By Koustav Samanta

SINGAPORE, (Reuters) – Global jet fuel prices are at or near their 14-year peak due to a surge in supply shortage worries. This has slapped travellers and air carriers with sharp cost increases as well as air travel beginning to rebound from COVID-19 restrictions.

As supplies fall and global demand recovers, oil prices are at their highest point since 2008. This is as a result of the U.S. considering banning Russian oil imports after Moscow invaded Ukraine.

Since the invasion of Ukraine by Russian troops on February 24, 2016, global crude oil benchmark rose 26% to $120 per barrel. This triggered a worldwide scramble for alternative sources to Russian crudes, which are subject to sanctions.

Graphic: Jet fuel prices lurch to 14-year highs, outperform crude on tight supply worries: https://fingfx.thomsonreuters.com/gfx/ce/mopandboqva/SinJetvsBrent.png

Oil prices have risen due to the race for crude oil. Prices of refined products could be affected by tighter crude supply. Singapore jet fuel prices have outperformed Brent prices since February 24th, gaining almost 35% and hitting $150 a barrel for first time since July 2008.

Similar gains have been seen in US and European jet fuel prices, leaving international carriers that have suffered from COVID-19 for the past two decades to have to pay higher fuel surcharges or increase fares.

Graphic: Soaring global jet fuel prices threaten to snuff out air travel recovery: https://fingfx.thomsonreuters.com/gfx/ce/znvnenqmjpl/GlobalJetFuelPricesMar2022.png

This could lead to a slowdown in the air travel recovery as international borders are opened.

From now on, travel (by air), is going to not be affordable. According to a Singapore-based Jet Fuel Trader, people are less able to afford travel due the rising cost of living.

She stated that more people would travel less and added that restrictions due to pandemics – many of which still require negative COVID testing – add to uncertainty for travelers.

The global capacity of airlines fell by 0.1% to reach 82 million seats. It is still 23% lower than that week pre-pandemic 2019 according to OAG aviation data.

Graphic: Global airline seat bookings remain well below 2019 levels in most regions: https://fingfx.thomsonreuters.com/gfx/ce/gdpzybjabvw/ChangeinAirlineBookingsbyRegion.png

In North East Asia, total airline capacity fell 4.5% in the week up to Monday, which is more than in any other region. International capacity, however, remains at 88% of the 2019 corresponding week.

Graphic: Global airline seat bookings change vs 2019 by region: https://fingfx.thomsonreuters.com/gfx/ce/akpezxjyrvr/AirlineBookingChangebyRegionsince2019.png

The domestic flight schedules of the United States were on target to exceed 2019’s level this spring. However, higher fuel costs and increased ticket prices could slow that progress.

Airlines will again be forced to limit credit and see less willingness of suppliers to provide unsecured terms. A senior London-based trade source stated that there could be more casualties following COVID. This was just as recovery seemed to have improved.

Graphic: U.S. domestic airline bookings on course to recover above 2019 levels; international bookings still weak: https://fingfx.thomsonreuters.com/gfx/ce/zgvomzyllvd/SeasonalAirlineBookingsMar2022.png

In anticipation of tighter supply, Asian refining margins on jet fuel rose to $26.17/barrel Monday, surpassing Dubai crude. It is the highest record level according to Refinitiv Eikon data which goes back to 2009.

Graphic: Asia jet fuel refining margins hit all-time highs after surge in jet fuel prices to 14-year top: https://fingfx.thomsonreuters.com/gfx/ce/lgpdwaqgyvo/AsiaJetrefMgnMar2022.png