Less U.S. jet fuel consumption so far in 2022 than in 2019 (11/30/2022)
U.S. jet fuel consumption so far in 2022 has been consistently below 2019, although airline passenger counts in the United States have nearly returned to 2019 levels in recent months, according to data reported by the Transportation Security Administration (TSA). In 2020, U.S. jet fuel consumption fell significantly because of mobility restrictions aimed at reducing the spread of COVID-19. As travel restrictions and other responses to the COVID-19 pandemic eased in the latter part of 2020 and especially into 2021, consumption of jet fuel gradually increased, particularly in the first half of 2021. In the second half of 2021, consumption averaged 1.5 million barrels per day (b/d) and has continued to average about 1.5 million b/d so far through 2022, according to weekly product supplied data reported in our Weekly Petroleum Status Report. For comparison, product supplied of jet fuel in 2019 averaged 1.7 million b/d.
Although jet fuel consumption has remained around 1.5 million b/d since July 2021, the rolling seven-day average passenger data from TSA suggest that passenger rates have moved closer to 2019 levels throughout 2022, briefly overlapping with 2019 in September and October (Figure 2). The increasing passenger counts, despite consistent levels of jet fuel demand, may reflect airlines’ measures to ensure each flight is full, moving as many passengers as possible per trip. As demand for air travel has increased, constraints on labor supply, as well as high fuel prices, have led air carriers to consolidate flights despite high passenger demand.
Although relatively less jet fuel has been consumed in the United States this year than in 2019, supplies of jet fuel have also been low this year, both globally and in the United States. So far this year, U.S. jet fuel inventories have remained below the five-year (2017–2021) average (Figure 3). The low inventories contrast with 2021, when increasing refinery utilization after the COVID-19 pandemic combined with less relative demand for jet fuel contributed to well-above-average inventories as a result of refiners increasing production to meet growing demand for gasoline and distillate fuel oil. Tighter jet fuel supplies in 2022 stem from a number of factors, including disruptions in global petroleum trade following Russia’s full-scale invasion of Ukraine and associated sanctions on Russia, as well as less export of petroleum product out of China. Although the United States has not historically imported substantial volumes of jet fuel from Russia, countries that have imported jet fuel and other products from Russia—particularly countries in Europe—are now turning to other global sources, contributing to a tighter balance of supply and demand for jet fuel globally.
This tighter balance is reflected in lower inventories and higher prices. In the spring, inventories decreased sharply after the Russian invasion. In response to high prices during the summer, refinery utilization increased to maximize production of all liquid fuels, which grew jet fuel inventories to levels just below the five-year average. Lower refinery utilization in September and October, when refiners were undergoing seasonal maintenance, contributed to inventory levels dipping back below the previous five-year low during that time.
Low inventories of jet fuel have contributed to increases in the jet fuel crack spread since the start of the year (Figure 4). The crack spread is the difference in price between a gallon of jet fuel and a comparable amount of crude oil, and it functions as a means of measuring the value of refining a barrel of crude oil into jet fuel. High jet fuel crack spreads suggest that rising jet fuel prices are not only a result of higher crude oil prices, but also limitations on refinery production to produce the fuel. A high jet fuel crack spread translates to a higher price for the fuel. When jet fuel inventories dipped below the five-year low in the fourth quarter of 2021, jet fuel crack spreads began to increase, and they started 2022 at five-year high levels. Market disruptions contributed to additional increases in crack spreads in March, but then crack spreads began decreasing in the summer as inventories returned to more normal levels. The second decline in inventories in September and October occurred despite lower crude prices and contributed to another sharp increase in the crack spread. The October monthly average crack spread was the highest for this year, and it was the highest crack spread in inflation-adjusted terms since 2005.
The increase in crack spreads is not specific to jet fuel. High crack spreads for gasoline and diesel fuel oil have also been prevalent through much of this year because disrupted imports from Russia and lower U.S. refining capacity since 2020 have contributed to overall increases in refinery crack spreads. In October, crack spreads for distillate fuel oil (often sold as diesel fuel) increased as both seasonal demand and seasonal refinery maintenance contributed to lower relative inventories. Jet fuel and distillate fuel oil are relatively similar products and increases in refinery yields of one product often results in lower yields of the other. The sharp increase in distillate prices also indirectly contributed to rising jet fuel prices during the same time.
Although high, the jet fuel crack spread is nonetheless lower than the crack spread for distillate fuel. In other words, refiners have an incentive to reduce their jet fuel yield to maximize distillate production. Previously, when jet fuel crack spreads increased sharply in March and April, refiner yields of jet fuel increased in April, partially in response to the higher jet fuel value (Figure 5). However, because prices and crack spreads for distillate fuel oil are also high this fall, the higher jet fuel crack spreads have not contributed to a similar increase in yields in September or October. The extent to which refiners can individually adjust their yields of certain petroleum products is limited by the capacities of individual units within their refineries.