It is not only the recent attacks on Saudi oil fields that could lead to higher fuel prices, Avolon’s former head of strategy Dick Forsberg has warned, noting that aviation could also face rising costs owing to competition with the shipping industry.
During his keynote speech at an ISTAT event in Berlin today, Forsberg noted that a commitment by the International Maritime Organization – Sulphur 2020, aimed at substantially reducing sulphur emissions from marine diesel fuel as of January 2020 – could lead to competition for the lighter, cleaner fuel typically used to operate aircraft.
“For the first time, aviation will be competing with shipping for the same fuel products,” says Forsberg. “As demand increases, inevitably, price will follow.”
Forsberg says the impact of this competition could cause a 10-25% increase in jet fuel costs.
Following the attacks on Saudi oil facilities on 14 September, the wholesale price of jet fuel rose by around 10%, according to data provided by ICIS – which, like Cirium, is RELX-owned – in its Jet Kerosene Weekly report published on 17 September. This is presumed to be a short-term spike while the facility gets back up and running at full speed.
But tensions in the Middle East remain a concern for Forsberg.
“The highly delicate situation between the US and Iran has overtaken some of the long-run global issues… [with a] heightened threat to oil supplies directly reflected in oil prices.
“If we were to return to $100-plus oil and there was serious restriction of supply either through further strikes on Saudi facilities or a blockade in the Strait of Hormuz, the impact on the global economy, to say nothing of the aviation sector, would be profound.”
This inisght was originally made available to Cirium Dashboard news and was written by Sophie Seagal (Aviation Finance Editor – Cirium)
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