The threat to summer holidays looming from jet fuel shortages
Summary
The price of jet fuel has risen sharply due to the conflict in the Middle East and a blockage of the Strait of Hormuz. This has caused airlines to raise ticket prices and reduce flights, threatening disruption during the summer holiday season, especially in the UK which relies heavily on imports of jet fuel.Key Facts
- The Middle East, especially the Gulf region, normally supplies about 20% of the world's jet fuel.
- The Strait of Hormuz has been blocked for eight weeks, stopping these supplies and causing fuel shortages.
- Jet fuel prices in Europe more than doubled from around $831 per tonne in February to over $1800 in April.
- Europe, and the UK in particular, depend on imports for most of their jet fuel due to limited refining capacity.
- The UK has only four refineries left, after several closures in recent years.
- Fuel makes up about 25-30% of airline operating costs, so rising prices substantially increase expenses.
- Some airlines use fuel price hedging to protect against cost spikes, but this is not foolproof.
- The shortage and higher prices could lead to fewer flights and higher fares during the busy summer travel season.
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