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

Even far from the Middle Eastern battlefield, the bitter consequences of the global “energy artery” blockage are triggering an aviation crisis that is spreading worldwide.

As of the time of writing, 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 world’s largest oil exporter, American airlines, have canceled some unprofitable routes due to high oil prices.

Soaring Aviation Fuel Prices

Although the actual blockade of the Strait of Hormuz has caused fuel prices to spike collectively, the energy pressures faced by the aviation sector are particularly severe.

According to data from commodity research firm General Index, the price of jet fuel specifically for jet engines has risen from nearly $800/ton at the end of February when the conflict began to $1600/ton, a rise that far exceeds 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, while also requiring the use of crude oil reserves 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 historically, only a small portion of emergency reserves is utilized for the aviation sector.

Data from Energy Aspects’ OilX service indicates that global production of aviation fuel and kerosene in March is expected to decrease by about 600,000 barrels per day compared to the previous month. Although this represents only about a 7% decline, it comes at a time when demand is gradually increasing ahead of the peak summer travel season. As a “mitigating factor,” the flights grounded due to the war may reduce demand by approximately 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, there will be a loss of about 37 million barrels of aviation fuel and kerosene production this month and next.

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

Flight Cancellations and Price Increases

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

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

Air New Zealand also announced in mid-April 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 inbound port will receive aviation fuel next month.

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

That said, several analysts predict that if the conflict in the Middle East continues, Europe could face situations where flights cannot be operated or there is no fuel to fly as soon as May.

Although Europe does not import large quantities of crude oil from the Persian Gulf, it is a major importer of aviation kerosene from the region. Vortexa data shows that supplies from this 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 experiencing fuel shortages in May. He added that regardless of what actions European refiners take, such as increasing throughput, delaying maintenance, and adjusting product output to favor aviation kerosene, it will not be able to compensate for the losses caused by the closure of the Strait of Hormuz.

The continuous rise in ticket prices/fuel surcharges is also expected. Thomas Tesen, chief analyst at Scandinavian Airlines, noted that so far, the Iran conflict has increased costs by about $300 per passenger for transatlantic flights.

Aside from 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 aviation kerosene have turned around at sea, redirecting 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 firm Alkagesta, stated, “The market will not immediately return to normal; as trade flows gradually normalize, refinery output structures are readjusted, and airlines rebuild flight schedules, there is typically a lag period in the market.”

(Source: Caixin)