The blockade of the Strait of Hormuz has entered its seventh week, and the European aviation industry is seriously in trouble. Until now, dependence on jet fuel imports was about 500k barrels, with over 70% of supply coming from the Middle East, but that source of supply is effectively about to be cut off.

Asian refineries have also lost about 3 million barrels of production capacity due to crude oil shortages, so the amount of aviation fuel flowing into Europe has drastically decreased. The volume arrived in March was 437k barrels, a 13% decrease compared to the same month last year. According to research firm Kpler, April is expected to drop further to 275k barrels, with more than half relying on long-distance transportation from the United States. The limits of the supply chain are truly imminent.

Stockpiles are also rapidly decreasing, which is frightening. The inventories at major hubs in Amsterdam, Rotterdam, and Antwerp fell 8% last week to 646k tons, marking the lowest level since March 2023. The benchmark fuel price for the aviation industry has fallen from a record high of $1,800 per ton on March 18 to $1,450, but refining margins remain abnormally high, over $100 per barrel, more than five times what they were a year ago. The International Air Transport Association’s Europe branch warns that systemic supply shortages could fully materialize within three weeks. If that happens, airlines will be forced to choose between competing for rising fuel prices or reducing flights.

Lufthansa has already planned to cut 5% of its operational capacity and is considering early retirement of 20 to 40 aging aircraft to reduce fuel consumption. The company holds an 85% hedge position, so it’s relatively safe in the short term, but other carriers like easyJet will see their hedges expire by the end of summer, making a surge in ticket prices unavoidable at that time. The European Aviation Association is calling on the EU to temporarily suspend the aviation carbon market and abolish aviation taxes, but given the ongoing structural reduction of energy infrastructure, policy responses and climate change measures are fundamentally at odds. The consequences of Europe closing over 30 refineries in the past 25 years are now likely to hit the airline industry this summer, reflected in soaring ticket prices and flight schedule disruptions.