Aviation fuel prices have doubled in just one month. A global "flight crisis" is beginning to emerge.

Cailian Press, March 28 (Editor: Shi Zhengcheng) Even far from the Middle East battlefield, the bitter fruits of a blockage in the global “energy arteries” are triggering an aviation crisis that is spreading worldwide.

As of the time of publication, airlines from Vietnam to New Zealand have begun canceling flights due to a shortage of aviation fuel, and the EU and the UK may find themselves in a similar situation within weeks. Even the largest oil-exporting country, the United States, has seen its airlines cancel some unprofitable routes due to high oil prices.

Surging Aviation Fuel Prices

Although the actual blockade of the Strait of Hormuz has caused fuel prices to surge collectively, the energy pressure on the aviation sector is particularly severe.

According to statistics from the commodity research firm General Index, the price of jet fuel specifically for jet engines has skyrocketed from nearly $800/ton at the end of February, when the conflict started, to $1600/ton, a much higher increase than that of gasoline, marine fuel, and naphtha.

Meanwhile, Asian refineries have been forced to cut production due to a lack of crude oil from the Middle East. Oil traders and analysts have stated that the impending supply shortage means flights need to be reduced to curb demand, and crude oil reserves may also need to be tapped to enhance the supply of specific products. So far, member countries of the International Energy Agency have agreed to release 400 million barrels of oil, but based on past experience, only a small portion of emergency reserves released will be used by the aviation industry.

Data from Energy Aspects’ OilX service indicates that global aviation fuel and kerosene refinery output in March is expected to decrease by about 600,000 barrels per day compared to the previous month. Although this is only about a 7% decline, it comes at a time when demand is gradually increasing ahead of the summer travel peak. As a factor to “alleviate the situation,” the flights suspended by Middle Eastern airlines due to the war may reduce demand by about 400,000 barrels per day.

Eugene Lindell, head of refined products at energy consulting firm FGE NexantECA, estimates that if the Strait of Hormuz remains closed, approximately 37 million barrels of aviation fuel and kerosene production will be lost this month and next.

Lindell stated, “The current market conditions are extremely tense, and there is no way to replace these losses.”

Flight Cancellations and Price Increases

As the region most quickly impacted by energy supply shocks, several Asian countries have entered a state of emergency. Philippine President Marcos stated this week that it is “a clear possibility” for the aviation industry to suspend flights due to fuel shortages. The country’s national airline, Philippine Airlines, disclosed that it has managed to secure fuel supplies until the end of June, but the situation beyond that remains unclear.

In Vietnam, Vietnam Airlines has suspended some domestic flights, and the country’s low-cost carrier VietJet Air is also reducing the frequency of some international routes.

Air New Zealand also announced mid-month that it would cancel 1,100 flights, at least until the end of April.

Meanwhile, Sydney Airport in Australia has warned that it cannot guarantee that the country’s largest entry port will have aviation fuel next month.

Sumit Ritolia, chief research analyst for refining and modeling at the energy intelligence platform Kpler, stated that the current shortages are localized rather than systemic, with the most severe shortages occurring in import-dependent regions such as Southeast Asia.

That said, several analysts anticipate that if the conflict in the Middle East continues, Europe could experience a situation of “no flights” or “no fuel to fly” as early as May.

Although Europe does not import large quantities of crude oil from the Persian Gulf, it is a major importer of jet fuel from the region. Data from Vortexa shows that supplies from the region account for half of the EU and UK’s imports.

Philip Jones-Lux, senior oil analyst at energy analysis firm Sparta Commodities, stated that if the Strait of Hormuz remains closed, Europe will start to see fuel shortages in May. He added that no matter what actions European refiners take, such as increasing operating rates, delaying maintenance, and adjusting product output to favor jet fuel, they will not be able to make up for the losses caused by the closure of the Strait of Hormuz.

Thomas Tesen, chief analyst at Scandinavian Airlines, pointed out that to date, the war in Iran has added approximately $300 in costs for each passenger on transatlantic flights.

In addition to the Middle East, another major supplier for Europe is India, but they will face competition from Asian buyers. Recent reports indicate that some tankers carrying jet fuel have turned around at sea, changing their destinations to higher bidding Asian countries.

Even if the conflict in the Middle East cools quickly, it will take time to restart the entire supply chain. Orkhan Rustamov, founder and CEO of commodity trading company Alkagesta, stated, “The market will not immediately return to normal; as trade flows gradually normalize, refinery output structures readjust, and airlines rebuild flight plans, there is typically a lag in the market.”