Chevron warns jet-fuel squeeze via Hormuz

Chevron Chief Executive Mike Wirth said airlines could face a deeper jet-fuel squeeze in the next few weeks if flows through the Strait of Hormuz do not resume. (cbsnews.com) Wirth told CBS on April 26 that about 20% of global oil supply normally moves through Hormuz, and that disruption has stripped out the system’s usual inventory buffers. (cbsnews.com) He said jet fuel was already tightening “very quickly” in Europe and Asia, where airlines were announcing schedule changes and higher fares were starting to show up. (cbsnews.com) (foxbusiness.com) Jet fuel is usually an airline’s biggest cost after labor, and analysts told CBS it typically makes up about 25% to 30% of total airline costs. (cbsnews.com) That cost shock has been steep since the war began on Feb. 28. CNBC reported U.S. jet fuel prices rose from $2.50 a gallon on Feb. 27 to $4.88 on April 2. (cnbc.com) Airlines have already started cutting flying rather than absorb the full increase. Delta said it was trimming four routes through the summer, and Air Canada said it was suspending Toronto and Montreal service to New York John F. Kennedy International Airport from June 1 through Oct. 25. (cbsnews.com) KLM also told CBS it was adjusting its schedule because some routes were “no longer financially viable to operate” at current fuel prices. (cbsnews.com) Europe looks especially exposed because it relies heavily on imported jet fuel. Reuters reported April 28 that Europe’s imports of jet fuel loaded from the Middle East in April are set to dry up. (reuters.com) Wirth said even a ceasefire would not fix the problem immediately, because markets would still need time to rebuild inventories and reroute ships and pipelines. (cbsnews.com) His bottom line was simple: until fuel starts moving normally through Hormuz again, airlines are likely to keep cutting flights, raising fares, or both. (cbsnews.com)