Supply Concerns Grow Stronger – Airlines Taking Hit

This morning oil prices are fluctuating heavily as the market continues grappling with uncertainty. With Russian product restrained along with weakening Chinese demand, the supply chain is seeing plenty of ups and downs. This has now started to affect pricing in other industries, with airlines seeing some of the highest jet fuel prices in years.

If you have tried to book a flight in the past few weeks, you will notice that prices are skyrocketing. Don’t worry, you are not alone. This is happening to everyone, everywhere. With summer around the corner, people are getting ready for their travel season. The biggest expense for airlines behind labor is the fuel they consume. With oil prices up around the globe, the airlines must make up higher costs by pushing their ticket prices higher as well. Recently Delta President Glen Hauenstein said that the company must raise rates by “$30 or $40 per ticket” to help offset prices. This is bad news for travelers, as sometimes airline companies are even cutting flights the same day in order to preserve cash and prevent losses.

Yesterday the EIA announced that crude stocks rose by a small 692,000 barrels last week, which was short of expectations. One other problem adding to rising travel costs, specifically with airlines, is that distillate inventories including diesel and jet fuel fell to their lowest since May 2008 last week. This paints the picture of the problem facing travel, especially as the busiest season of the year is approaching. China lowering demand due to COVID-19 may bring some relief for the supply chain in the short-run, but nothing will change until a permanent supply solution is found.