Will mass flight cancellations happen this summer due to fuel shortages?

Illustrative photo. Photo: Nasha Niva

Despite the loss of supplies from the Middle East and a record price surge, Europe is so far avoiding a crisis in the aviation fuel market.

Already in April, the head of the International Energy Agency (IEA) warned that the region had approximately six weeks of resources left, however, today industry representatives state that such a scenario is unlikely to materialize.

As the Financial Times reports, oil refineries, which managed to adapt their technological processes, played a key role in stabilizing the situation. The Spanish group Repsol increased aviation fuel production by 20-25% compared to last year, by reconfiguring its plants to obtain a larger volume of jet fuel from each barrel of oil.

Such a step is atypical for the industry, where production flexibility is usually limited, but the need to meet peak season demands forced the company to even postpone scheduled maintenance. The Portuguese company Galp also adopted a similar strategy, maximizing production to fully cover domestic demand.

Airlines also confirm their readiness for summer loads. British Airways stated it has enough suppliers to operate its full schedule, and Air France secured several months' worth of supplies for its airports.

The head of Wizz Air, József Váradi, noted that high market prices forced the market to adapt and stimulated additional supplies from abroad: plants in the USA and Nigeria began actively directing fuel to Europe.

Price dynamics remain tense: after a peak in April, when a tonne of fuel cost a record $1904, the price dropped to $1328, which is still 60% higher than pre-war levels.

Diversification of supply sources has become an important security factor. This is confirmed by the example of Istanbul Airport, which became an important transit hub after the closure of major aviation hubs in the Persian Gulf.

According to FGE NexantECA analysts, technological changes at European refineries could provide an additional 100,000 barrels of aviation fuel per day, which would compensate for about 20% of lost supplies from the Middle East.

The remaining deficit is planned to be covered by imports and the use of strategic reserves of IEA member countries. According to experts, these reserves could cover about 34% of the aviation fuel supply deficit in Europe.

In addition to increased supply, a slight decrease in demand also affected the market. European airlines reduced the number of unprofitable short-haul routes, which reduced fuel demand by approximately 2% in the second quarter. This helped avoid the sharp drop in demand that experts feared at the beginning of the year.

At the same time, the high price of fuel allows refining companies to achieve record profits, which incentivizes them to increase aviation fuel production at the expense of other types of fuel.

Despite apparent stability, market participants urge caution. Łukasz Strupczewski, a senior trader at the Polish company Orlen with 20 years of experience, calls the upcoming summer a real "stress test" for the global energy security system. In his opinion, the current balance is very fragile, and even a minor change in external conditions could once again create serious problems for the entire industry.

• 3
• 0
• 0
• 0
• 0
• 1
• 1
• 0