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Geopolitical disruption drives pivot toward LNG and dual-fuel operational resilience

By Carly Fields

Ongoing disruption stemming from the conflict in the Middle East is doing more than just driving up operational expenses; it is actively reshaping the relative commercial viability of alternative fuels, according to experts at ING.

Historically, fuel strategies were once a predictable calculation tied to compliance and marginal cost containment. However, the current environment has forced a strategic pivot toward dual-fuel flexibility, operational resilience, and supply security.

ING’s Gerben Hieminga and Rico Luman recently examined two price scenarios from a Northwest European perspective. In a low-price environment where the Strait of Hormuz is fully open, traditional marine fuels behave normally, with marine gas oil (MGO) pricing at $750 per tonne. However, under the high-price scenario dictated by a fully closed strait, the economics fall apart. In this situation, MGO prices spike violently to $1,500 per tonne, while very low sulphur fuel oil (VLSFO) doubles from $500 to $1,000 per tonne.

As Hieminga and Luman note, the Middle East war has compressed the supply of oil and oil products to such an extent that traditional maritime fuels bear the brunt of the volatility. Crucially, while natural gas and power inputs rise as well, they do not experience the same exponential leap. Liquified natural gas (LNG), though affected, benefits from a wave of new capacity coming online and the stabilising presence of regional pipeline networks and domestic production.

This creates an economic distortion that alters the competitive field for alternative shipping fuels, the ING authors note. 

As the report points out, the high-case scenario hits oil products significantly harder than gas and power inputs, accelerating a shift in relative costs. “When oil products spike and gas rises less, the relative economics of LNG and (to a lesser degree) methanol and even ammonia improve quickly, even if the absolute cost of all energy carriers rises," Hieminga and Luman state. Consequently, LNG is the most attractive "available now" hedge.

Total cost

The numbers back this up conclusion. On an indicative unsubsidised basis measuring fuel costs in dollars per deadweight tonnage per 1,000 kilometres sailed, MGO rises 97% from 0.38 to 0.75, and VLSFO climbs 103% from 0.30 to 0.61. In contrast, LNG moves up a more modest 64%, shifting from 0.25 to 0.41. This reality makes LNG not just a transitional decarbonisation option, but commercially the most attractive option on the water today.

While LNG holds the strongest near-term attraction, the oil shock has also breathed new life into the commercial momentum of synthetic fuels, most notably methanol. 

The rapid escalation of bunker prices has narrowed the price premium that previously kept synthetic alternatives on the economic fringes. Under an open strait scenario, green methanol carries an 85% price premium over MGO, while blue methanol sits at a 45% premium. Once the strait closes and MGO doubles, that relative price gap shrinks to 42% for green methanol and 15% for blue methanol. Grey methanol, derived from unabated natural gas, drops to a negligible 5% premium. But Hieminga and Luman urge caution, reminding the market that oil products like MGO and VLSFO remain fundamentally cheaper than the truly low-carbon blue and green synthetic variants.

Despite these cost barriers, methanol has significantly outpaced ammonia in deep-sea commercial adoption over the past three years due to several practical, systemic advantages. First, engine and

vessel adaptations are simpler and faster, requiring fewer system-wide modifications than ammonia, which demands extensive redesigns and complex safety overhauls. Second, because methanol remains a liquid at ambient conditions, bunkering and handling are more straightforward. Third, it offers an immediate "ready now / ready later" optionality. Orders for methanol-ready dual-fuel vessels allow shipowners to hedge their bets by running on conventional fuels today while retaining the ability to switch as low-carbon supply chains mature.

Clean questions

However, switching to synthetic fuels does not automatically guarantee a cleaner footprint. The ING white paper reveals that traditional fuels generate roughly 1,900 to 1,950 kilograms of CO2 per deadweight tonne for every 1,000 kilometres sailed, while LNG reduces this to 1,400 kilograms. For synthetic fuels, the ultimate climate benefit hinges entirely on the production pathway. Green variants utilise electrolysers powered by renewable energy, blue pathways combine natural gas with carbon capture and storage, and grey pathways rely on unabated fossil feedstocks. Because methanol molecules inherently contain carbon, combustion always releases CO2 at the tailpipe. If a shipowner merely switches to grey methanol to bypass expensive oil, the carbon footprint actually worsens to 2,500 kilograms. For grey ammonia, which is carbon-free at the tailpipe but highly energy-intensive to manufacture, the full well-to-wake footprint skyrockets to 4,000 kilograms.

"Synthetic fuels can increase emissions if they are produced in a non-sustainable way, because the production chain is energy-intensive and the carbon intensity of inputs dominates outcomes,” Hieminga and Luman said.

This reality underscores why blue methanol, rather than green, represents the most plausible near-term stepping stone for heavy industry. Because the green hydrogen market remains confined to a pilot phase, blue synthetic pathways can scale much faster by leveraging existing gas infrastructure and localised carbon capture systems. Over the longer horizon, ammonia remains firmly on the industry's radar because its blue and green variants offer absolute tailpipe decarbonisation. While current adoption is stymied by a 112% to 211% price premium over MGO in a closed strait scenario, market perception is shifting from "probably not to probably yes" as a long-term play, they state.

Ultimately, shipping costs represent less than 5% of the final price of consumer goods, meaning the end consumer will barely feel these macroeconomic shifts. For shipowners and charterers, however, the financial exposure is direct and severe. By investing in LNG-powered or methanol-ready dual-fuel vessels, operators could be buying an ‘insurance policy’ against an unstable world.

The early-year surge has proven to be a temporary high-tech anomaly rather than a sustainable economic recovery, leaving global supply chains and trade-dependent economies facing a volatile and challenging year ahead.