The United Kingdom is facing a serious risk of jet fuel rationing due to supply shortages stemming from the ongoing conflict in Iran, according to experts. With fuel supplies potentially dropping to critically low levels, concern is mounting over the impact on Europe's jet fuel market and summer travel plans. Several airlines, including KLM and Lufthansa, have already canceled flights due to fuel concerns.
Goldman Sachs Warns of Extreme Tightness
Goldman Sachs, one of the world's largest investment banks, has reported that the prolonged closure of the Strait of Hormuz has created extreme tightness in the jet fuel market. The UK is particularly vulnerable due to its limited stockpiles, heavy reliance on imports, and constrained refining capacity. The bank suggests that rationing is being considered to sustain the travel sector.
Jet fuel prices have doubled since the war began on February 28, prompting warnings from Keir Starmer that travelers may need to reconsider their holiday plans. The Gulf region supplies approximately one-fifth of globally traded fuel, and Europe's heavy dependence on these flows has led airlines to compete for alternative sources, driving prices even higher.
UK's Vulnerability Exposed
According to The Times, Goldman Sachs noted that the UK, as Europe's largest net importer of jet fuel, lacks strategic reserves and relies primarily on commercial inventories. These levels, particularly in Britain, could fall dangerously low, increasing the likelihood of rationing. Any sustained shortage would likely force airlines to cancel or consolidate flights while pushing ticket prices upward.
Fuel accounts for up to a quarter of airline operating costs. IAG, the parent company of British Airways, has already indicated it will raise fares to offset higher fuel expenses, acknowledging it is not immune to ongoing volatility despite hedging strategies. Air France expects its jet fuel bill to rise by $2.4 billion this year, while American Airlines anticipates an increase of more than $4 billion.
Industry Reactions and Government Response
Although UK ministers have suggested that supplies can be sourced from elsewhere, industry figures are less optimistic. Ryanair chief Michael O'Leary said airlines are desperately looking for flights to cancel and could begin doing so within weeks. Fuel suppliers have also warned that the UK has the most limited visibility in Europe regarding jet fuel supply, largely due to its dependence on Middle Eastern imports.
The European Commission said it would issue guidance to airlines this week, with a spokesperson noting that uncertainty remains high and preparations are being made for multiple scenarios. Analysts also pointed to the UK's reduced refining capacity following the closure of the Grangemouth refinery last April. Concerns had also surrounded the future of the Prax Lindsey refinery, though its new owner, Phillips 66, said the recent acquisition should help stabilize supply.
Broader Implications
A report from the Tony Blair Institute argued that Europe's climate-focused energy policies have contributed to higher prices and increased dependence on imports. Fuel suppliers said May demand should remain manageable but warned that disruptions could begin by mid-to-late June if the Strait of Hormuz remains closed.
