A short reopening, a long recovery
Even with the temporary reopening of the Strait of Hormuz expected under the ceasefire agreement between the United States and Iran, it will still take months to rebuild jet fuel stocks. That was the message from Willie Walsh, the director general of IATA, the International Air Transport Association and the airline industry’s main global trade group. Because apparently one of the world’s most important energy shipping lanes was not dramatic enough already.
In recent weeks, the closure of the strait, one of the world’s key maritime routes for energy transport, had raised serious concern that supplies of kerosene, the petroleum-based fuel used by aircraft, could run short. Gulf states are major producers of this fuel, so any disruption there tends to ripple far beyond the region.
Fuel prices have surged
Since the start of the war, the price of kerosene has almost doubled and it has become difficult to source. As a result, airlines have begun drawing up plans to cut flights, while some airports, especially in Southeast Asia and also in Italy, have started rationing fuel in case supplies run tight in the coming months.
Walsh said the temporary reopening of Hormuz does not solve the problem right away. The market needs time, he said, and the technical process of restarting trade and rebuilding inventories will take months.
The same outlook applies to other petroleum products and to gas, since Iranian attacks have seriously damaged extraction and production facilities. As with crude oil and natural gas, Walsh said kerosene prices are likely to remain high for a long time.
