Lufthansa says it plans to cut flights in the coming months because of high fuel prices.Thomas Lohnes/Getty Images
Airlines in Europe could face a jet fuel shortage by June if the Strait of Hormuz remains blocked, the International Energy Agency warned.
Most of Europe’s jet fuel usually passes through the waterway, which has essentially been closed since the conflict between Iran, the United States and Israel began on Feb. 28, sending energy prices soaring.
Lufthansa and KLM said they planned to cut flights in the coming months owing to high fuel prices, while Nigerian airlines threatened to stop flying altogether by April 20. The shortages could affect Canadian airlines’ overseas operations although the carriers said on Thursday they haven’t changed any schedules yet.
European refiners have been unsuccessfully “scrambling” to replace the lost supply with fuel from U.S. sources ahead of the busy summer travel season, the IEA said in a report on Thursday.
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“Several European countries may start to face shortages of jet fuel in the next six weeks, depending how much they are able to import from international markets to replace the lost supply from the Middle East, which accounted for 75 per cent of Europe’s net imports of jet fuel previously,” the IEA said in an e-mail to The Globe and Mail on Thursday.
Canada is largely self-sufficient in jet fuel, producing 80 per cent of its needs, and importing much of the rest from refineries in the U.S. northeast. However, Canadian airlines could see their routes affected by shortages overseas, said John Gradek, who teaches aviation leadership at McGill University.
An overseas shortage of jet fuel would spur Canadian airlines to consolidate flights because they cannot carry enough fuel for return trips, he said.
“You’re going to have cancellations for sure.”
Christopher Anderson, a professor and airline expert at Cornell University in Ithaca, N.Y., said the higher fuel costs will upend the European airline business model of intense competition, low fares and packed planes. He expects carriers to cut less profitable routes, severing connections.
This will affect North American travellers, many of whom begin their European trip with a stop at a major hub before taking another flight elsewhere.
“You can still get into Paris, [but] maybe it’ll be harder to get out of Paris on Air France, [so] now you’re going to take rail,” Prof. Anderson said in an interview. “Now the question is, does that little bit of resistance create enough tension that the North American traveller decides not to do that trip?”
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The no-frills airlines will struggle the most to pass rising costs to their price-conscious passengers, he said, predicting some will fail or merge should fuel prices remain high.
European ports have not seen a Mideastern jet fuel tanker since April 8, and inventories in the key refining region of Amsterdam-Rotterdam-Antwerp recently fell to a five-year low, the IEA said.
The United Kingdom, which is Europe’s largest user of jet fuel and relies on imports for 65 per cent of its consumption because of a lack of refineries, could be the hardest hit. In contrast, Spain is also a major consumer but also a net exporter, the IEA said.
Asian markets also rely on the strait for much of their oil.
An end to the conflict has eluded American and Iranian negotiators, who have met with Pakistani mediators. The conflict has spread as Iran began attacking neighbours and Israel bombed Lebanon.
Only a small number of vessels have sailed through the Strait of Hormuz since the conflict began. Iran closed the waterway in April, using drone attacks and laying mines. U.S. President Donald Trump on Sunday announced the U.S. Navy would blockade Iranian ports, further restricting oil tanker traffic.
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U.S. forces have turned around 14 vessels in the past 72 hours, U.S. Central Command said on social media on Thursday.
Attacks on oil storage and refiners in the Middle East, coupled with the lack of tanker movements, have caused jet fuel prices to soar and oil prices to rise by 40 per cent since the conflict began. U.S. Gulf Coast kerosene-type jet was selling for US$3.75 a gallon this week, compared with US$2.43 before the war, according to the U.S. Energy Information Administration.
Airlines in Canada and around the world have responded by raising seat fares and other charges, and, in some cases, cancelling flights.