MARY LOUISE KELLY, HOST:
The war in Iran has caused the largest disruption to oil supplies in history, and as a result, the cost of jet fuel for airplanes is soaring. Now, you may have noticed airlines have started to pass those rising costs on to their passengers. For more, NPR's Camila Domonoske is here to talk it through. Hey, Camila.
CAMILA DOMONOSKE, BYLINE: Hi there.
KELLY: How much has jet fuel gone up since the war began?
DOMONOSKE: It's basically doubled, which is a huge increase. It's a lot more than we've seen with gasoline or diesel, for instance. And we are hearing some concerns about the availability of jet fuel in Europe and especially in Asia. A group called the Airport (ph) Council International sent a letter to the European Commission this month warning that Europe could potentially face a systemic jet fuel shortage in the weeks ahead, and Asia is already seeing some very tight supplies.
Now, the United States is the world's largest oil producer and net exporter of jet fuel, so there's much less risk of actual shortages in the States. But the United States is still interconnected to the global oil market. And with jet fuel, where it's made in the U.S. isn't always where it's needed, and it's a big country. So California actually buys a lot of jet fuel from South Korea, and South Korea relies on crude from the Persian Gulf.
KELLY: OK. So I get it's a big world. It's all interconnected. But why are prices for jet fuel up so much more than they are even for gasoline?
DOMONOSKE: Yeah. So of course, it all goes back, ultimately, to the Strait of Hormuz - right? - where ship traffic remains a trickle. But jet fuel, one of the many products that can be made out of crude oil - there are two things that are happening. One is that there are a lot of refineries that are important suppliers of jet fuel on the Persian Gulf behind the strait, so they can't get their finished product out to market.
And then, meanwhile, a lot of the crude oil that normally comes out of the strait goes to Asian refineries for processing, and that crude's not moving either. So those refineries can't get the raw material they need to make jet fuel. George Shaw is with the trade intelligence group Kpler, and he calls this a double whammy.
GEORGE SHAW: So it's not just the 20% that you're missing from the Strait of Hormuz. It's the - actually it's the additional export that you'd get from China and from Korea.
DOMONOSKE: I mean, the three top exporters of jet fuel globally are China, South Korea and Kuwait. China and South Korea can't make enough right now, and Kuwait can't get it out.
KELLY: Well, and of course, I think my mind, probably many people's minds, are turning to summer travel, which is upon us. What's this going to mean for airlines? What's it going to mean for people trying to fly on those airlines?
DOMONOSKE: Costs go up, and they get passed along to travelers. We have seen a bunch of airlines hike their baggage fees. There are fuel surcharges, just pricier tickets. Anybody who's been planning travel recently might have noticed that happening. It's also interesting that U.S. airlines have not been hedging. So that's when you lock in prices for fuel months in advance, and it's a good strategy for you if prices wind up going up. It costs you money if prices wind up going down. U.S. airlines had decided that it really wasn't worth it to do that, which means that now they are stuck paying market prices. Delta recently estimated on an earnings call that these prices are costing them an extra $2 billion this quarter, and Delta's actually relatively better off than most airlines 'cause they own a refinery.
KELLY: And Camila, real quick, any chance that prices will come back down soon?
DOMONOSKE: Not likely. Even if the strait fully reopens, it just takes time for tankers to travel around the world. Europe just got its last known shipment of jet fuel from the Persian Gulf, which left before the war. It took six weeks to get there. And that's just shipping time. You have to restart oil fields, refineries, repair damage, too.
KELLY: That's NPR's Camila Domonoske. Thank you.
DOMONOSKE: Thank you. Transcript provided by NPR, Copyright NPR.
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