While the United States and other global powers wait for Tehran’s response to a proposed peace agreement, a looming jet fuel shortage could further complicate the energy crisis already affecting the U.S. and other countries, with global air travel facing particular pressure.
With the bottleneck at the Strait of Hormuz continuing, the head of the International Energy Agency warned that Europe may have only “six weeks or so” of remaining jet fuel supplies.
IEA Executive Director Fatih Birol described the situation as the “largest energy crisis we have ever faced,” driven by the disruption of oil, gas and other energy shipments that normally pass through the Strait of Hormuz.
“In the past there was a group called ‘Dire Straits.’ It’s a dire strait now, and it is going to have major implications for the global economy,” Birol said. “And the longer it goes, the worse it will be for economic growth and inflation around the world.”
Some countries are better positioned than others when it comes to oil and jet fuel reserves, but if the conflict continues, even well-supplied nations could eventually feel the strain.
In the United Kingdom, 13,000 international flights are expected to be cut this month, removing nearly two million seats from May schedules. Even so, the reductions are still considered “marginal,” according to the Advantage Travel Partnership.
U.K. airlines are not currently facing widespread jet fuel shortages, but industry experts warn that prolonged disruption to deliveries could create supply problems within weeks.
“Some countries may be richer than the others. Some countries may have more energy than the others, but no country, no country is immune to this crisis,” Birol said.
Istanbul and Munich have experienced some of the largest reductions in flight capacity, according to aviation analytics firm Cirium.
Airlines have also begun adjusting schedules and raising fares in response to higher fuel costs.
Air France, KLM, Air Canada, Delta and SAS have all reduced portions of their summer schedules. Lufthansa said it plans to remove 20,000 flights between now and the end of October.
Air Canada also announced last month that it would suspend service to New York’s JFK International Airport between June and October, citing the surge in fuel prices.
Spirit Airlines shut down altogether after a failed merger with JetBlue, two bankruptcy filings in two years and a liquidity crisis worsened by higher jet fuel costs.
The U.K. is preparing several measures to help airlines manage the disruption, including allowing carriers to cancel flights at busy airports such as Heathrow well in advance without risking the loss of valuable takeoff and landing slots.
U.K. Transport Secretary Heidi Alexander said there is currently no shortage of jet fuel, but warned that “this is clearly an evolving situation.”
The U.K. imports roughly 65% of the jet fuel it consumes, with a significant share normally coming from the Middle East.
Jet fuel prices have more than doubled since the beginning of the war. One metric ton traded at about $831 in late February, before climbing to a high of $1,838 in early April.
Larger airlines may have an advantage in regions facing shortages because they have greater financial resources to absorb elevated fuel costs, according to Jacques Rousseau, managing director at Clearview Energy Partners.
Asia-Pacific countries are the most dependent on Middle Eastern jet fuel supplies, followed by Europe.
Most of Europe’s jet fuel is produced by European refiners, but Rousseau estimated that roughly 20% to 25% of the region’s normal supply is currently missing because of the war.
To help close that gap, the United States sharply increased jet fuel exports to Europe, sending about 150,000 barrels per day in April, roughly six times the normal level, according to Rousseau.
The U.S. is in a stronger position because it is itself a major oil producer, making outright shortages less likely domestically.
“It’s just going to cost more here, whereas in different parts of the world you could actually get to a point where there’s just no fuel,” Rousseau said.
The closure of the Strait of Hormuz is removing an estimated 10 million to 15 million barrels of oil per day from global markets, according to Pavel Molchanov, senior investment strategist at Raymond James & Associates.
The International Energy Agency has announced the release of 400 million barrels of oil from member countries’ emergency reserves, but those barrels will not necessarily reach markets quickly.
“It could take until the end of the year to get all of those barrels onto the market,” Molchanov said.
Airlines have already begun passing some of the higher fuel costs on to travelers through increased ticket prices and additional fees.
For passengers, the impact may extend well beyond more expensive fares.
Travelers could also face later booking patterns, greater schedule volatility and fewer low-cost options, particularly if the disruption continues into the peak summer travel season.
