There are reports that Buffalo Niagara International Airport has run out of Jet-A. Those reports are untrue, as the airport still has fuel, but its fuel farm is experiencing mechanical issues resulting in delays. An FAA NOTAM issued last night around 10:30pm stated that the airport has no fuel available. That notice did not state the reason, which is an apparent electrical circuit failure at the airport’s fuel farm. That has resulted in some flight and schedule disruptions.
While planes could land and leave if they had adequate fuel, if they needed refueling they are temporarily out of luck. Airlines have now begun to tanker fuel to get to Buffalo and their next stop without the need to refuel.
The situation in Buffalo is a fuel farm, rather than a supply issue. But that brings us to the more important question of whether the possibility of fuel shortages exists, and that is alarming.
Is a Fuel Shortage Coming?
Published reports indicate that the United States is down to 21 days worth of Jet-A, leaving the industry vulnerable to supply chain disruptions. This is particularly important as hurricane season is coming with a number of refineries situated near the Gulf of Mexico, which typically experiences severe weather. Pray for no destructive storms this season. But so far, the GEF trackers indicate EU and US Jet Fuel at a score of 57, not robust but not yet critical.
The disruption in international markets from the Netanyahu-Trump war on Iran, which is now reaching six months, and has effectively closed of the Strait of Hormuz and partially closed the Strait of Bab El-Mandeb. The Strategic Petroleum Reserve has been drawn down, and that reserve is now down to only 41 days of crude oil supply. While the US is self-sufficient in oil, the distribution system is complex and entails some international imports for fuel on the West Coast.
Compounding the shortfall due to the closure of the Strait of Hormuz, the trade negotiations with Canada broke down over the weekend. Apparently the negotiations have now alienated our largest supplier of crude oil imports, likely impacting the price of 1 million barrels per day as Canada has promised dollar-for-dollar retaliation to newly imposed tariffs on a variety of Canadian goods. That negotiations had included the Keystone pipeline to increase Canadian crude imports, which could help alleviate the current shortfall, but is now apparently out of the picture.
Internationally, with economic sanctions, some countries are already in a shortage situation. But there are only a handful of these situations globally.
The Bottom Line
Should airlines can expect spot shortages in Jet-A? While the supply chain is thin, it is holding together and operating normally, except for localized glitches like the one Buffalo is experiencing. But any significant disruption in refining or distribution could result in the system being quite taxed. We are transitioning away from historical distribution patterns for oil and other products, which can have unexpected impacts. Fortunately, Delta Air Lines was cognizant enough to purchase its own refinery, which produces Jet-A for the airline and its competitors, assuring a dedicated resource for supply.
In a free market, where supply and demand impact prices, we already know what direction they will go in a shortfall situation. The question is how high, and what the secondary impact will be on inflation, since virtually everything we buy relies on diesel and JetA to power freight from point to point. We can expect higher prices if markets tighten.
While we are not geopolitical experts, a three week supply of Jet-A means we are relying on the system to continue to produce at peak levels without major disruptions. We also know that refineries need to shut down for maintenance periodically, and occasionally experience mechanical breakdowns. Factoring that, and potential weather impacts, it is likely that the tight situation could get worse before it gets better. We are skating on thin ice, and hoping that it will hold our weight. We believe it can, but that we also need to plan carefully and measure the thickness.
Meanwhile, the false alarm in Buffalo about fuel shortages indicates that we must continue to dig beneath misleading headlines to know what is really going on.
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