Europe has jet fuel reserves only until summer. Why did this happen and what to do?

Illustrative photo. Photo: Nasha Niva

The Strait of Hormuz, a key route for jet fuel from the Persian Gulf, has been effectively closed by Iran for more than six weeks in response to US and Israeli attacks. This has led to a sharp rise in prices and created the risk of shortages.

IEA Executive Director Fatih Birol told AP that flights could soon begin to be canceled if supplies remain blocked.

In its monthly oil market report, the agency, which advises 32 member countries on energy supply and security, stated that exports from the Persian Gulf region were the largest source of jet fuel to the global market.

Refineries in other major exporting countries, such as South Korea, India, and China, were themselves heavily reliant on crude oil imports from the Middle East.

As a result, the crisis has "thrown a wrench into the well-oiled machinery of jet fuel markets," the report stated.

In the past, Europe relied on the Middle East for approximately 75% of its jet fuel imports, the IEA notes.

Currently, European countries are trying to replace supplies from Persian Gulf countries with imports from other countries. Analysts say supplies are coming from the US and Nigeria.

The IEA stated that there has been a rapid acceleration of jet fuel exports from the US in recent weeks.

However, in its report, the agency warns that even if all these supplies are destined only for Europe, they will replace just over half of the lost supplies.

Analyzing various scenarios, the IEA notes that if the EU cannot replace more than 50% of its imports from the Middle East, "physical shortages could emerge at individual airports, leading to flight cancellations and demand reduction."

If three-quarters of supplies can be replaced, the same situation could still arise, but not before August.

Omaar Khan, head of European jet fuel pricing at Argus Media, believes that even if supplies from Persian Gulf countries resume soon, shortages could still be seen ahead of the summer travel peak.

"It's not certain, but it's becoming more likely that some regions in Europe will experience shortages. Of course, airports like Heathrow will probably have priority over other smaller airports or smaller demand centers. But yes, even if these supplies materialize, it will take five to six weeks," he said.

Many airlines worldwide have been forced to take emergency measures to counter rising fuel costs, which typically account for 20-40% of their operating expenses.

In early April, the price of jet fuel in Europe reached a historic high of $1838 per ton, compared to $831 before the start of the war in Iran.

Earlier this week, the European Commission stated that there was "no evidence of fuel shortages" in the European Union, but acknowledged that supply problems could arise "in the near future."

A European Commission spokesperson told a press briefing that crude oil supplies to EU refineries are "stable, and there is no need for additional releases from stocks at this moment."

The Commission stated that oil and gas coordination groups meet weekly, and energy measures will be announced by the Commission President next week.

Last week, the European airports' trade body, Airports Council International, wrote a letter to the European Commission warning that the continent could face jet fuel shortages if the Strait of Hormuz does not reopen in the next three weeks.

The industry group Airlines for Europe called on the EU to clarify its passenger compensation rules to ensure that fuel shortages or airspace closures are considered "extraordinary circumstances."

This would mean that if flights are canceled, airlines would not have to make significant compensation payments.

In a trading update released earlier on Thursday, EasyJet reported that it incurred additional fuel costs of £25 million (approximately US$33.8 million) in March due to the conflict in the Middle East.

This occurred despite the airline having secured more than three-quarters of its jet fuel at a fixed price before prices rose—a process known as hedging. It stated that the conflict caused "short-term uncertainty regarding fuel costs and customer demand."

Dutch airline KLM announced that it would cancel 160 flights in Europe next month due to rising fuel prices. It clarified, however, that this represents less than 1% of its European flights, adding that it is not currently experiencing jet fuel shortages.

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