The sanctions placed on Russia, the world’s largest exporter of crude oil and petroleum products, by Western nations are having a domino effect on jet-A pricing in the U.S., particularly on the East Coast.
According to the U.S. Energy Information Administration, the country is divided into five Petroleum Administration for Defense Districts (PADD) that enables regional analysis of petroleum product supply and movements, with District 1 being the East Coast. The region receives its refined fuel supplies mainly from the Colonial Pipeline that runs from Texas to New Jersey, as well as from imports from Europe. According to Reuters, deliveries of the latter are down nearly 60 percent as Europe deals with its own fuel supply difficulties.
That has caused record-high pricing for jet-A in recent days in PADD-1, with the market closing out last week above $6.60 per gallon, more than twice the seasonal average. Additionally, the pandemic factors into the pricing as refiners, faced with a surplus of jet fuel due to drastically diminished airline flight schedules over the past two years, diverted supplies toward diesel and gasoline.
Jet fuel pricing correlates strongly with the price of home heating oil, and Reuters noted that the spread between heating oil and U.S. crude futures is now nearly three times what it was a year ago.