EU energy ministers eye jet fuel reserves as Strait of Hormuz crisis threatens supply
With the peak summer season drawing near, EU energy ministers are wary that jet fuel supply may be further strained, even as analysts see "sharp movement" towards greater jet fuel production within European refineries.
European energy ministers are considering the strategic release of jet fuel reserves as prolonged disruption in the Middle East threatens to jeopardise supply just as the summer travel season begins, a document seen by Euronews reveals.
A European Council briefing prepared ahead of a gathering of EU energy ministers on 26 June warns that while crude oil and natural gas markets have so far avoided major physical shortages, aviation fuel remains the most exposed product as disruptions to shipping through the Strait of Hormuz enter their third month with no resolution in sight.
Ministers are now considering the potential coordinated release of strategic fuel reserves, including jet fuel stocks, should commercial supplies prove insufficient later this year.
"Jet fuel is drawing more focus as the demand is heading into its seasonal summer peak. The possibility of drawing on strategic reserves to cover commercial shortfalls before the year ends is a real and near-term risk," reads the document.
The closure of the Strait of Hormuz has dramatically reduced tanker traffic through one of the world's most important energy chokepoints, cutting off a significant share of Middle Eastern oil exports and sending shockwaves through global markets.
To try and offset the resulting shortage, the International Energy Agency (IEA) coordinated the release of 400 million barrels of oil on 11 March. While the overall global release consisted largely of crude oil, the IEA noted that European emergency contributions specifically prioritised refined oil products such as jet fuel due to regional shortages.
While oil prices have retreated from the highs they reached in the conflict's early stages, refined products have remained under acute pressure, and jet fuel has been the hardest hit.
According to the Council's briefing, prices for jet fuel surged far more sharply than crude itself, with some regional markets seeing values roughly double during the height of the disruption.
Despite the price shock, George Shaw, an energy analyst at the market intelligence firm Kpler, said there has been a “sharp movement” towards increased jet fuel production across European refineries. The majority of the EU's refining capacity and production is concentrated in Germany, Italy, Spain and the Netherlands.
Growing imports from the US are also expected to continue, Shaw added. Nigeria is another important importer to Europe, while “smaller quantities” of fuel come from the Middle East.
"As we get further into the summer, though, and particularly around August and September when consumption increases, supply will certainly be stressed,” Shaw told Euronews.
Seasonal pressure
The European Airports’ industry association, ACI Europe, warned the European Commission in a letter on 10 April that a “systemic” jet fuel shortage was set to become a reality for the EU if the Strait of Hormuz wasn't opened "within the next three weeks".
These concerns were echoed by IEA chief Fatih Birol, despite a change in tone from several airlines in the following weeks. Both Air Canada and Lufthansa have said they are not concerned about jet fuel shortages and do not expect mass flight cancellations during the summer.
A spokesperson from the International Air Transport Association (IATA) rejected challenges in securing jet fuel supply in the short term ahead of the peak summer season, but acknowledged that difficulties are in store.
"While we anticipate no immediate fuel supply shortages, current market dynamics highlight broader, systemic vulnerabilities."
In particular, the airline industry is calling for a temporary suspension of the EU's so-called "anti-tankering" rules, which prevent airlines from carrying extra fuel to save money.
"The EU should amend its rules to allow suppliers and airlines to allocate and concentrate fuel stocks where they are most critically needed. This would eliminate the massive administrative burden of processing thousands of individual exemption requests," the IATA spokesperson added.
In particular, the airline industry is calling for a temporary suspension of the EU's so-called "anti-tankering" rules, which prevent airlines from carrying extra fuel to save money.
"EU suppliers and airlines could allocate and concentrate fuel stocks where they are most critically needed (...) and it would eliminate the massive administrative burden of processing thousands of individual exemption requests," the IATA spokesperson added.
Yet while widespread shortages have not yet begun, EU energy ministers acknowledge that the risk is growing as demand accelerates for the summer.
Inventories and alternative supply routes have so far acted as a buffer. High pre-crisis stock levels, increased imports from the US and Nigeria and weaker demand in some sectors have prevented serious disruptions from reaching consumers – but those safeguards are not expected to last indefinitely.
The prospect of prolonged disruption is driving a broader debate in Brussels over energy security. According to the document, the EU executive is preparing recommendations on coordinated reserve releases and demand-management measures, while warning governments against unilateral interventions that could fragment the single market.
"The Commission is preparing formal recommendations on demand management and on the coordinated release of strategic reserves, including jet fuel stocks, to ensure equitable distribution across member states," the Council briefing says.
Energy analysts have estimated that even under the most optimistic scenario, recovery will be slow.
Refining activity in the Gulf States would take months to return to normal after any reopening of the Strait of Hormuz, while product shipments to the EU would require an additional 30 to 40 days in transit, meaning fuel markets could remain strained throughout the summer regardless of when shipping resumes.
