Airlines Face 12- to 24-Month Jet Fuel Strain as 1 Billion-Barrel Shortage Threatens LCCs
Updated
Updated · Aviation Week · Aug 12
Airlines Face 12- to 24-Month Jet Fuel Strain as 1 Billion-Barrel Shortage Threatens LCCs
1 articles · Updated · Aviation Week · Aug 12
Summary
Jet fuel prices are likely to worsen for months even if the Iran war ends now, with some low-cost carriers unlikely to survive a prolonged cost spike, energy expert Chris Russo said.
Refineries are already at capacity and global refining output has fallen, leaving limited ability to turn available crude into jet fuel while demand remains high.
A nearly 1 billion-barrel crude supply shortfall could drive another round of price increases after the U.S. and China drew on strategic reserves during the almost six-month conflict, Russo said.
Russo urged airlines to move beyond reactive cuts and hedging, and instead use 12- or 24-month supply contracts more aggressively; better contract terms can save 1 to 4 cents per barrel.
Strong travel demand has so far absorbed higher fares, but Russo expects passengers to eventually resist further increases, a shift that could squeeze weaker budget airlines and favor legacy carriers.