US Jet Fuel Demand Shrinks As Travel Wanes
The struggling US airline industry is likely to buy less jet fuel for the fourth year in a row as the recession keeps passengers away from boarding gates and cargo from loading docks.
That will put more pressure on an already gloomy market for petroleum distillates, the refined products that also include diesel fuel.
A sharp drop in jet fuel prices has let carriers cut air fares in hopes of enticing business and leisure travelers into the air. But bargains at the ticket counter have not been enough to trump job-loss worries and economic malaise.
"The economy is a big driver," said John Maples, a long-term forecaster for the US Energy Information Administration. He bases his jet fuel demand estimates on disposable income, jet fuel prices and air fares.
According to government estimates, passenger travel between January 2008 and January 2009 fell about 5 percent despite lower ticket prices, cutting estimates for jet fuel demand for the period by about 6 percent.
The EIA sees 2009 US jet fuel demand at 1.43 million barrels per day in 2009 versus the 1.52 mbpd used in 2008, which was lower than 2007 due to mothballing of older, less efficient planes.
Airlines are losing the battle for dwindling consumer dollars, while businesses faced with falling revenues are cutting back on shipping and corporate travel.
Organizers of a high-profile wireless electronics show on this week in Las Vegas anticipated a 15 percent drop in attendance and show floor space as companies send fewer people than in the past.
CARGO ALSO TAKES A HIT
US government figures also show cargo tonnage down almost 25 percent for both domestic and international shipments between January 2008 and 2009.
"We are seeing a slide in passenger miles and cargo, which is getting fairly hit hard," said Michael Morris, a short-term energy forecaster with the EIA.
Cargo carriers such as FedEx and United Parcel Service are considered bellwethers of US economic activity. When the economy does well, companies and consumers ship more goods; in a recession package volumes drop.
"Demand for air travel and air cargo, especially time-sensitive shipments, is down sharply in all regions in which US carriers operate," said John Heimlich, chief economist for the ATA trade organization.
Jet-fuel demand estimates are unlikely to change much when the next government short-term outlook is published on April 14.
"It could possibly be revised down, but not by much," said the EIA's Morris.
Economic conditions could improve late this year, economists say, and that would bode well for the transport sector and consumer travel.
"This would be very favorable for jet fuel demand. But not till late this year or early next." said the EIA's Morris.
