Wholesale jet fuel prices in New York have risen more than 162% since mid-March, as buyers at some of the world's busiest airports, located on the US East Coast, anticipate dwindling supplies as Western sanctions shun Russian energy exports.
On Monday, jet fuel prices jumped 93 cents to $7.61 a gallon, a new record high, according to Bloomberg data going back to 1988.
According to Reuters, there are two major issues. The first is East Coast depends on fuel shipments via the Texas-to-New Jersey Colonial Pipeline for refined products and imports from Europe. But there's been a snag as distillate shortages in Europe and shunning of Russian energy exports have helped accelerate the decline in distillate stockpiles in PADD 1.
Distillate stockpiles at PADD 1 are at 2015 levels.
For this time of year, ahead of the summer flying season, distillate levels are at some of their lowest levels in two decades (besides 2003 & 2015).
"It is ridiculous what's going on in PADD I with jet, and it's not sustainable," Patrick DeHaan, lead petroleum analyst at GasBuddy, told Reuters.
DeHaan tweeted a video of airline ticket prices soaring, likely because airlines are price sensitive to jet fuel and may already pass higher costs to consumers.
Pricing some flights and this one went from $3039 to $19,167 on check out. Ouch. pic.twitter.com/XZQ1YnZYcG— Patrick De Haan ⛽️📊 (@GasBuddyGuy) April 4, 2022
S&P Global Commodity Insights said industry insiders "do not attribute this exponential leap in jet fuel's value to a single, consequential event confined within the parameters of the Atlantic Coast jet fuel market. Rather, it is regarded as only the most recent development in a sequence of events beginning with the conflict between Russia and Ukraine. "
The best and easiest cure for soaring jet fuel prices is demand destruction, which will be costly for airlines that will see a collapse in ticket sales.