finance
Strait of Hormuz Closed, Halting Middle East Jet Fuel Exports to Europe
The Strait of Hormuz blockade has disrupted Gulf jet fuel exports, driving prices above $1500 per tonne in Europe and risking shortages. Airlines including Lufthansa and Air France KLM have cut schedules, while UK officials warn of cancellations impacting holidays. Extra U.S. imports may offset half the lost supplies, but reserves hover near critical levels.
EI
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LONDON -- Jet fuel prices in Europe rose from $831 per tonne in late February to $1,838 per tonne by early April and have remained above $1,500 per tonne, according to Argus Media data cited by the BBC. The increase follows an eight-week closure of the Strait of Hormuz that stopped exports from the Gulf region, which normally accounts for 20% of daily international trade.
Amaar Khan, head of jet fuel pricing at Argus Media, said rising demand against shrinking supply had pushed stocks at the Amsterdam-Rotterdam-Antwerp trading hub to their lowest level in six years. The International Air Transport Association states that fuel makes up 25-30% of airline operating costs.
EasyJet had hedged 80% of its fuel needs for the first half of the year at $717 per tonne but still recorded an extra £25 million in costs for March alone.
Air France KLM, Air Canada and SAS have reduced elements of their summer schedules. Lufthansa said it would cancel 20,000 flights between now and the end of October. Long-haul fares have risen sharply in some cases, with Teneo reporting that a June London to Melbourne ticket now costs 76% more than a year earlier.
Virgin Atlantic has added surcharges ranging from £50 on return economy tickets to £360 for business class. IAG, which owns British Airways, Iberia, Aer Lingus, Vueling and Level, said travellers will have to pay more as costs rise. United Airlines CEO Scott Kirby told investors the carrier would recover 100% of the jet fuel price increase as quickly as possible.
Before the closure Europe held roughly 37 days of jet fuel supply, a figure that Beroe estimates has fallen to around 30 days. The International Energy Agency considers 23 days the level at which some airports risk running out. com, indicated that if current trends continue reserves could reach critical levels by June.
