A delay in restoring the adequacy of aircraft fuel is expected even in the event of the reopening of the flow through the Strait of Hormuz, according to the general director of the International Air Transport Association (IATA), Willie Walsh.
Speaking to reporters in Singapore, the head of IATA noted that although crude oil prices may decline, the cost of jet fuel will remain high for a longer period due to problems in the operation of refineries in the Middle East.
As he explained, even if the Strait of Hormuz is reopened and remains accessible, “it will take months for the supply to return to the required levels,” as refining capacity has been disrupted in an area that is a critical hub for the global fuel market.
His intervention comes after US President Donald Trump announced a two-week ceasefire agreement with Iran, provided that the Strait of Hormuz, through which about 20% of the world’s oil trade passes, is reopened immediately and safely. Following this development, oil prices fell below $100 per barrel.
However, the crisis has already significantly affected the air transport industry. Airlines in Asia are cutting routes, transferring additional fuel from their bases, and adding refueling stops in an effort to manage shortages and increased costs.
The impact is more severe in markets with lower incomes and high dependence on imports, such as Vietnam, Myanmar, and Pakistan, especially after China and Thailand decided to stop exporting aircraft fuel and South Korea limited its exports to the previous year’s levels.
Walls appeared cautiously optimistic that, with the resumption of crude oil flow, countries like China and South Korea would return to exports of refined products. As he mentioned, there is available refining capacity, however, it takes time to fully restore the market, while high refining margins (crack spread) act as an incentive to increase the production of aviation fuel.
Source: Reuters
