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Syria crisis raises concerns over jet fuel prices

The cost of Brent crude oil has risen amidst the prospect of US military intervention in Syria and following chemical weapon attacks thought to be at the hands of Syria's president, Bashar al-Assad.

The cost of Brent crude oil has risen amidst the prospect of US military intervention in Syria and following chemical weapon attacks thought to be at the hands of Syria's president, Bashar al-Assad.

No sooner had the price of Brent risen than the value of airline stocks dropped. Indeed, Bloomberg's US Airlines Index fell 5.1 per cent on August 27, the lowest since June. Of course, investors are expecting airlines to suffer through this price spike. The cost of Brent crude oil directly affects the cost of jet fuel, which in turn controls an airline's operating costs.

With political tension in Syria rising there are growing fears surrounding the supply of oil from the region. Although Syria does produce oil, it doesn't provide that much. The major concern is its location; Syria borders Iraq and Iran, both of which are major oil producers.

With potentially all three out of the running, Saudi Arabia would be relied on to supply oil but demand would still outstrip supply and this would push up prices.

Fearing either a dearth of oil or higher prices down the line, countries and companies may decide to stockpile. But it's this panic buying that often has the greatest impact on the supply and demand equilibrium, not the initial problem itself.

Added to all this, some long-haul airlines may have to re-route flights that would otherwise have gone through Syrian airspace. This not only has the potential to cause flight delays, disruptions and cancellations, but airlines would also require more fuel to go around Syria rather than through it.

Of course, these issues are paltry compared to the wider concerns in the area but none the less, as the world watches to see how the conflict unfolds, airlines, their investors and oil suppliers will similarly be on guard.

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