The ongoing Iran war and the effective closure of the Strait of Hormuz have sparked a potential jet fuel shortage in Europe and Asia. This could have significant impacts on world travel, including higher airfares and flight cancellations, as the summer travel season approaches.
In an exclusive interview with the Associated Press, International Energy Agency Director Fatih Birol expressed concern over the situation, stating that Europe has approximately six weeks of remaining jet fuel supplies and warned of a potential energy crisis on a global scale.
Typically, European countries hold several months’ worth of jet fuel inventory, but according to a recent IEA report, some countries are currently relying on less than 20 days of coverage. This is a significant decrease from the usual supply levels, and if it falls under 23 days, physical shortages may occur at certain airports, resulting in flight cancellations and decreased demand.
Jet fuel is a refined kerosene-based oil product and is the biggest cost for airlines, making up about 30% of their overall expenses. As jet fuel prices have roughly doubled since the start of the war, airlines are facing increased costs. Some carriers have already passed these costs onto consumers by raising fees for baggage and other add-ons, embedding costs into ticket prices, or implementing fuel surcharges.
The process of obtaining jet fuel for airlines is similar to how drivers purchase gasoline from stations, but on a much larger scale. Jet fuel is produced from crude oil at refineries and is then transported to airlines via ships, pipelines, and stored at airports. Airlines are responsible for purchasing their own fuel, and if there is a shortage in a particular region, some airlines may have more stored than others. However, remaining flights are likely to be more expensive due to the increased fuel costs.
The Asia-Pacific region is the most reliant on oil and jet fuel from the Middle East, followed by Europe. While most of Europe’s jet fuel is produced by European refiners, approximately 20-25% of its supply is currently unavailable due to the war. To compensate for this, the US has increased its exports of jet fuel to Europe significantly. However, availability of jet fuel is not as much of an issue in the US, as it is a major oil producer.
The world is currently experiencing a significant lag in the supply of jet fuel, with an estimated 10-15 million barrels of oil being lost daily due to the closure of the Strait of Hormuz. The IEA has released 400 million barrels of oil from emergency reserves, but this will not have an immediate impact as it could take until the end of the year to get all of these barrels onto the market.
The current fuel shortage could have various impacts on air travel. Christopher Anderson, a professor at Cornell University, believes that travelers should prepare for more than just higher airfares. He states that this is no longer just a fuel-price story but a network-planning story as well.