U.S. jet fuel consumption recovery to 2019 levels challenged by fewer flights
U.S. jet fuel consumption rose in December 2022 from a year earlier but a faster recovery to the pre-pandemic, 2019 levels is challenged as carriers like Delta Air Lines have had success in efforts to become more energy efficient through grouping more people in fewer flights.
This occurs as the market for jet fuel is likely to remain “structurally constrained,” for a period, the Chief Financial Officer of Delta Air Lines, Dan Janki, said on Jan. 13, 2023 during the company’s fourth quarter earnings discussion, according to a transcript of the call by Motley Fool.
Janki, answering a question from an analyst related to unusually high crack spreads and refining margins that the company faced in 2022, said he didn´t “anticipate them being at those levels for the current year.”
Delta Air Lines has insight on the refining and fuel market, in addition to being a buyer, because it formed Monroe Energy in 2012 to buy the 185,000-barrel-per-day (bpd) refinery in Philadelphia that it continues to own.
Separately Kinder Morgan, a leading midstream operator in North America, said there was an increase in jet fuel transportation in December, according to the fourth quarter earnings discussion transcript also published by Motley Fool.
The Energy Information Administration (EIA) published a report in December 2022 that included commentary on the airline industry trend of flying fewer flights since the pandemic, and about its impact of this trend on the jet fuel market.
More jet fuel moved by pipelines
According to Kinder Morgan, volumes of jet fuel transported increased about 10% in December 2022 from a year earlier. Kinder Morgan, based in Houston, is a leading midstream company in North America.
Kim Dang, president of Kinder Morgan, said that the company saw increases in transported fuels in December 2022 from December 2021
“Road fuels were down 3%, but we saw a 10% increase in jet fuel demand,” he said.
Jet fuel consumption below 2019
According to a press release by the Energy Information Administration on Dec. 4, 2022, the average jet fuel consumption in the U.S. in 2022 was consistently below 2019.
“Although airline passenger counts in the U.S. have nearly returned to 2019 levels in recent months, based on Transportation Security Administration (TSA) reports. So far in 2022, jet fuel consumption has averaged 1.5 million barrels per day” (bpd), according to weekly product supplied data reported in the EIA’s Weekly Petroleum Status Report.
“By comparison, consumption of jet fuel in all of 2019 averaged 1.7 million” bpd, the EIA said.
In the second half of 2021, U.S. consumption grew to 1.5 million bpd and has remained at that level through 2022.
“Jet fuel consumption has remained somewhat steady since July 2021, although passenger data from TSA suggest that the number of air passengers has grown closer to 2019 numbers throughout 2022,” the EIA said in its Dec. 4 press release.
“The increasing number of passengers and yet unchanging jet fuel demand may reflect airlines’ measures to ensure that flights are full,” according to the EIA’s report signed by Kevin Hack.
Outlook for 2023
“Utilization of refineries are high. And you get disruptions. You've seen it as winter storms came through in December. And incredibly low temperatures, you know, refineries were impacted,” Delta’s CFO Janki said.
“And if you think about Europe, we'll actually be bigger in the trans-Atlantic this year than we were in 2019 (…) And so, what's really left to reopen is China,” Delta’s CEO, Ed Bastian, added.
“We expect the trans-Atlantic to be about 108% restored to 2019 levels. So, we'll be bigger than 2019. Most of that is in gauge as we bring in the newer, more efficient fleets,” said Glen Hauenstein, the company’s president, according to a Motley Fool transcript.
The company does not plan to significantly increase the number of flights in the immediate term.
“We will probably not, for the next couple of years, see the flight numbers we did in 2019. We will get seat capacity restoration to 100%, which means that gauge will go up significantly. When you look at our fleet evolution, that was always our plan, was to continue to grow not by additional departures but by larger airplanes, more efficiency, less fuel burn, better products and services,” he said.
Airline officials said in 2022 that a stronger dollar compared with recent years was in part contributing to slower international travel.
By Renzo Pipoli