May madness – cost of fuel soars this spring

A modicum of sanity has descended on the crude oil market. The price has dropped in recent days, because of the strengthening of the U.S. dollar (oil is denominated in dollars). That’s a relief, because, in May, prices went ballistic.

According to the monthly OPIS Transportation Fuel Index, crude began the month of May costing about $112 per barrel. By Memorial Day, it had soared to $132.

How does that break down for the wholesale cost of jet fuel? Jet A averaged $3.77 per gallon in May, an increase of more than 37.3 cents per gallon compared to April’s numbers and a whopping $1.70 per gallon more than last year. To put things in longer-term perspective, OPIS says jet fuel prices have skyrocketed by 418 percent over the past five years.

This surge is causing airlines to ground older, more fuel-inefficient airplanes.

The Air Transport Association, an industry trade group, says that fuel expenses have, historically, ranged from 10 to 15 percent of passenger airline operating expense in the U.S. Now, it’s between 30 and 50 percent. ATA says that at approximately 19.5 billion gallons of jet fuel per year, every penny paid for a gallon of the propellant costs the airline industry $195 million annually.

Such are the elemental equations driving the airline industry today.

© Cheapflights Ltd Jerry Chandler