Experts Contemplate $200 per Barrel Oil as War Drags On

With the price of oil rising in response to the U.S. and Israel’s attack on Iran, and with the conflict now lasting more than a month, industry analysts at Macquarie Group are warning that the price per barrel has a 40% chance of hitting $200 if the conflict drags on through June. For refined petroleum products such as jet fuel, prices could rise even higher, they said.

According to the report, the conflict has resulted in access to 13% of the world’s global oil supply being choked at the embattled Strait of Hormuz in the Persian Gulf. “The current hit to supply is already bigger than the peak in either of the 1970s oil shocks, or the first two Gulf Wars,” Macquarie’s analysts said.

“Hypothetically, if crude reaches $200 per barrel, we’d be looking at a $90 per barrel increase in the cost of that product. In this scenario—at a very basic level—we might expect the price of jet fuel to go up at least $2.25 per gallon, if not more,” Muneeb Ahmed, Avfuel’s director of trading and logistics, told AIN, adding that it could raise wholesale jet-A prices to more than $7 a gallon. “Of course, there are many nuances that go into jet fuel pricing, including freight charges, supply locations, taxes, into-plane rates, and more.”

For fractional and charter aircraft providers, the surge in fuel pricing has resulted in increased costs for customers, with operators such as Jet Linx instituting a fuel surcharge. “Given the variable nature of fuel costs, at the onset of each month, we update our Fuel Component Adjustment based on the average price per gallon at that time,” a Flexjet spokesperson explained to AIN. “Though the monthly adjustment will reflect current market pressures, the model does not employ a surcharge in times of escalating prices.” NetJets declined to comment.

Though the U.S. for the near term has strong petroleum reserves, countries around the world with less capacity are already feeling the pinch. “The big issue with jet-A in Europe presently is supply reliability,” said one European fuel industry executive who wished to remain unidentified. “Most suppliers keep their fuel for the airlines and are not keen to fuel business aviation.”

Sustainable aviation fuel (SAF) has carried a higher cost per gallon than conventional jet-A. Some have wondered, if petroleum reaches the $200/barrel plateau, whether SAF—which can be blended with the oil-based jet-A at ratios currently approved up to 50%—could actually achieve pricing parity. “It is possible that SAF premiums come off a bit,” said Ahmed, “but given SAF market dynamics and the fact that SAF is still just a small component of jet fuel consumption, we don’t believe SAF pricing will be affected much in the near term.”