The dramatic rise in the price of jet fuel has caused airplanes to rise, with industry experts saying that it should. However, in the meantime, consumers who are hungry for travel seem to be willing to pay.
Jet fuel prices have been steadily declining since Russia’s invasion of Ukraine caused them to rise sharply last month, but the market remains volatile. The problem is particularly acute in New York, where oil prices have quadrupled to $ 7.50 a gallon before returning to $ 5.30 in recent days.
Shopping is very difficult and prices have gone up all over the country. The Department of Energy this week said the amount of jet fuel on the East Coast stood at 6.5 million barrels, the lowest since the agency began tracking the system in 1990.
“Jet fuel has run at an astonishing rate that I have never seen in any other fuel,” said Tom Kloza, global energy research chief at Oil Price Information Service. “He’s just crazy.”
Prices are no longer the result of airfare and global inflation. On Wednesday, for example, Amazon announced plans to impose “extra fuel and rising prices” on retailers whose stocks store and deliver.
Airlines can offer some of their extra fuel costs to consumers, many of whom are eager to travel after being denied access for two years.
Earlier this year, the average return trip home was $ 235, according to Hopper, an airline tracking program. Since then, ticket prices have risen 40 percent, to $ 330. Adit Damodaran, an economist at Hopper, who monitors airline and hotel prices, said the company expects another 10 percent increase, up to $ 360, by the end of May, before prices fall again in the summer.
“It’s not just the modern prices that travelers pay more compared to history, but also the rise has been the highest since January,” he said.
In addition to the high cost of jet fuel, Damodaran said, the flight could also be due to the weather and the need for early landing as the Omicron coronavirus spreads.
Some airlines have also reduced flights due to reduced staffing, resulting in greater competition and the cost of the remaining flights.
Carriers usually supply buyers with about 60 percent of the constant rise in fuel prices, experts said, a process that often takes months. However, this time around, these companies have been able to spend money quickly, largely due to the high demand and changes in consumer behavior during the ticket-buying epidemic near the day of travel.
“We are restoring a large portion of oil,” Ed Bastian, chief of Delta Air Lines, told economists and journalists at a press conference Wednesday. “This is happening almost in real time, because of the strong demand.”
Mr Bastian said Delta, the first major carrier to report financial results for the first three months of this year, has seen strong returns so far and is preparing for spring and summer.
Delta paid an average price of $ 2.79 per gallon of jet fuel, up 33 percent from last year’s quarter. The cost also included saving 7 cents per gallon from an airstrip outside Philadelphia. Delta said it expects oil prices to increase by 15 to 20 percent over the next three months, reaching between $ 3.20 and $ 3.35 per gallon, which includes about 20 cents for refining.
Jet fuel prices, such as petrol and diesel, often go up and down with crude oil.
In February, American Airlines reported that the price paid per gallon of jet fuel has risen more than a third of last year, from $ 1.48 in 2020 to $ 2.04 in 2021. 2022 is approximately $ 40 million. This week, the American says it paid $ 2.80 to $ 2.85 per gallon in the first quarter of the year.
Rising oil prices and rising prices seem to be detrimental to consumers. Mr Bastian said Wednesday that March was the best-selling month in the Delta, hitting the record set in 2019, even though it had less than 10 percent seats. This is due to the fact that the prices of home flights were about 20 percent between March 2019 and March 2022, according to the Adobe Digital Economy Index, which cites online sales from six of the top 10 US companies.
“We’ve all been home for two years, and I think now that we have a chance to get out, there will be a willingness to pay,” said Joe Rohlena, an aviation expert at Fitch Ratings. “If it is too expensive to travel far, then you can see the need to pay for high-cost return tickets.”
Russia-Ukraine War and Global Economy
The epidemic significantly reduced air traffic, so it is not surprising that jet fuel prices dropped significantly less than oil prices two years ago. In 2020, when the plague disrupted all traffic, American oil refineries reduced their production of jet fuel – often making a profit – by one million barrels per day.
But even in a business that is as circular as refining, jet oil recovery has been amazing.
Richard Joswick, head of global oil analysis at S&P Global Commodity Insights, said the flow of jet fuel, albeit increasingly, did not meet the demand.
A handful of shipments destined for New York this month were sent from the Panama Canal to Los Angeles as California oil prices began to rise. Some of the oil was shipped to Baltimore and Washington when supplies became scarce.
“It’s like a water balloon – you squeeze it in one place, it comes out in another,” Joswick said.
Experts predict rising prices in the Rocky Mountain and West Coast regions as the summer travel season culminates in July and August. Reservations are also low in all parts of the country, with most airports only taking three days, putting you at risk if there are adverse weather events like a hurricane.
Oil refineries extract jet fuel from the same fuel cell as diesel, and refineries produce as much diesel fuel as possible. Europe has reduced its purchase of Russian diesel since Ukraine took over Ukraine, and instead exported diesel from the United States, just as cars and trains have returned here.
The closure of cleaners in Europe and North America in recent years has been another factor. As of January 2019, refining power has dropped by 5 percent in the United States and 6 percent in Europe, according to Turner, Mason & Company, a consulting company in Dallas.
John Auers, Turner, Mason’s vice president, said it was difficult to produce more fuel when the market needed more diesel, and it was difficult to produce more diesel when the market needed more jet fuel. “People are moving, driving and flying, and there are a lot of businesses, so we will have a tight market,” he said.
Although the high cost of jet fuel has hurt airlines and consumers, construction managers are enjoying a growing business after two years of low earnings.
“Travel is on the rise and demand for oil is rising, and the Russian attack on prices, whether by accident or by accident, is going well for oil companies and jet manufacturers,” said Linda Salinas, vice president of operations at Texmark Chemicals, a Texas company. which produces renewable jet fuel from diesel mixed with cooking oil used by waste.