Flying has become expensive, and it looks like it may become more so. Bob Henderson reports in The Wall Street Journal that rising fuel costs will push airfares higher. He writes:
Airfares have eased from last year’s highs. Now a resurgence in jet-fuel prices is threatening to push them higher again.
Prices for the kerosene-based product have been climbing since December, propelled by diminished supplies after winter storms shut down refineries. Swelling demand has also pushed up prices, as millions of Chinese travelers took to the skies to celebrate the Lunar New Year and newfound freedom from Covid restrictions.
The global jet-fuel price index maintained by S&P Global is up 20% since Dec. 7, while prices on the U.S. East Coast are up about 77%.
While global demand for gasoline and diesel has already recovered from its pandemic downturn, jet-fuel consumption is just now taking off. The International Energy Agency forecasts that jet fuel will drive 44% of the 1.9 million barrels a day of global oil-demand growth that it expects this year, after accounting for less than 6% of demand last year, according to research firm Rystad Energy.
Russia’s invasion of Ukraine in February 2022 sent refined oil-product prices soaring, after Western sanctions curtailed Russian exports. Last June, S&P Global’s jet-fuel index shot up to $4.33 a gallon, near its highest level ever.
Meanwhile, the U.S. ended 2022 with its lowest inventories of jet fuel since 1996, according to Energy Information Administration data. Fresh sanctions on Russian refined products set to start Feb. 5 threaten to further affect global supplies.
Read more here.
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