Indicators - Economic
Jet fuel prices have had a critical influence on airline and route decisions over the past five years. The rapid rise in prices during 2008 resulted in airlines retiring older less fuel efficient aircraft faster than originally planned. This, combined with slower than anticipated deliveries of new aircraft, slowed overall capacity growth and may have saved airlines from even larger economic problems in 2009.
Oil prices peaked in July 2008; crude oil prices reached USD132.72 a barrel and jet fuel prices reached USD166.48 a barrel, representing a refiners margin of 25%.
By December 2008 crude oil prices had fallen to USD39.95, but at the same time the refiners margin had increased to 47%. Jet fuel prices fell to a low of USD52.78 two months later and airlines responded by lowering and/or by removing fuel surcharges.
Oil prices have since edged higher. July 2010 crude oil prices were up 89% on the December 2008 low, at USD75.58 per barrel. However the margin has compressed over this period, from 47% to 13%, limiting the increase in average jet fuel prices. In July 2010 the average jet fuel price was USD85.63 per barrel, up 62% on its February 2009 low.
TFI expects that crude oil prices will increase during 2010 but not to pre-July 2008 levels. Movements in oil prices are highly uncertain however and remain a significant risk factor in aviation planning.
Singapore Jet Fuel and Crude Oil Prices
January 2008 to July 2010, USD per Barrel
Source: TFI based on U.S. Energy Information Administration