The link between crude oil prices and airfares
The takeaway
Crude oil is used to provide jet gas. Adjustments in crude oil costs, like those since March 2026, can have an effect on jet gas costs, which can or could not have an effect on airfares.
Crude oil, jet gas, and airfares
Fluctuations within the value of crude oil can have an effect on the costs of oil-intensive merchandise, corresponding to jet gas. On this submit, we monitor the present enhance in worldwide crude oil costs and search for any influence on airfares, provided that flights are doubtless the buyer product that requires essentially the most gas.
Our FRED graph above exhibits the latest evolution of costs for a particular kind of crude oil, kerosene-based jet gas, and each US and European airfares.
The number of crude oil we monitor is WTI: a.okay.a. West Texas Intermediate gentle candy crude oil. WTI is healthier suited to producing kerosene-based jet gas than, say, Brent crude oil from the North Sea. So, costs for WTI and jet gas needs to be aligned.
Not surprisingly, the spot value of WTI spiked as soon as the US-Iran battle started on February 28, 2026. Maybe surprisingly, the spot value of kerosene-based jet gas reacted much more strongly.
However the response in costs for each US and European airfares was way more muted. The explanations?
- Airfares embody extra than simply gas, even when it’s the most important element and 20% to 30% of airlines’ total operating expenses.
- Airways usually purchase jet gas with futures contracts, locking-in costs months prematurely.
If crude oil and kerosene costs stay elevated, the image for airfares could change.
How this graph was created: Search FRED for “airfare” and take the CPI sequence for the US. Click on on “Edit Graph,” open the “Add Line” tab, and search once more, taking the European sequence. Repeat for “kerosene” and “WTI.” Change unites to “Index (100…)” with date 2026-01-01 and click on on “Copy to all.” Lastly, limit the pattern to the previous yr (on the time of this writing).
Advised by Christian Zimmermann.
