Brussels, we have a problem. With the fragile ceasefire with Iran officially over, and fighting over access to the Strait of Hormuz ongoing, new analysis suggests that the risk of Europe running dry of jet fuel supply is a lot more precipitous than everyone has been led to believe.
Before the Iran War started at the end of February, Europe and the United Kingdom sourced the majority of its jet fuel supplies from the Middle East, primarily from Kuwait and the United Arab Emirates, with supplies shipped on months-long journeys that started with passage through the Strait of Hormuz.
Initially, jet supplies weren’t in danger as there were still plenty of tankers in transit to Europe, having already sailed through the SoH before the conflict began. Europe then looked towards the United States and Canada for additional fuel supplies.
The real issue facing many airlines wasn’t the physical supply of jet fuel but rather the dramatic rise in the cost of buying fuel… especially for airlines that hadn’t ‘hedged’ their fuel needs (whereby airlines lock in a set price for their fuel regardless of whether the wholesale price goes up or down).
No doubt, the entire aviation industry breathed a collective sigh of relief when President Trump reached a memorandum of understanding for a ceasefire with Tehran last month. The SoH would reopen, allowing hundreds of stranded ships loaded with fuel to set sail towards Europe and Asia, where the bulk of Persian Gulf oil is consumed.
The threat of mass flight cancellations over the busy Summer holiday period, and airlines told customers that they could have confidence in booking flights.
Unfortunately, the supply crunch facing Europe and the UK may be more severe than initially thought. According to Reuters, there is only one month of jet fuel supplies left in Europe, and Energy Aspects claims the continent could face a supply deficit of 600,000 barrels per day in the third quarter.
Europe and the UK’s woes are particularly acute because their own jet fuel refineries have been shut down in recent years, with a heavy reliance on supplies from the Middle East.
So far, supplies have been kept steady by tapping new imports from Canada, India, Nigeria, and the United States.
At present, these warnings haven’t translated into flight cancellations. Airlines were, at first, alarmed by the closure of the SoH, although that panic quickly subsided when supplies were sourced from other countries.
The end of the Summer season, though, does present an issue with airlines expected to ramp up their schedules to meet seasonal demand.
That being said, we’ve heard these warnings before, and planes have continued flying without interruption. The biggest risk remains the high cost of jet fuel, with airfares expected to remain elevated for quite some time to come.
In fact, some airlines, such as Delta Air Lines, have indicated that they won’t necessarily lower airfares in line with the falling price of jet fuel… whenever that might happen.
Useful information. For context it might like be likewise helpful to know what normal jet fuel usage for Europe is on a normal day. A 600K barrel deficit is a lot different out of a million barrels or out of say four million barrels.