Increased military demand for jet fuel and loss of production from a major refinery in Kuwait have caused aviation fuel prices to increase more than crude oil prices, an oil industry economist said.
But he said consumers can expect relatively stable gasoline prices in coming months, provided war can be averted in the Persian Gulf.Michael Canes, the American Petroleum Institute's vice president and chief economist, said this week the airline industry has borne the brunt of the economic hardships caused by the Persian Gulf crisis.
This much has been illustrated by the financial losses most major carriers recently reported in their quarterly results.
"Jet fuel prices were up more than crude prices at their peak and are still up more (than crude) even since crude prices have begun to drop," Canes told reporters at the industry group's annual meeting.
Canes said demand for jet fuel is up and production capacity down.
"You've lost production of 750,000 barrels a day of sophisticated refining capacity in Kuwait," and refineries in Saudi Arabia that produce jet fuel are directing their output toward "military use," Canes said.
"With the military buildup, you've got increased military demand for jet fuel, so while September production of jet fuel reached an all-time high . . . stronger demand has kept prices high," he said.
There is also a seasonal factor in jet fuel demand. He noted that jet fuel - kerosene - is usually blended with diesel fuel for cars and trucks in winter to prevent it from turning to gel in cold weather.
He noted demand for jet fuel is up around 4 percent while gasoline demand is down about 3 percent.