Boost for Brits' summer flights as jet fuel cost falls 10% in biggest drop since Iran war began
The jet fuel crisis could have already hit its peak after the average global price fell by more than 10 per cent to its lowest level in two months, the Daily Mail can reveal.
Concerns over supplies have intensified as Iran continues to have a stranglehold on tankers passing through the Strait of Hormuz, leading to a surge in oil prices.
Experts have warned of fuel shortages within weeks and some consumers are waiting to book holidays or flights in case they are cancelled over the coming months.
But the average global jet fuel price fell by 10.1 per cent in the week ending last Friday compared to the week before - the biggest drop since the Iran war began.
The new level of $163 (£142) per barrel is the lowest the price has been since mid-March, and is down 22 per cent from a peak of $209 (£155) at the start of April.
But the price is still 65 per cent above the $99 (£73) level at the end of February when the war began, according to the International Air Transport Association data.
Experts suggested that the recent drop appeared to be linked to greater production by UK oil refineries and a boost in imports from both the US and Nigeria, where much of Europe's jet fuel is now being sourced while the Strait remains effectively closed.
Susannah Streeter, chief investment strategist at Wealth Club, told the Mail: 'The sharp drop in the jet fuel prices will be welcome relief for airlines, and for holidaymakers fearful that their trips could be hit by a wave of cancellations.
'The 10.1 per cent fall indicates that some of the immediate panic around fuel supply disruption is easing off.
'The closure of the Strait of Hormuz triggered contingency plans with European and UK refineries switching to 'max jet mode' prioritising fuel production for the airline industry over other refined products.
'This, in addition to increased shipments from the US Gulf Coast and exporters such as Nigeria, appear to have done the trick of reassuring markets that there won't be an immediate fuel shortage crisis.'
However, she pointed out that jet fuel prices still remained about 60 per cent higher than before the conflict began, and the stand-off between Iran and the US continued.
Ms Streeter continued: 'The Strait of Hormuz remains effectively closed, and there's an expectation that oil prices will remain elevated, potentially above $100 a barrel, for much of the rest of this year and possibly into next year.
'So, while the latest decline may indicate that markets are becoming less fearful of an immediate worst-case scenario supply shock, the underlying risks haven't completely disappeared.
'Prices are highly sensitive and could easily spike again if the conflict escalates further. So, all in all, this is more a sign that conditions may have stabilised rather than suddenly become cheaper.'
While fuel is one of the biggest costs for airlines, many hedge fuel purchases months in advance - meaning lower wholesale prices do not immediately feed through into ticket prices.
Ms Streeter added: 'Wider operational costs also continue to keep fares higher.
'But we appear to be out of the immediate danger zone of further mass cancellations, and this is likely to reassure travellers, who until now may have been holding off from booking trips.'
While the price is moving down at the moment, the world's biggest oil company Aramco warned global stocks of jet fuel could reach 'critically low levels' before the summer if the Strait remains closed.
The Saudi firm's boss Amin Nasser said the war had caused the largest energy shock in history, with market recovery likely to go into 2027 even if the blockade ends soon.
Mr Nasser warned that the loss of key fuels was 'rapidly accelerating', with petrol and jet fuel showing the quickest decline.
He added that since war broke out, the world has lost one billion barrels of oil supplies, with another 100million barrels being lost every week that the Strait stays closed.
Mr Nasser said that inventories around the world were 'the only buffer that is available today', but that these have been 'materially depleted.'
Meanwhile today, European Union energy commissioner Dan Jorgensen told reporters that the EU does not expect a serious jet-fuel supply issue in the short term linked to the war – but the situation is less clear longer term.
He said: 'We don't expect a very serious security of supply issue on a very short term. But we cannot exclude that there will be security of supply issues on a longer term. This all depends, of course, on the situation in the Middle East.'
Britain's biggest airports warned yesterday that summer flights could be cancelled for millions of UK tourists because of Government plans to tackle the jet fuel shortage.
Labour announced a temporary rule change on May 2 allowing airlines to cut flights from their schedules if they can fit passengers onto other planes with empty seats.
Carriers are being permitted to cancel flights to save fuel without fear of losing their take-off and landing slots - which can be worth millions of pounds - avoiding last-minute cancellations and giving passengers several weeks to prepare for changes.
But bosses at airports including London Heathrow and Gatwick oppose the plans amid fears over disruption and lower seat availability leading to higher fares.
They believe existing rules suffice for airlines to cancel flights in the event of fuel shortages and avoid losing slots the following year – but adjusting this could cancel more than 100,000 flights and tens of millions of seats, according to reports.
Meanwhile new figures released yesterday showed airlines have increased the number of flight cancellations for May.
Aviation analytics company Cirium said airlines have axed 296 departures from UK airports this month, equivalent to 0.75 per cent of the total. That is up from 120 cancellations six days ago.
Figures for the peak summer months show week-on-week schedule reductions are currently limited.
The number of outbound flights planned for June is 48 lower than a week ago, after 0.2 per cent of flights were cancelled.
For July the week-on-week reduction is 31, while the figure for August is just four.
Airlines avoid being liable for compensation if they axe a flight with at least two weeks' notice, meaning they can delay decisions on summer cancellations and still avoid payouts.
Previous global figures released by aviation analytics company Cirium showed 13,005 flights planned for May were axed between April 10 and April 21, equivalent to 1.5 per cent.
And the situation could yet worsen - with Paul Charles from travel consultancy The PC Agency telling the Mail last week that 10 per cent of flights could be at risk in June if oil supplies continue to be squeezed, equating to about 85,000.
Some airlines are cutting flight prices to boost summer holiday bookings after concerns about cancellations have seen tourists delaying buying tickets.
Between April 9, when European airports first warned jet fuel was in danger of running out, and May 6, fares for a week-long trip in July dropped for 27 of the top 50 European flight routes, according to analysis by the Financial Times.
They declined by 10 per cent or more for 15 of the routes, including from Heathrow to Nice, and as much as 44 per cent in the case of Milan to Madrid.
It comes as Heathrow Airport reported passenger numbers fell by 5.3 per cent last month. Around 6.7million passengers passed through its four terminals in April, compared with 7.1million 12 months previously.
The reduction reflects 'the ongoing impact of the Middle East conflict on some markets and short-term adjustments to travel plans', the airport said.
But Heathrow insisted 'underlying demand remains resilient' noting an increase in passengers using the airport as a hub for journeys to Asia and the Pacific that would normally go through Middle Eastern airports.
Last week, British Airways owner IAG warned that if the current conflict continued to restrict flows of both crude oil and jet fuel, 'there is the potential for supplies of jet fuel to be restricted on a global basis.'
A spokesperson for Airports UK, which represents more than 50 airports, said: 'We are supportive of government efforts to plan for future contingencies.
'But we are not there yet and supply is not an issue. Our view is that the existing mechanisms will suffice for the time being. We haven't heard anything that would suggest that there is a need to go any further.'
A Department for Transport spokesperson told the Mail: 'UK airlines have been clear they are not currently facing fuel shortages.
'Holidays are taking off as planned, and based on current information, we're confident that most people travelling this summer will have a similar experience to last year.
'We're not sitting on our hands though - we know this is an evolving situation, and it's only right we plan ahead to ensure protections and mitigations are in place so airlines can get ahead of any problems and lock in schedules which work for passengers and prevent last minute disruption.'
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