New York Jet Fuel Supply Lowest for This Time of Year Since 1996

(Bloomberg) -- Jet fuel supplies are draining fast on the East Coast, supporting wholesale prices at near-record highs just when demand for air travel is closing the gap to pre-pandemic times.

East Coast jet fuel stockpiles fell for a third straight week to their lowest level seasonally since 1996, as government data reflect what suppliers in the spot market have said for the past two weeks -- there's very little aviation fuel available.

Jet fuel is fetching $7.49 a gallon, nearly double the spot price of diesel in New York and more than 1.5 times that of gasoline. Since fuel accounts for up to a third of airline operating expenses, airfares will likely get a lot pricier. Some carriers have already begun to pare flights due to high fuel costs -- and those decisions were made a month ago, when jet prices were less than half of what they are now.

Fuel costs are forcing airlines to scale back at a time when air travel is slowly returning to pre-Covid levels. The number of passengers going through security at U.S. airports averaged 2.08 million per day in the first five days of April, around 9.9% lower than the same period in 2019, according to Transportation Security Administration data. March travelers were down by 12.4% compared with 2019.

The fuel scarcity is partly a result of U.S. refiners prioritizing diesel in the weeks following Russia's invasion of Ukraine, which sent Europe scrambling for the fuel. The European Union relied on Russia for about a fifth of its diesel imports in 2019. As jet fuel and diesel share some overlap in the refining process, maximizing diesel meant cutting back on the aviation fuel.

That shortage prompted the soaring prices, which in turn led refiners to ramp up production in late March, processing 9.5% of crude into the aviation fuel by early April, up from 8.5% in mid-March.

A pandemic-hit New Jersey refinery restarted last week after idling in December 2020. This should bring some relief to the New York Harbor jet fuel market, along with imports, including a cargo from Saudi Arabia slated to arrive within the next week after being diverted from its original destination in Spain.