Panic as holiday flight prices surge as jet fuel hits $300 a barrel | UK | News
The price of a holiday flight is about to get a lot more painful. Jet fuel has risen to levels that one of Britain’s leading energy market experts described to MPs as “crazy” and airlines are already passing the cost on to passengers.
Founder of Market Intelligence at Energy Aspects, Dr. Amrita Sen has reportedly appeared before the House of Commons Treasury Committee to give a clear assessment of what the Iran crisis is doing to aviation fuel markets. He said that while the world was watching crude oil, the real shock was happening somewhere else entirely. Jet fuel has doubled or even tripled from its previous level of $90 per barrel; This is a move that dwarfs what happened to crude oil.
“Everybody’s talking about crude oil, but jet fuel prices are over $300; it’s crazy what’s going on,” he told lawmakers.
“Production focuses so much on the Middle East that it will not be possible to compensate for this with other sources. I expect serious increases in airfares.
“Some airlines are taking precautions against price increases, which may help a little, but we should definitely expect higher airfares for at least the next few months.”
Airlines move fast
According to the Daily Mail, the industry did not wait long to take action. Qantas, Air New Zealand and Scandinavia’s SAS announced pay increases on Tuesday; More carriers are expected to follow suit as supply disruptions in the Gulf deepen.
Hong Kong Airlines went further and announced it would impose surcharges of up to 35 percent starting Thursday.
Not every airline is in the same position. IAG, the group behind British Airways, said hedging arrangements protected it against immediate pressure and that it had no plans yet to raise prices. Other carriers were less reassuring and said fuel surcharges were on the way.
Inflation threat
Beyond the airport, the crisis threatens to send UK inflation significantly off course. The Office for Budget Responsibility has laid out some of the risks: If oil remains at current levels, UK inflation could fall a full percentage point above target, to three per cent rather than two.
Professor David Miles, who sits on the OBR’s budget responsibility committee, told the same Treasury committee that the ripple effects on British prices could be “significant” and “wholly unwelcome”. The numbers he cited told their own story: Oil remains nearly 20 percent above its level before the conflict began, and gas is up by about half.
Most households’ energy bills have been moderated for now; The official ceiling price is valid until the end of June. But while prices show no signs of easing, ministers are quietly working on contingency plans for a support package that would cushion the blow if the situation does not improve by the summer.
