Now that the USA and Iran are re-engaged in their on/off conflict, we can expect one grade of fuel to make a quick return to the headlines. Over the last few months, there have been many column inches devoted to the shortage of jet fuel and consequent high prices, as a result of so much refining capacity being stuck “inside” the Strait of Hormuz. Seeing as many of you will be jetting off on holiday at this time of the year, this month’s report will revisit what jet fuel is, why it is so prone to price shocks and what (if any) are the plans to find alternatives in a decarbonising world?
Jet Fuel (often called Jet A1 and sometimes called AVTUR = Aviation Turbine Fuel) is a type of paraffin that comes from a refinery’s Crude Distillation Unit (CDU). Gasoline (petrol) “sits” above Kerosene in the CDU, meaning the former boils first (at a lower temperature), giving it a more volatile and explosive nature. Diesel lies lower than Kerosene in the CDU, which means it takes longer (higher temperature) to reach its boiling point, resulting in diesel being more stable, but less flammable. Put all of this together and you have the reason that Kerosene is used to power aeroplanes. Gasoline would not only be excessively hazardous, but its combustibility (whilst good for take-off) would be inefficient once the plane was airborne. Fuel consumption would be too rapid and the plane would have to quickly land to refuel. Diesel on the other hand is much more fuel economic and releases energy in a more “conservative” fashion. This means that it would be suitable for jet propulsion once the plane is airborne, but to take-off would require a runway with a length of about 5 km! Kerosene then, is the perfect “in-between” grade; more stable and fuel efficient than petrol, but more combustible than diesel.
Refinery yields vary according to the crude slate (ie, the type of crude that a CDU processes), but in general the amount of jet fuel produced from 1 barrel (=159 litres) of Brent Crude is around 25 litres (ie, a 15% yield). By comparison, Brent yields 65 litres (~ 40% yield) of petrol and 55 litres (~ 35% yield) of diesel. Certain refining processes can increase the yield of jet fuel, but these are technically difficult and expensive. Which means that whilst still not a specialist grade, jet fuel is most definitely not a ubiquitous, “everyday” grade such as gasoline or diesel.
This “weak” supply position, versus strong and very specific demand dynamics (planes have to use it and there are no alternatives) is one of the reasons that jet fuel is prone to rapid price shocks. In Europe, the situation is exacerbated by a lack of indigenous production and an over-reliance on imports (the UK for example, imports 60% of its jet fuel). This price volatility has obviously been amply illustrated in 2026, where the price of jet went up to $234 per barrel ($1,842.50 / tonne) in the aftermath of the Israeli and US attacks on Iran. But this is not the first time that jet fuel has been acutely affected by price shocks. During the Arab Spring in 2012, Jet A1 topped $150 / bbl, even though the associated loss of production from Libya only concerned crude oil. In the aftermath of the Russian invasion of Ukraine (widely seen as a crude and diesel crisis), jet fuel still hit $188 / bbl ($1,475.25 / tonne), whilst crude at the same time was “only” trading at $119. And that same level of extreme price movements can also occur when prices tank, with AVTUR Kerosene often falling the fastest and furthest. In the pandemic, the UK saw a 30% reduction in jet fuel demand in Q1 2020 and this resulted in a drop in the price of AVTUR from $83 / bbl at the start of that year ($652 per tonne) to $14 / bbl ($111 / tonne) by the end of April!
For refinery schedulers and aviation fuel buyers alike, the exposure to this kind of volatility is the stuff of nightmares. There is no such thing as a jet fuel refinery; you can’t just stop producing one product eg, (jet fuel) if you want to carry on producing another (eg, diesel). At the same time, increasing jet fuel production at the expense of other grades is difficult and requires more complex refining technology. Buyers of course can hedge their exposure, but protection can only last so long and at some point, the hedge has to be renewed at a higher price. Equally, hedging your jet fuel around $85 a barrel, only to see the price plummet to $15 / bbl is a fairly calamitous exercise – particularly if your planes are grounded through lack of demand.
Such is the torturous tightrope of supplying and buying jet fuel. Over the last few months, some commentators have pointed to Sustainable Aviation Fuel (SAF) as a neat solution to some of these problems. Not only does it reduce emissions, but because the supply chain sits outside the machinations in the Middle East, could SAF support supply resilience and help strip-out price volatility? We will have a look at that topic next month, but in the meantime, happy holidays!
