EU Confident in Jet Fuel Supply Amid Price Surge and Middle East Disruption
Europe's Jet Fuel Market Faces Challenges but Remains Stable
By Julia Payne
BRUSSELS, June 5 (Reuters) - There are no signs of jet fuel shortages in Europe in the coming months despite the energy shock from the Iran War, though high prices are prompting airlines to cut uneconomic routes, the European Union's transport chief told Reuters.
Impact of Strait of Hormuz Disruption
The Strait of Hormuz, a key shipping lane linking the Gulf to global markets, has been largely shut for the past three months, cutting oil supplies by about 14 million barrels per day, or around 14% of global demand.
The EU has so far weathered the disruption as the Middle East accounts for about 20% of its jet fuel imports, with U.S. and Nigerian supplies largely filling the gap.
Airline Responses to High Jet Fuel Prices
Route Cancellations and Fare Adjustments
SOME ROUTES CUT, HIGHER FARES POSSIBLE
"There is currently no jet fuel shortage in Europe. We have no signs that we will have a shortage in the coming period," transport commissioner Apostolos Tzitzikostas said in an interview, adding regional airports were most at risk.
The main concern is the surge in price. The International Air Transport Association says jet fuel accounts for 25-30% of airlines' operating costs.
"This is why we see that some airlines are choosing to cancel some of their routes that didn't make any economic sense," Tzitzikostas said.
Potential Impact on Passengers
Passengers may not feel the full impact in higher fares until later this year or next as airlines' hedges expire, though Tzitzikostas said the situation was "very different airline to airline".
Market Outlook and EU Preparedness
Oil Price Forecasts
Analysts expect oil prices to average around $90 a barrel this year, up 40% from February.
Contingency Plans and Emergency Stocks
Looking to the year end, Tzitzikostas said the situation would be "very difficult" if Middle Eastern supplies remained disrupted.
"It's critical that the war stops and that the Strait of Hormuz opens and this needs to happen as soon as possible .... We should always keep in mind that Europe is prepared. We have the emergency stocks in our member states," he said, adding the Commission would coordinate any releases and there was no need to discuss redistributing reserves for now.
"For the time being, there is a certain degree of stability."
Geopolitical Developments and Broader Economic Risks
Negotiations and Regional Control
Tehran and Washington have held talks since an early April ceasefire, but with limited progress and repeated violations.
Sources told Reuters this week that even if a deal is reached soon, it is likely to be a temporary arrangement, with Hormuz staying under Iranian control.
Global Economic Implications
Beyond aviation, a prolonged conflict could hit the global economy. The OECD has warned that could sharply slow growth to levels last seen during the 2008-2009 financial crash or the COVID-19 pandemic.
Risk of Global Recession
"It's not only an issue of jet fuel or fuels. We will have even possibly a global recession," Tzitzikostas said.
(Reporting by Julia Payne. Editing by Mark Potter)