Ameer Randolph
The price of jet fuel per litre is a highly variable figure, influenced by factors such as regional demand, oil price fluctuations, and hedging practices employed by airlines. As of January 2022, the price of Jet A1, a commonly used aviation fuel, was approximately $816 per metric tonne, equating to about $0.82 or £0.61 per kilogram. This price has exhibited significant variation over time, influenced by events such as the COVID-19 pandemic, which caused a collapse in oil prices. The national average price for jet fuel in the US is $6.29 per gallon, with regional variations, such as the FAA Alaska region reporting a higher average of $8.11. These prices do not include additives or delivery fees. The cost of jet fuel significantly impacts the aviation industry, with a Jumbo Jet (Boeing 747-400) flight from London to New York requiring approximately 70,000 kilograms of fuel, resulting in substantial fuel expenses.
| Characteristics | Values |
|---|---|
| Price of Jet A1 as of January 2022 | $816 per metric tonne |
| Price of Jet A1 in May 2020 | $200 per metric tonne |
| Price of Jet A1 in January 2021 | $430 per metric tonne |
| Global average jet fuel price for the week ending 28 September 2023 | $92.92 per bbl |
| National average price for jet fuel in the US | $6.29 per gallon |
| National average price for 100LL aircraft fuel in the US | $6.50 per gallon |
| National average price for Sustainable Aviation Fuel (SAF) in the US | $8.74 per gallon |
| Highest jet fuel price in the US (in the FAA Alaska region) | $8.11 per gallon |
| Lowest jet fuel price in the US (in the FAA Central region) | $5.61 per gallon |
| Cost of fuel for a Boeing 747-400 flying from London to New York | £53,500 or €64,300 |
| Cost of fuel for an A380 | £205,000 |
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What You'll Learn
Jet fuel price per litre varies by region
The price of jet fuel per litre varies across the world and is dependent on various factors, including the region, demand, and the price of oil, which fluctuates daily. As of January 2022, Jet A1 fuel was priced at approximately $816 per metric tonne, which equates to roughly $0.82 per kilogram or £0.61 per kilogram. This price was about double what it was a year prior in January 2021, when Jet A1 was priced at approximately $430 per metric tonne or $0.43 per kilogram.
The absence of taxation on aviation fuel in certain regions, such as the UK and Europe, also influences the price disparity. In the US, the national average price for jet fuel is $6.29 per gallon, with prices varying across different regions. For instance, the FAA Alaska region reports the highest jet fuel price at an average of $8.11 per gallon, while the FAA Central region has the lowest average price at $5.61 per gallon.
The cost of jet fuel for a specific flight can be calculated based on the amount of fuel required and the fuel efficiency of the aircraft. For example, a Jumbo Jet (Boeing 747-400) flying from London to New York burns approximately 70,000 kilograms of fuel, which equates to 82,300 litres. The cost of the fuel for this flight would be approximately £53,500 or €64,300, resulting in a cost of approximately £118, €141, or $158 per passenger, assuming a capacity of 450 passengers.
Airlines employ various strategies, such as hedging, to manage fuel price fluctuations. Hedging involves agreeing on a constant price for fuel for a set period, protecting the airline from price increases but also potentially resulting in higher costs if fuel prices drop. For instance, an airline may agree to purchase a set quantity of fuel at a fixed price, as reflected in a contract for $600 per metric tonne. If the fuel price rises, the airline is safeguarded, but they may end up paying more if the fuel price decreases.
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Fluctuations in jet fuel price
The price of jet fuel, a derivative of crude oil, is subject to constant fluctuations, which poses a challenge for airlines. Oil prices often fluctuate wildly, and since the price of jet fuel is closely aligned with the price of oil, jet fuel prices follow suit. For instance, in May 2020, the price of jet fuel was down 69% compared to the previous 12 months due to the collapse in oil prices brought about by the Covid-19 pandemic. A year later, in January 2022, jet fuel prices had doubled to approximately $816 per metric tonne or $0.82 per kg.
Airlines employ various tactics to hedge their exposure to high fuel prices, such as fuel hedging, which involves monitoring fuel prices to determine the best course of action to prevent being caught off guard by rising prices. They may also use options contracts, which allow them to balance risk exposure to rising fuel prices. Airlines can also purchase futures contracts, which are agreements between buyers and sellers for future prices. For example, if an airline anticipates that fuel prices will rise next year, they may buy a futures contract that allows them to purchase fuel at a lower price.
However, hedging tactics have limitations and are not always effective in the face of sustained increases in global fuel prices. Additionally, hedging strategies carry inherent risks and can be expensive. If fuel prices do not rise as anticipated, airlines may lose money on unused options and contracts.
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Jet fuel tax
The price of jet fuel varies depending on several factors, including the region, demand, and the price of oil, which fluctuates daily. As of January 2022, the price of Jet A-1 fuel, a widely used type of jet fuel, was approximately $816 per metric tonne, which equates to about $0.82 or £0.61 per kilogram. The price per litre can be calculated by converting the price per kilogram, given that one litre of water has a mass of one kilogram.
While the price of jet fuel can vary, it is important to note that fuel taxes are typically included in the amount charged for the fuel. Fuel taxes have been implemented as a way for the aviation community to contribute to funding for aviation authorities, such as the FAA in the United States. These taxes are generally easy to collect for the government, as they are included in the fuel price and are difficult to avoid.
In the United States, for example, gross receipts from the sale of jet fuel are subject to a combined general rate of sales and use tax, which businesses must collect and remit. This ensures that the tax revenue is efficiently collected and contributes to a stable source of funding.
However, it is worth noting that there are regions without taxes on aviation fuel. For instance, as of 2023, there is no tax on aviation fuel in the UK or Europe. This may impact the overall price of jet fuel in these regions, making it lower compared to regions with fuel taxes.
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Hedging jet fuel
The price of jet fuel is responsible for 20% to 40% of airlines' operating expenses. Fuel prices have risen in recent years and become very volatile, primarily due to the geopolitical situation worldwide. The volatility in jet fuel prices can squeeze airline profits, which aim to keep ticket prices stable.
A fuel hedge contract is a futures contract that allows a fuel-consuming company to establish a fixed or capped cost, via a commodity swap or option. The companies enter into hedging contracts to mitigate their exposure to future fuel prices that may be higher than current prices and/or to establish a known fuel cost for budgeting purposes. If an airline buys a fuel swap and the price of fuel increases, the gain on the swap will offset the increase in their actual fuel expense. Conversely, if the price of jet fuel declines, the loss on the swap will offset the decrease in their actual fuel expense.
A swap is an agreement whereby one party exchanges their exposure to a floating fuel price for a fixed fuel price over a specified period. Swaps are available on nearly all types of fuel, including jet fuel. Purchasing a jet fuel swap allows an airline to hedge its exposure to unpredictable jet fuel prices.
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Jet fuel price vs. oil price
The price of jet fuel is closely aligned with the price of oil, which varies daily. For example, in May 2020, the price of jet fuel was down 69% compared to the previous year, due to the collapse in oil prices caused by the Covid-19 pandemic.
The price of jet fuel also depends on the region and demand. For instance, the northeast has been prone to huge spikes in jet fuel costs over the last few years. Jet fuel prices also tend to peak near big travel weekends and holidays, as more air travel means more jet fuel is used.
The price of jet fuel is also influenced by the type of fuel. In the US, aircraft commonly use "Jet A" fuel, while Jet A-1 is used in Europe, Asia, and other international markets. Jet A-1 has a slightly lower freezing point, making it more useful in colder climates. The military uses a unique specification of jet fuel called "JP-8", which contains additives to enhance performance and safety for military applications.
The cost of jet fuel can significantly impact airline expenses. For example, Southwest Airlines spent over $1.5 billion on fuel and oil in the first quarter of 2023, totalling nearly 25% of the airline's expenses for that quarter. The price airlines pay for jet fuel also depends on the quantity of fuel purchased and the contract details. Airlines can hedge the price of fuel by agreeing on a constant price for a set period, protecting them from price increases but also resulting in financial losses if fuel prices drop.
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Frequently asked questions
The price of jet fuel is variable and dependent on several factors. As of January 2022, the price of Jet A1 was approximately $816 per metric tonne, which equates to about $0.82 per KG or £0.61 per KG.
The price of jet fuel is closely aligned with the price of oil, which fluctuates daily.
Hedging allows airlines to agree on a constant price for fuel for a set period, protecting them from price increases but also resulting in higher costs if prices drop.
A Boeing 747-400 flying from London to New York burns approximately 70,000 kilograms of fuel, costing approximately £53,500 or €64,300.
The national average price for jet fuel in the US is $6.29 per gallon, with prices varying by region.
