(Bloomberg) — Coming any minute in a sky near you: a plane full of people going on vacation, leaving in its wake thin white streaks and memories of Covid-19 that seem like a bad dream.
Most read on Bloomberg
The world is flying again. In the third quarter, 10.5 million flights are expected to crisscross the skies, according to industry data compiled by BloombergNEF. The International Air Transport Association expects record numbers of passengers this year and planes that will be about as full as before the virus, using record amounts of fuel.
For environmentalists, this trend will be greeted with dismay as it will lead to a concomitant increase in carbon emissions and another sign of a resurgence in tourism. For the oil industry, however, the recovery is a welcome boost. We live in a world in which OPEC and its allies have been forced – since the early days of the virus – to artificially limit oil supplies. Jet fuel consumption has suffered a shock far greater and more lasting than any other common petroleum product.
“As a human race, we’re starting to travel more,” said Eugene Lindell, head of refined products at industry consultant FGE. We are “recovering from years of pandemic.”
International travel is expected to see the largest increase. This figure will increase by 9.7% this year, with considerable increases in Asia, Europe and North America. International flights from Asia are expected to increase by 23% but substantial gains are being seen almost everywhere.
In Singapore, another gateway between Asia and the West, passenger numbers at Changi Airport in the first three months of 2024 – at 16.5 million people – exceeded 2019 levels. Pent-up demand made China the airport’s top destination for the quarter, following the introduction of a 30-day visa waiver agreement between the two countries.
This translates into record numbers of passengers on major long-haul hubs in Asia and the Middle East. Dubai International Airport, for example, recorded its busiest quarter in terms of passenger numbers in the first three months of the year, with 23 million visitors. The airport’s general director expects 91 million by 2024, a record.
However, it is the shorter distances that have really driven the rebound, according to Simon Warren, an analyst at Vitol Group, the world’s largest independent oil trader. He predicts that demand for jet fuel will increase by 650,000 barrels per day this year.
“Global jet demand has now returned to pre-Covid levels, for the first time since 2020,” he said. “The recovery was mainly driven by the short-haul sector. Jet is one of the main drivers of overall oil demand growth.
Oil traders pricing jets often look at their cost relative to diesel, a relatively similar type of fuel that makes up a much larger share of the global oil market. In Europe, the measure shows jet fuel has strengthened since March, with a similar picture in Asia and the United States, according to fair value data compiled by Bloomberg.
“We are seeing nice increases based on booking data for jet fuel demand globally, particularly in Asia, in countries like China,” said Daan Struyven, head of oil research at Goldman Sachs Group Inc. “Last year, the number of international flights, for example, was still very, very low, and we will continue to see positive year-over-year demand growth due to a recovery over there.
Efficiency gains
IATA projects fuel consumption of 99 billion gallons this year by the global airline industry, an increase of 3% from 2019.
However, the increased efficiency curbs fuel consumption.
The International Energy Agency and FGE do not expect demand for jet fuel – including kerosene used for heating – to exceed 2019 levels this year.
“Air travel is basically back to pre-pandemic levels,” said Jeffrey Barron, an analyst at the U.S. Energy Information Administration. However, “they’ve also tried to increase their efficiency in terms of putting more people on planes, so they use a little less jet fuel than before the pandemic.”
–With the help of Serene Cheong.
Most read from Bloomberg Businessweek
©2024 Bloomberg LP
