Fuel is the largest single cost of running most ships, and it is the one that moves. Understanding what actually drives the price of very low sulphur fuel oil, and how that price reaches your operating account, is worth more than watching a daily quote.
A Fuel That Exists Because of a Rule
Very low sulphur fuel oil is not a naturally occurring grade that shipping happened to adopt. It exists because MARPOL Annex VI capped the sulphur content of marine fuel at 0.50% by mass outside emission control areas, with a stricter 0.10% limit inside them. Refiners responded by producing blended products that meet the cap, and the modern bunker market reorganised itself around them.
That origin explains the market’s odd behaviour. VLSFO is not one uniform commodity like crude. It is a family of blends whose composition varies by refinery, feedstock, and port, which is why price differs between locations for reasons that have nothing to do with the underlying oil price. It also explains why compatibility and quality problems recur, since two compliant fuels from different sources are not necessarily compatible with each other in the same tank.
What Actually Moves the Price
Operators often track VLSFO as though it simply follows crude. Crude is the foundation, but several forces sit on top of it, and they explain most of the variation an operator experiences month to month.
Crude benchmark: The underlying cost of the barrel, which sets the general level but not the local price.
Refining and blending margin: What it costs to produce a compliant low sulphur blend, which varies with refinery configuration and demand for competing products.
Regional supply balance: Availability at the specific port, where a tight local market can push prices well above a neighbouring hub.
Logistics and barge costs: Delivery to the vessel, which differs sharply between a major hub and a minor port.
Regulatory cost layers: Emissions schemes that add a cost per tonne of fuel burned in certain trades, independent of the bunker price itself.
The practical consequence is that comparing a single global VLSFO figure against your own delivered cost is close to meaningless. What matters operationally is the delivered price at the ports your ships actually take bunkers in, and the spread between those ports, which is where genuine savings sit for anyone whose trading pattern gives them a choice.
The Spread That Decides Scrubber Economics
The single most consequential number in marine fuels is not the VLSFO price. It is the spread between VLSFO and high sulphur fuel oil, because that gap is what a scrubber earns. A vessel fitted with an exhaust gas cleaning system may burn cheaper high sulphur fuel while meeting the sulphur requirement through abatement, so the value of that installation is directly proportional to how wide the spread runs.
A scrubber does not save fuel. It buys access to a cheaper grade, so its entire return depends on a price gap the owner does not control.
When the spread is wide, scrubber-fitted tonnage enjoys a real operating advantage and payback accelerates. When it narrows, that advantage compresses and the capital, maintenance, and lost cargo space become harder to justify. This is why the spread, rather than the absolute price of either grade, is the figure worth tracking for anyone making or reviewing that investment. It also matters to charterers, since scrubber-fitted vessels command different rates depending on where the spread sits.
How Fuel Price Reaches Operating Cost
Fuel does not hit every operator’s accounts the same way, and the charter structure decides who actually feels a price move. Under a voyage charter, the owner generally supplies and pays for fuel, so bunker price moves land directly on the owner. Under a time charter, the charterer typically supplies fuel, so the exposure sits with them while the owner is more concerned with the vessel’s consumption performance against warranted figures.
That distinction turns fuel price into a contractual question as much as a market one. It is why consumption warranties, speed provisions, and bunker clauses receive close attention in negotiation, and why disputes about performance tend to surface when prices are high. A vessel burning slightly more than warranted matters little when fuel is cheap and a great deal when it is not.
The Regulatory Cost Layer
An increasingly important point is that the price on the bunker delivery note is no longer the full cost of burning that fuel. Emissions regimes now attach a cost to combustion in certain trades, and they are structured to tighten over time. For operators trading into regions that price carbon or mandate progressively lower greenhouse gas intensity, the total cost of a tonne of conventional fuel includes a compliance component that rises on a published schedule.
This changes how fuel decisions should be evaluated. A comparison between conventional fuel and an alternative that looks uneconomic on bunker price alone can look different once the regulatory layer is included, and more different again against future years of the schedule. Operators making vessel or contract decisions with a multi-year horizon are increasingly obliged to model the compliance cost alongside the fuel cost rather than treating them separately.
The bunker price tells you what the fuel costs. It no longer tells you what burning it costs, and the gap between those two numbers is widening by design.
What to Actually Watch
For an operator, the useful discipline is narrow. Track delivered price at your own bunkering ports rather than a global index, because that is the number you pay. Track the VLSFO to HSFO spread if scrubber economics are relevant to your fleet or your chartering. Know which party carries fuel exposure under each of your charters, since that determines whether a price move is your problem or your counterparty’s. And treat consumption performance, hull condition, and bunker quality as cost levers you control, in contrast to the price itself, which you do not.
Fuel price will keep moving for reasons no operator can influence. What separates well-run operations is not predicting that movement but being positioned so that a move in either direction has a manageable effect, through the charter terms they agreed, the consumption they achieve, and the ports they choose to bunker in.
Frequently Asked Questions
What is VLSFO and why does it exist?
Very low sulphur fuel oil is marine fuel blended to meet the MARPOL Annex VI sulphur limit of 0.50% by mass outside emission control areas, where a stricter 0.10% limit applies. It exists because of that regulatory cap rather than as a naturally standard grade, which is why VLSFO is a family of varying blends rather than a single uniform product.
Why does the VLSFO to HSFO spread matter so much?
Because it determines the value of a scrubber. A vessel with an exhaust gas cleaning system can burn cheaper high sulphur fuel while meeting the sulphur requirement, so the saving it generates is exactly the price gap between the two grades. A wide spread accelerates payback and strengthens the vessel’s commercial position, while a narrow one erodes both.
Who pays for bunkers, the owner or the charterer?
It depends on the charter. Under a voyage charter the owner generally supplies and pays for fuel, carrying the price exposure directly. Under a time charter the charterer typically supplies fuel, so price exposure sits with them while the owner’s exposure runs through consumption warranties. This is why bunker and performance clauses matter as much as the market price.
Is the bunker price the full cost of burning the fuel?
Increasingly not. Emissions regimes in some trading regions attach a compliance cost to fuel combustion that sits on top of the delivered bunker price and is scheduled to tighten over time. For decisions with a multi-year horizon, such as vessel investment or long charters, the compliance layer needs to be modelled alongside the fuel price rather than considered separately.
Sources: IMO MARPOL Annex VI, Regulation 14, Sulphur oxides and particulate matter (0.50% global limit, 0.10% in emission control areas) · IMO Resolution MEPC.320(74), Guidelines for consistent implementation of the 0.50% sulphur limit · ISO 8217, Petroleum products, Fuels (class F), Specifications of marine fuels · IMO MARPOL Annex VI, Regulation 18, Fuel oil availability and quality, and bunker delivery note requirements
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