Europe has only six weeks of jet fuel left before shortages will hit because of the Iran war, according to the head of a global energy watchdog.
Fatih Birol, the executive director of the International Energy Agency, said there would be flight cancellations “soon” if oil supplies from the Middle East were not restored within the coming weeks.
“I can tell you soon we will hear the news that some of the flights from city A to city B might be cancelled as a result of lack of jet fuel,” he told the Associated Press.
KLM, part of the Air France-KLM group, said on Thursday it would cut 160 flights in the coming month because of high kerosene jet fuel prices. Although less than 1% of its schedule, the cancellations underline the financial pressures on the airline industry.
The Dutch airline said: “This concerns a limited number of flights within Europe that, due to rising kerosene costs, are currently no longer financially viable to operate. There is no kerosene shortage.
“KLM expects a busy May holiday period and is making sure passengers can travel to their holiday destinations as planned.”
The US-Israel war on Iran has caused turmoil in global energy markets since the first strikes at the end of February. In retaliation, Iran has effectively closed the strait of Hormuz, a vital export route for oil from the Gulf.
The US and Iran last week agreed a two-week ceasefire, but talks on ending the war failed over the weekend. Indirect talks brokered by Pakistan are continuing.
Brent crude oil futures prices, a global benchmark, remain more than 30% higher than they were before the war. The rapid increase in petrol prices has put pressure on the US president, Donald Trump.
However, there have not yet been outright shortages of jet fuel as shipments that set off before the war continued to arrive. The final cargoes have now made it to Europe.
Birol said Europe had “maybe six weeks or so [of][jet fuel left”, AP reported. His comments add to that of Airports Council International Europe, a lobby group that last week wrote to the EU’s energy and transport commissioners saying the bloc was three weeks away from shortages.
Airports and airlines tend to have about six weeks of fuel supplies in normal times, according to people in the industry. However, the Iran war has dragged on long enough that any extra reserves in the system are being used up, and other suppliers do not have enough capacity to replace supplies that come through the Gulf.
“In the past there was a group called Dire Straits,” said Birol. “It’s a dire strait now, and it is going to have major implications for the global economy. And the longer it goes, the worse it will be for the economic growth and inflation around the world.”
The impact will be “higher petrol prices, higher gas prices, high electricity prices”, Birol told AP, with some parts of the world “hit worse than the others”.
Some airlines have cancelled flights that would be loss-making because of higher fuel prices, particularly if they did not have hedging arrangements in place to insure against big increases.
However, even those who have hedged are considering flight cancellations. Air France-KLM has hedged 87% of its fuel exposure, but still decided to cut the flights because of the costs it would otherwise have to bear.
It focused cancellations on busy routes between Amsterdam’s Schiphol and London and Düsseldorf, on which passengers can be easily booked on to other flights. Airlines in the EU and UK can make adjustments to flight schedules without paying compensation as long as passengers are offered alternatives more than two weeks in advance.
The British airline easyJet on Thursday said it had no concerns about fuel supplies for the next month. Kenton Jarvis, the easyJet chief executive, said: “We have visibility to the middle of May and we have no concerns.”
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: theguardian.com
