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Skyrocketing Jet Fuel Prices May Cripple Airlines

Air travel is only starting to recover from the blow it received from the Covid-19 pandemic, but a surge in jet fuel prices is threatening that shaky recovery.

U.S., European, and Singapore jet fuel prices have risen in near lockstep with rising crude oil prices, and it’s hurting everything it touches—including airline stocks and air travel demand.

And the new U.S. ban on Russian crude oil is threatening to hoist crude oil prices even further.

Airlines who haven’t fully recovered from the travel demand destruction that took place during the Covid-19 crisis may be less able to withstand this latest shock.

Delta airlines, for example, may be simply unable to make it through another one-off event—this time stemming from high jet fuel prices--without some level of government intervention.

Those airlines will need to pass on the cost of the increased jet fuel to the consumer—a reality that could be a drag on air travel demand.

According to Reuters data, global airline capacity has already fallen 0.1% this week to 82 million seats—which is 23% below pre-pandemic levels. Scheduled airline capacity in North East Asia in the week ending last Monday dipped 4.5% from the previous week—the hardest-hit region.

In the United States, most analysts had forecast that air travel demand would tick up and surpass 2019 pre-pandemic levels yet this spring. But those rising jet fuel prices could now push that arrival date further into the future.

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Asia refining margins for jet fuel rose on Monday to $26.17 a barrel over Dubai crude—their strongest level ever recorded, Refinitiv Eikon data shows—as near-term supplies are largely expected to grow tighter.

By Julianne Geiger for Oilprice.com

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