Travellers will be hit as airlines and tour operators add fuel surcharges to holiday packages, says report
Rising jet fuel prices may cause “a summer of financial misery” for travellers as airlines and tour operators add fuel surcharges to holiday packages, according to UK-based researcher KBC Energy Economics.
European jet fuel barge prices advanced to their highest in more than two years after Libya’s violent unrest disrupted oil supply from Africa’s third-largest producer last week, Peter Stewart, economic analyst at KBC, said in a note on Monday. Barges of the aviation fuel traded at $1,060 a metric ton in the Amsterdam-Rotterdam-Antwerp oil hub on March 4, the highest since September 25, 2008, when the price reached $1,067.50 a ton, data compiled by Bloomberg show.
“Jet fuel prices have soared this week on the drop in Libyan light-sweet crude production and the possibility of some form of military action over Libya,” Stewart said. “Like gold among the basket of commodities, jet fuel is the product that tends to respond most to geo-political tensions, because the fuel that is used by commercial airliners is with minor quality differences the same fuel that is used by military jets.”
Jet barge premiums to gasoil for March delivery on London’s ICE Futures Exchange expanded to $95 a ton on March 3, the most since September 3, 2008, when the spread was $110. The product’s crack, or premium to Brent crude, increased to $20 a barrel in February, doubling from the previous year, Stewart said.
About 64 percent of Europe’s jet fuel imports came from the Middle East and North Africa in November, according to the Paris-based International Energy Agency’s latest monthly report.
The International Air Transport Association, or IATA, reduced its 2011 airline industry profit outlook to $8.6bn because of higher fuel costs on March 2, down from its December estimate at $9.1bn. The estimate reflects a 46 percent decline from $16 billion the industry earned in 2011, Geneva- based IATA said in a press release.
“With oil prices now being driven by speculation on geopolitical events in the Middle East rather than strengthening economic growth, this is a significant downside risk,” IATA said. The group raised its 2011 oil price forecast to $96 a barrel from $84 in December.