Jet fuel shortages pose a risk to summer holiday travel plans
Jet fuel shortages have become a significant concern for the aviation industry, posing a risk to summer holiday travel plans. The price of jet fuel has risen sharply due to disruptions in supply, particularly linked to the ongoing conflict in the Middle East and the blockade of the Strait of Hormuz. This situation has led to increased costs for airlines, reduced flight capacity, and the potential for flight cancellations during the peak travel season.
Causes of Jet Fuel Shortages
The Gulf region is a major exporter of jet fuel, supplying about 20% of the fuel traded on international markets daily. Europe, including the UK, is heavily reliant on these imports due to limited refining capacity. However, the blockade of the Strait of Hormuz for over eight weeks has severely restricted supplies from the Gulf, forcing buyers to seek fuel from alternative sources. This has caused jet fuel prices in Europe to more than double from $831 per tonne in late February to a peak of $1838 per tonne in early April, though prices have since stabilized above $1500.
Jet fuel is a refined form of kerosene produced through fractional distillation of crude oil. The shortage is exacerbated by refinery closures in Europe, including two in the UK, reducing domestic production capacity. The UK now operates only four refineries, making it dependent on imports for 65% of its jet fuel needs.
Impact on Airlines and Passengers
Fuel costs represent 25-30% of airline operating expenses. Rising jet fuel prices have led airlines to increase ticket prices, especially on long-haul routes. For example, flights from London to Melbourne in June are now 76% more expensive than last year. Some airlines, such as Air France KLM, Air Canada, SAS, and Lufthansa, have cut their summer schedules to manage costs. Lufthansa plans to remove 20,000 flights through October.
Low-cost carriers that hedged fuel purchases in advance have a competitive advantage, while others face higher expenses. EasyJet hedged 80% of its fuel supply at lower prices but still incurred significant additional costs. US carriers, which often do not hedge, are particularly exposed to price increases.
On short-haul European flights, fare increases have been less pronounced. Some airlines, like Wizz Air, have even lowered prices to encourage hesitant travelers amid uncertainty about the fuel supply situation.
Risk of Physical Fuel Shortages and Responses
Beyond price increases, there is a growing risk of actual jet fuel shortages. The International Energy Agency (IEA) warned that Europe may have only about six weeks of jet fuel reserves left. Although imports from the US and East Asia have increased, they only partially compensate for lost Gulf supplies. Additionally, differences in fuel specifications limit the volume of US jet fuel that can be used in Europe.
European jet fuel stocks are at their lowest in six years, with critical levels expected by June if the Strait of Hormuz remains blocked. Larger airports are likely to be prioritized for fuel allocation, while smaller airports may face greater shortages.
Governments and regulators are preparing measures to mitigate the impact of shortages. In the UK, airlines may be allowed to cancel flights well in advance without losing valuable airport slots, helping them manage reduced capacity more efficiently. Refineries have been urged to maximize jet fuel production, and the government is exploring the feasibility of importing US Jet A1 fuel.
The European Commission is considering similar steps and has designated cancellations due to jet fuel shortages as “exceptional circumstances,” which exempts airlines from paying compensation for delays or cancellations, though passengers remain entitled to refunds or alternative flights. Rules on “tankering”ācarrying extra fuel to avoid refueling at expensive airportsāmay also be relaxed to help airlines manage costs.
While these measures address the symptoms of the crisis, the underlying issue remains Europe’s structural dependence on imported jet fuel and limited refining capacity. The situation continues to evolve as stakeholders seek solutions to ensure stable fuel supplies for the upcoming summer travel season.