Why Air Travel Costs Will Continue to Rise

**Jessica Mendoza** (0:05)
The war in Iran has sparked the most intense global energy shock in decades. And one big tangible effect for people outside the region is the jet fuel crunch.

**SPEAKER_2** (0:17)
Airlines worldwide are taking some extraordinary measures to keep flying and stay in business.

**SPEAKER_3** (0:23)
A warning for anyone hoping to travel for the summer holidays. Europe may run out of jet fuel.

**SPEAKER_4** (0:29)
So many folks are trying to take those summer trips.

**SPEAKER_3** (0:32)
We're talking about double-digit airfare hikes in the months ahead.

**Alison Sider** (0:36)
The Iran war has had a pretty significant impact on air travel.
I mean, there's routes that airlines are no longer flying because, you know, they could potentially be dangerous. You know, planes are having to sort of root around this Mideast airspace.

**Jessica Mendoza** (0:54)
We spoke to a couple of reporters who've been following this story, including Alison Sider, who covers airlines.

**Alison Sider** (1:01)
The big question for airlines is, how are they going to manage just billions of dollars in added jet fuel costs?

**Jessica Mendoza** (1:11)
Airlines are now scrambling to figure out how to secure fuel supplies and deal with increased expenses.

**Alison Sider** (1:18)
Their fuel bills doubled in a matter of weeks, and it's not a super high margin business, so somebody has to pay that bill. And in a lot of cases, it seems like it's going to be customers who will be paying higher ticket prices.

**Jessica Mendoza** (1:36)
Welcome to The Journal, our show about money, business and power. I'm Jessica Mendoza. It's Monday, April 27th.
Coming up on the show, the jet fuel crisis and what it could mean for your summer travel.

**SPEAKER_3** (2:04)
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**Jessica Mendoza** (2:39)
The problem we're talking about here is jet fuel, but isn't the issue that oil is stuck in the Strait of Hormuz? So what's the difference?

**Matthew Dalton** (2:48)
Oil is crude oil.

**Jessica Mendoza** (2:50)
Okay.

**Matthew Dalton** (2:51)
That's what comes out of the ground.

**Jessica Mendoza** (2:53)
Our colleague Matthew Dalton covers the geopolitics of energy.

**Matthew Dalton** (2:57)
Jet fuel is what's refined from crude oil, and it's transformed into jet fuel in huge factories that crack open the crude oil molecules, strip them down, clean them into something that can be put into a plane.
And the Persian Gulf, as it happens, supplies a lot of crude oil, but it also supplies a lot of jet fuel, refined jet fuel from refineries that are on the wrong side of the Strait of Hormuz right now. So the impact on the industry has both been because crude oil has not been available from the Gulf. It's also because jet fuel itself from refineries and on the Persian Gulf has not been available.

**Jessica Mendoza** (3:42)
Matthew says the regional consequences of the conflict quickly became global.

**Matthew Dalton** (3:47)
Since the Strait of Hormuz has been closed due to the conflict, about 20% of the world's jet fuel has not been able to get to global markets and pass through the Strait of Hormuz. And that has been a big problem for the jet fuel supply for airlines.

**Jessica Mendoza** (4:07)
Okay, so if some of the jet fuel, 20% of jet fuel is coming out of the Gulf, where does the rest of it come from?

**Matthew Dalton** (4:15)
China is a big importer of crude oil, but they are a huge refiner, so they do actually end up exporting a lot of their jet fuel. But since the crisis has started, they've been stopping exports and keeping production at home for their domestic airlines.

**Jessica Mendoza** (4:30)
And how significant is that?

**Matthew Dalton** (4:32)
Well, I mean, in Asia, that's been a big problem for like regional carriers. Countries like Vietnam and Myanmar have had to slash operations.
Well, in Pakistan, airlines have been told to fly in with as much fuel as possible, so that they don't have to refuel much to take off again, because the Pakistani authorities don't want to stress their jet fuel supplies. So like that's been a knock on effect of China as well, because China is such a big exporter in the region, or was.

**Jessica Mendoza** (5:07)
And it's not just jet fuel exports out of China that have had an impact. Asian economies also buy about 85% of the crude that passes through Hormuz.