The head of the International Air Transport Association (IATA) has warned that it could take months for jet fuel supplies to recover, even if Iran were to reopen the Strait of Hormuz. The ongoing disruptions to Middle East refineries, caused by geopolitical tensions and Iran's strategic moves, have significantly impacted global jet fuel availability and costs.
Fuel is the second-largest expense for airlines after labor, typically accounting for about 27% of operating costs. The closure of the Strait of Hormuz, vital for global oil flows, has choked supplies of jet fuel worldwide. Despite news of a ceasefire and the potential for safe passage, IATA's director general emphasized that the impact on refineries in the Middle East means the supply chain will remain strained for months.
Impact on Airlines and Fuel Prices
Airlines across Asia have responded by reducing flights, carrying extra fuel, and adding refueling stops. Jet fuel prices have more than doubled since the recent Iran conflict, far outpacing the 50% increase in crude oil prices prior to the ceasefire announcement. Shares of major Asian carriers surged on optimism about the situation, though experts warn that capacity recovery, especially of Gulf carriers which accounted for 14.6% of international capacity last year, will be temporary.
"Some of that capacity will be replaced by airlines outside of the region, but there's no way they can replace the entire capacity that was provided by the Gulf carriers," said Walsh, the director general of IATA.
Walsh added that if the Strait remains open, it would be beneficial not only for crude oil flows but also for refined products including jet fuel. Countries like India and Nigeria could increase refinery outputs temporarily while China and South Korea are expected to resume exports of refined products once crude flows normalize. However, the overall recovery will still require several months due to the complex adjustments needed in refinery operations and disruptions.
The ongoing geopolitical tensions and the blockade of the Strait have also raised concerns about the stability of energy supplies in Southeast Asia, with discussions on managing energy crises and fuel subsidies ongoing in the region.
In summary, while the situation appears to be improving with ceasefire news, analysts warn that full recovery for jet fuel supplies and airline capacity remains a long-term process, with disruptions potentially extending into several months.
