber-fitted ships), Very Low Sulphur Fuel Oil (VLSFO, 0.50% S) and Ultra Low Sulphur Fuel Oil (ULSFO, 0.10% S) used in Emission Control Areas or ECAs. (b) distillate fuels (mainly used in auxiliary engines): Marine Gas Oil (MGO) and Marine Diesel Oil (MDO), used in Emission Control Areas and at berth, and as mainengine fuel on smaller vessels.

Alternative – Currently less than 10%: alternative fuels such as LNG, methanol, LPG, biofuel blends, ammonia, hydrogen.

The volume of the conventional fuel category remains overwhelmingly dominant; but the alternative fuels category is where nearly all regulatory and investment attention currently appears to be directed at.

The total bunker market comprises about 325 Mln tons p.a. and has been relatively stable over the past years. As such, marine fuels make up less than 10% of about 3.8 Bt of all refined oil products used annually worldwide which include diesel, gasoline, jet fuel, heavy fuel oil, marine fuels, and others. S&P Global Commodity Insights projects that bunker fuel consumption will rise only marginally to about 330 Mln tons by 2030, then decline toward roughly 300 Mln tons by 2050 [14], as efficiency improves and the switch to alternative fuels is expected to outpace trade growth.

Why bunker fuel? Historically, on steamships, coal for ships’ engines was stored in dedicated compartments called bunkers (the same word used for coal storage in general, including on land, coal bunkers in buildings/rail yards). “Bunkering” meant loading coal into those compartments before a voyage. When ships switched from coal to fuel oil in the early-to-mid 20th century, the tanks storing the new liquid fuel took over the same name, “bunkers”, even though nothing was being stored in a compartment in quite the coal sense anymore. The term just carried across the fuel transition rather than being replaced, so “bunkering” now means taking on fuel oil, and “bunker fuel” means the fuel itself.

3. One industry, competing rulebooks

Since marine fuels are largely refined oil-based products, they directly react to geopolitical circumstances, positively and negatively. What moves oil will move bunker fuel.

The conflict in the Middle East starting in March 2026 showed how quickly this can happen. As oil supplies and shipping routes came under pressure, in main ports like Singapore, the price of very low sulphur fuel oil (VLSFO) rose from roughly USD 500 to around USD 900 per ton.

But what really concerns the industry and causes a lot of distress are “carbon regulations (1)” targeted at “saving the climate” and doing so through envisioned “decarbonization”. The idea is to penalize CO e emitting fuels (conventional marine fuels) with large enough monetary consequences to have the market move towards lower CO e emitting transport solutions (alternative marine fuels). The problem, as it so often is, that only tail-pipe emissions are considered and not the entire life cycle or system required.

The economic and environmental impact of such “carbon regulation” appears to not be fully understood. This subject was covered in more detail in Schernikau’s article “The Problem with the Primary Energy Fallacy”. The hope is to have synthetically produced “e-fuels” manufactured using “green” electricity to replace oil-based products and by doing so reducing greenhouse gas emissions.

The EU Emission Trading Scheme or ETS is not only the fastest growing but probably the “strictest” of such “carbon regulations”. The EU is putting pressure on ships by calling on Europe to join the scheme starting as recent as 2024 (see box below), making this a new initiative. What is interesting is that the IMO (International Maritime Organization) has a “net-zero” framework that was in principle agreed on in April 2025, but was since derailed and is now subject to an “adoption vote” in December 2026. The IMO regulations are facing heavy US/Saudi opposition. This means, to date, there is no global “carbon regulation” for the global shipping industry.

In the meantime, regional rules keep expanding, creating large uncertainties for ship owners: EU, Mediterranean, Canadian Arctic and Norwegian Sea ECAs, North-East-Atlantic ECA, etc. An unwanted consequence of this regulatory uncertainty is that the IMO’s claim to be the shipping industry’s single global regulator, is now under threat. Current EU ETS regulation is projected to increase shipping fuel cost by 50-100%. For example, the EU ETS bill will reach almost 10 Billion USD in 2026 for the maritime industry [15].

Shipping is a global industry that requires oneglobal rulebook, yet shipowners face an EU systemthat already imposes costs while the global framework remains under negotiation and regional environmental requirements continue to multiply.

As an example, carriers pass regulatory costs on toconsumers through EU ETS surcharges on freight. A freight-rate guide estimates around $170 per container, or 6–7% on top of the base freight rate is added for EU-linked trades [16].

A sidenote on sulphur. In 2020, the IMO enactedregulation to reduce sulphur content of fuel from3.50% to 0.50% resulting in most of the fuel combusted in vessels today being of low sulphur quality (VLSFO – very low sulphur fuel oil).

The regulation reduced sulphur pollution fromships, delivering a measurable improvement in air quality. That benefit came at a substantial economic cost, as switching to compliant fuel increased fuel costs by around 15–20%. [17]

The increase of global temperatures, weassume, was an unintended consequence of lowering sulphur emissions. SO has a strongcooling effect on the climate, both through directly reflecting incoming sunlight and by acting as cloudcondensation nuclei [18]. Tselioudis et al 2025explained the physics in their peer-reviewacademic paper [19]. The consequences of “carbon regulation” for the marine fuel industry arenot only a far higher cost compared to sulphur regulations but also that there will be little if any measurable positive environmental impact (see last section), contrary to what happened after IMO2000.

4. Deciding which ship to order

Shipowners face significant uncertainty in their decisions about which engine type they shouldinvest in. The are ordering a vessel that will operate for decades, but they do not know whichfuel the regulations will favour, what that fuel will cost, or whether the fuel will even be availablealong the routes the ship takes.

Choosing a conventional engine leaves them exposed to future regulatory costs where an alternative-fuel engine means committing capital before the fuel supply and economics are clear. A dual-fuel vessel offers flexibility, but the ability to burn another fuel does not make that fuel affordable nor does it secure availability. Moreover, that increase in flexibility also carries an economic cost in both the upfront investment, and the cargo space surrendered to a second fuel system.

Waiting is making a decision too. Ships age, maintenance continues, and opportunities to improve efficiency may be postponed along with the investment.

Shipowners face this uncertainty and they appear to be resisting the change to alternative fuels. The orders for vessels powered by alternative fuels have slowed in 2026. Most alternative fuel orders in the first half of 2026 were LNG (50%) and LPG/ethane (40+%) [23]. Methanol, ethanol, ammonia, and hydrogen had only a handful of orders. Please note that LNG- and methanolcapable ships burn conventional fuels when alternative fuel prices rise. Also, most of these LNG/LPG-capable engines are on gas carriers, which fuel themselves from their own cargo and therefore create little conventional bunker demand in the first place. Reminder, 95% of the operating fleet by tonnage and 99% by number of ships today still runs on conventional fuel.

Alternative fuels present several practical and economic challenges.

1.The most obvious problem is the low energy density (Table 1, Figure 3). Methanol needs about 2.5x the tank volume of Marine Gas Oil MGO.

2.The most misunderstood problem is that at life-cycle and system level the “alternative fuels” are NOT better for the environment. Too many “net-zero” electricity sources are assumed that simply don’t exist. Hydro, biomass, solar, or wind do NOT generate “netzero” electricity (see Schernikau’s blog articles on hydro power here, on biomass here, and on wind and solar here) and grid-scale electricity is the most complex and most expensive form of energy.

3.The economics of “alternative fuels” are not favorable. It is energy-economically impossible that an e-fuel using wind and solar as the basis (which is largely assumed and globally targeted) will be lower cost than a conventional fuel. There is insufficient hydropower or biomass waste-power available to make a true difference in global transport.

For example, “green” ammonia requires 12 MWh/ton of “green net-zero” electricity that is 24/7/365 available on demand to industrially produce hundreds of millions of tons. “Green” ammonia from wind and solar + batteries may be technically feasible but capital-intensive, and scaling it to global demand would take thousands of TWh/yr of dedicated generation at very low electricity costs [25]. Also, solar and wind + batteries have a significant environmental impact along the entire lifecycle. See Schernikau’s published article “Can Solar and Wind + Batteries Really Provide 24/7/365 Electricity?” 22 “Producing” an alternative fuel is only the beginning. Before a ship can use it, that fuel must be transported, stored and supplied at the ports where the vessel needs to refuel, with suitable equipment and procedures for handling it safely. For a shipowner, the practical question is whether enough fuel will be available along the intended route, at a price that allows the vessel to remain competitive.

This creates a difficult investment challenge because fuel suppliers need customers before committing to production and bunkering infrastructure and shipowners need confidence in that supply before ordering vessels that depend on it.

Here is an extract on hydrocarbon fuels illustrating the importance of carbon that “carbon regulation” is trying to eradicate, copied from the author’s book “The Unpopular Truth… about Electricity and the Future of Energy”, Chapter 2.5 (www.unpopular-truth.com):

Because carbon adds its own significant energy to the mix, gasoline has ~3,5x higher volumetric energy density (joules per liter) than liquid hydrogen, and ~7x higher density than compressed H2.

The addition of carbon transforms hydrogen froma low-density, explosive gas that will only become liquid at around -250°C (20K) into an easilyhandled room temperature hydrocarbon liquid, such as gasoline, diesel, or other petroleum products (C H O ). These hydrocarbons have more than triple the energy density of hydrogen alone (see Kiefer 2013 for more details).

Thus, hydrocarbon fuels are convenient to produce, store, transport, and consume, while H is very difficult and energy-intensive to produce, handle, store, or transport for consumption, and is highly explosive. Until a means to duplicate the utility of hydrocarbon fuels in a presently unknown H or H-containing medium is found, hydrogen cannot solve the “renewable” energy storage or transportation problem, neither economically nor environmentally.

Since the periodic table shows that discovering a new element to replace carbon is not probable, we must invent something else to replace carbon’s role by finding ways to increase the volumetric density of H2.

“If we didn’t have carbon, we would have to invent it as the ideal tool for handling hydrogen”

A sidenote on nuclear: Nuclear propulsion is well established and holds promise for commercial shipping, although we believe widespread adoption is still many years away.

Prof. Jan Emblemsvag (NTNU, Dept. of Ocean Operations and Civil Engineering) from Norway is one of the global academic leaders on maritime shipping and a nuclear propulsion specialist. He argues, and we agree, that nuclear propulsion is a possible avenue for future maritime transport, particularly for large ships [24].

Emblemsvag drew the following conclusions in his recent peer-reviewed academic research paper [25] which is aligned with our analysis:

The gravimetric energy densities are orders of magnitude too low, or the thermodynamical losses are too high, for electricity to replace fossil fuel in this particular application [marine fuels]… the estimated electricity required to produce [green] alternative fuels is far beyond the current power system capabilities.

Originally published at SSRN, October 10th, 2026.