The restoration of normal jet fuel flows around the world will take months, even if Iran reopens the Strait of Hormuz today, the head of the International Air Transport Association warned.
“If it were to reopen and remain open, I think it will still take a period of months to get back to where supply needs to be given the disruption to the refining capacity in the Middle East, which is a critical part of the global supply of refined products, and not just jet fuel for other products as well,” Willie Walsh, director-general of IATA said, as quoted by Reuters.
Soaring jet fuel prices since the start of the U.S. and Israeli war against Iran have hit the profitability of airlines, who have started raising air fares and grounding flights to contain the fallout from the Iran war, which has more than doubled aviation fuel prices over the past month.
The product market came under more severe stress than the crude markets as the war dislocated oil and fuel supplies and sent jet and diesel premiums over Brent to astronomical highs. Nowhere has the stress been more severe than in jet fuel cracks and prices, signaling acute price pain for airlines and consumers going forward.
According to IATA data, jet fuel prices are up by 132.1% from a year ago, at $209 per barrel. Regionally, Asian jet fuel prices are the highest, at $228 per barrel, while North America enjoyed the lowest prices, at an average of $192 per barrel. Even that, however, is an increase of over 100% from a year ago, the data shows.
“So there is (refining) capacity available once we get the crude oil flowing, but it’ll take a little bit of time, and with the crack spread elevated the way it is, I think that provides an incentive for refineries to increase the production of jet fuel,” Walsh said.
By Irina Slav for Oilprice.com
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