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

Ask AI · What global aviation chain reactions could be triggered by a blockade of the Strait of Hormuz?

Financial News, March 28 (Editor: Shi Zhengcheng) Even far from the Middle East battlefield, the consequences of blocking the global “energy artery” are triggering an aviation crisis spreading worldwide.

As of the time of writing, airlines from Vietnam to New Zealand have started canceling flights due to a shortage of aviation fuel, and the European Union 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

While the actual blockade of the Strait of Hormuz has led to a collective spike in fuel prices, the energy pressure on the aviation sector is particularly immense.

According to statistics from the commodity research firm General Index, the price of jet fuel specifically for jet engines has surged from nearly $800/ton at the end of February after the outbreak of war to $1,600/ton, a much larger increase than 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 indicated that the impending supply shortage means that flights need to be reduced to curb demand, while also tapping into crude oil reserves to boost 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 the emergency reserves released is utilized by the aviation industry.

Data from Energy Aspects’ OilX service indicates that global aviation fuel and kerosene refinery output in March is expected to decrease by about 600,000 barrels per day compared to the previous month. Although this represents only a 7% drop, it comes at a time when demand is gradually rising ahead of the summer travel peak. As a “mitigating factor,” the flights grounded due to the war causing Middle Eastern airlines to cease operations could reduce demand by about 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, approximately 37 million barrels of aviation fuel and kerosene production will be lost this month and next.

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

Flight Cancellations and Price Increases

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

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

Air New Zealand also announced mid-month that it will cancel 1,100 flights, at least until the end of April.

Meanwhile, Sydney Airport in Australia warned that it cannot guarantee that the country’s largest entry point will have access to aviation fuel next month.

Sumit Ritolia, chief research analyst for refining and modeling at energy intelligence platform Kpler, stated that the current shortage is localized rather than systemic, and the areas most severely affected are import-dependent regions like Southeast Asia.

That said, several analysts expect that if the conflict in the Middle East continues, Europe could soon face a situation where flights cannot take off or there is no fuel to fly as early as May.

While Europe does not import large amounts of crude oil from the Persian Gulf, it is a major importer of aviation kerosene from the region. Vortexa data indicates that supplies from this area account for half of the imports to the EU and the UK.

Philip Jones-Lux, senior oil analyst at energy analysis firm Sparta Commodities, stated that if the Strait of Hormuz remains closed, Europe will begin to experience fuel shortages in May. He added that no matter what actions European refiners take, such as increasing operating rates, delaying maintenance, or adjusting product output to favor aviation kerosene, it will not compensate for the losses caused by the closure of the Strait of Hormuz.

Thomas Tesen, chief analyst at Scandinavian Airlines, pointed out that so far, the war in Iran has increased the cost for each passenger on transatlantic flights by about $300.

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, changing their destinations to higher-bidding Asian countries.

Even if the conflict in the Middle East cools rapidly, it will take time to restart the entire supply chain. Orkhan Rustamov, founder and CEO of commodity trading company Alkagesta, stated, “The market will not immediately return to normal; there is usually a lag period as trade flows gradually normalize, refinery output structures readjust, and airlines rebuild their flight schedules.”

(Financial News, Shi Zhengcheng)