Low-cost fuel bonanza could run out of gas

• Published in: Airfinance journal 1999-02 (214), p.42
• Main Author: Collett, Naomi
• Format: Article
• Language: English
• Subjects: Airlines; Aviation; Business forecasts; Cost control; Cost reduction; Crude oil prices; Energy economics; Energy industry; Hedging; Inflation; International; Jet fuel prices; Petroleum industry; Petroleum refineries; Price increases; Prices
• ISSN: 0143-2257

By the end of 1998, benchmark Brent crude oil had dipped below $10 a barrel, its lowest nominal price since the 1986 crash and lowest real price since 1972. The price for jet fuel and gasoil, its related product, also followed a similar downhill run. The oil sector's misfortunes have been greeted with glee by the aviation world. Many airlines have taken advantage of the fall in prices to contain their energy costs, while, at the same time, increasing flight frequencies. Oil price volatility allows plenty of scope for analysts to make spectacular blunders. With the oil market becoming increasingly volatile, there are concerns over whether low-cost carriers could ride out a sustained price rise. The market is already factoring in an increase in jet fuel prices that could have negative implications for low-cost carriers. Market sentiment for jet fuel prices is mixed. David Becker at Citibank in New York remains cautious. Michael Ng of Trade in Americas at Shell International Trading and Shipping Co. forecasts averages of about $133 for 1999.