Recent market volatility, geopolitical disruption and tightening carbon regulations are challenging the perception that conventional fuels offer the safest path for shipowners. 

Jesper Sørensen, Global Head of Alternative Fuels and Carbon Markets of KPI OceanConnect, shared with Singapore-based bunkering publication Manifold Times how changing market dynamics are reshaping the commercial case for alternative fuels and highlighting the value of fuel flexibility in an increasingly uncertain environment:  

For years the case for conventional bunker fuels has rested, in part, on familiarity. Owners know how to procure it, use it and build voyage economics around it. Alternative fuels, by contrast, have required a leap of faith – underdeveloped supply chains, high costs and a siloed regulatory backdrop. It’s a familiar tension for many ship owners where the scales have consistently favoured conventional fuels. It was, after all, the safe, known pathway while the green transition matures at its own pace.

Recent market conditions, however, have shown that conventional fuels carry their own version of uncertainty, one that is easy to underestimate in quieter times. Since the Iran War began at the end of February, export terminals across Iraq, Oman, Bahrain and the UAE came under threat and were struck or evacuated within days of each other. The Strait of Hormuz, which carries around a fifth of global oil, has been effectively closed for over a month. Over this time, Brent crude – the global oil benchmark – has traded across a $46 range, between $73 and $119. ICE Gasoil front-month swung more than $400 per tonne in a fortnight. LSMGO briefly disappeared from the Singapore spot market. This is the broader market context every owner has been navigating. It is a difficult environment by any measure but is worth pausing on, because it also changes the conversation around alternative fuels.

Biofuel and methanol markets were also affected. But they moved within a materially narrower range and were largely decoupled from the specific geopolitical shocks driving conventional supply disruption. This meant that the spread between alternatives and conventional fuel narrowed considerably. When EU ETS and FuelEU Maritime compliance costs are also factored in, that spread reduced further still, to the point where alternatives have looked competitive on an all-in basis during this time. That is a different commercial conversation from the one the industry was having even six months ago.

Across the supply chain, the consistent feedback from suppliers, traders and charterers is that the window to lock in biofuel or methanol on terms more favourable than any point in the past eighteen months remains open. Disruption and uncertainty are likely to affect the conventional fuel market for many months after the conflict is resolved – indeed the longer disruption continues, the longer the post-conflict recovery will take – and yet most owners have not seized the biofuel opportunity open to them. 

LNG also warrants attention as the alternative fuel with the deepest fleet commitment. Disruption to Qatari export infrastructure is a significant setback, with a recovery timeline that will be measured in years rather than months. This equation is balanced however, by significant new US export capacity coming online in 2026 and 2027, which will help rebalance availability for European and Asian buyers. The harm done to LNG users highlights an issue that is less about LNG specifically and more broadly about resilience and independence from any single fuel source. Owners with flexibility across fuel types – LNG alongside biofuels, methanol and conventional – will be better equipped to absorb supply shocks wherever they arise.

New fuels are initially expensive, but as production scales, supply chains mature and regulation creates demand certainty prices can be expected to come down. We have watched this curve play out in solar power, in batteries and in biofuels for road transport. Marine alternative fuels are at an earlier stage of the same pathway, but the direction of travel is unambiguous. Today’s premiums reflect a market in its early stages of development, not the cost of a system at scale.

Carbon regulation in the maritime industry has advanced quickly, and while it faces fragmentation and disruption, it warrants attention. Under EU frameworks carbon compliance is no longer a future liability, but a direct cash cost to be settled annually, drawn from the same credit lines that fund bunker procurement and working capital. Managing that cost actively, through alternative fuel procurement during periods of narrow spreads, can have a direct impact on the carbon procurement bill. Active management will free up credit capacity and, in many cases, convert a compliance liability into a surplus that can be traded through FuelEU Maritime pooling. Finance teams need to appreciate this strong commercial argument for pursuing the energy transition now.

Carbon regulation by the International Maritime Organization determines prevailing and future conditions of global regulation, so the meaningful technical progress made at MEPC 84 has provided a clearer sense of where the international framework is heading. Technical work on fuel certification, GFI methodologies and reward mechanisms moved forward, and a broad majority of member states signalled support for the Net-Zero Framework as a foundation. But the Net-Zero Fund remains undefined, key elements of energy efficiency regulation have been delayed and further negotiation is inevitable. In the meantime, the EU’s regime is already in effect. Any owner with regular port calls in Europe is operating inside a binding compliance system today, whatever the longer-term international system looks like.

Looked at this holistically, current conditions remind us that certainty is an illusion. No single fuel can be taken for granted and global regulation that would bring simplicity and clarity for the industry is years away. The owners best positioned to navigate today’s environment are those building genuine flexibility into their fuel strategy, spreading exposure across technologies, supply sources and compliance pathways. The conditions to start doing that, or to go further than they already have, are as favourable now as they have ever been.

Photo credit: KPI OceanConnect
Published: 25 June, 2026