• Gennette Cordova

Jet fuel prices spike following the airstrike death of Iranian general

Following the news that the United States government killed Iran’s General Qasem Soleimani, widely regarded as the second-most powerful figure in the country, in a Friday morning airstrike at the Baghdad International Airport (BGW), Brent crude traded at US$68.65, up more than 3.6% from yesterday, having earlier spiked to an intraday high of $69.16.

CNBC analysts have suggested that oil prices could “surge toward $80 a barrel if escalating geopolitical tensions disrupt Middle East crude supplies.”

So, how will this affect jet fuel prices? In an interview with Jet Fuel Innovation News, Larry Weaver, Jr., president of Florida-based aviation fuel consultancy Dellem, said he’d already received phone calls from his clients concerned about price hikes.

“Prices will be up for this upcoming week and after that, it depends on how things escalate,” said Weaver. “If it’s just a bunch of posturing and flexing muscles, prices will spike a for a few weeks and then return to normal.”

He added, “I’m hoping cooler heads prevail and nothing more will come of it.”

A political risk consultancy, Eurasia Group, published a note Friday stating they expect moderate to low-level clashes for at least a month—most of which, they suggested, would be confined to Iraq. They went on to say that oil prices “will likely hold” around $70 a barrel, “but could make a run at $80 if the conflict spreads to the oil fields of southern Iraq or if Iranian harassment of commercial shipping intensifies.”

The summer of 2004, following the 2003 beginning of the U.S. war in Iraq, brought an increase of oil prices, surprising many oil analysts and Bush administration policymakers who expected prices to drop. During the 1991 Gulf War, the U.S. airline industry lost $4 billion, virtually all of it in the fourth quarter, when the cost of fuel doubled as a result of the Iraqi invasion of Kuwait. 

But the recent jump in oil prices should not give the industry cause for alarm just yet, according to Robert Horrocks, chief investment officer of Matthews Asia.

“I don’t think that you will see a sustained rally in oil unless you get some surprise economic data that is stronger than people expect both in the U.S. and in particular Europe,” said Horrocks. “Other than that, I doubt this is the start of a severe spike in the oil price.”

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