The jet fuel crisis could impact summer travel, even if you drive

The global energy supply shock was the final nail in the coffin of Spirit Airlines.

It’s also grounding thousands of flights worldwide ahead of summer travel season. And it’s only the beginning when it comes to how higher prices are curtailing demand and access to air travel.

Concern is rising over the future of flying around the world, said Rystad Energy chief economist Claudio Galimberti.

“In the next few weeks, you will start to see the jet fuel shortages in quite a few places,” he said.

He said especially in Southeast Asia, cancellations could go from sporadic to systemic. Europe will likely feel it next, followed by California.

“Because California imports quite a good chunk of its fuels from outside, specifically from Asia,” Galimberti said.

But American travelers overall are in a much better spot than most because of how much crude oil the U.S. produces and refines, said Karim Fawaz, a research director with S&P Global Energy.

“Our jet fuel market is still relatively well supplied,” he said. “Jet fuel inventories are still relatively high in the U.S.”

He estimated the world has lost about 40% of traded jet fuel supply since the start of the crisis, much of which is refined in the Middle East. So, demand will have to follow.

And unlike gasoline or diesel, jet fuel demand is more sensitive to rising prices.

“A lot of the jet fuel consumption that's not business related is largely discretionary to begin with,” Fawaz said. “The question is, how much of that can be substituted, reduced, curtailed — how elastic is it to higher prices?”

The higher ticket prices go, the more likely people will opt out of flying. So Abhi Rajendran, director of oil markets research with Energy Intelligence, said he does expect U.S. demand for jet fuel to come down this summer.

“I think you're going to see slightly worse demand in the US than expected at lower prices,” he said. “But… you may not actually see that much of an impact on on the gasoline side because of the substitution effect of people just choosing to drive instead of flying.”

Would-be Spirit Airlines flyers may opt for a road trip instead, which would increase demand for gasoline at a time of already higher prices and lower global supply.