Flying High With Jet Fuel Procurement Intelligence

The aviation industry's jet fuel sector is poised for impressive growth with a projected Compound Annual Growth Rate (CAGR) of 8.4% from 2023 to 2030. This growth story is predominantly scripted by a dual focus on cleaner jet fuel solutions and an ever-increasing appetite for air travel services. Moreover, market dynamics have been shaped by factors like restricted crude oil supplies (including U.S. stockpile constraints and OPEC production cuts), which have directly impacted the prices of jet fuel's raw material.

In the ongoing pursuit of reducing carbon emissions, environmentally friendly aviation fuels have taken center stage. These sustainable jet fuels boast an impressive 75% reduction in emissions across the entire spectrum of transportation, combustion, production, and distribution when compared to their fossil fuel counterparts. Sources like municipal solid waste and woody biomass are now being harnessed to produce Sustainable Aviation Fuel (SAF), contributing significantly to the global effort to lower CO2 emissions. The adoption of renewable oils goes a step further, reducing hazardous particle emissions by up to 90% and entirely eliminating sulfur emissions.

As of the last week of September 2023, the global price for jet fuel rested at approximately USD 131.02 per barrel. According to the IATA Jet Fuel Price Index, prices have been on a downward trajectory in the third quarter of 2023 compared to the beginning of the year, a result of an initial production surge that didn't align with actual demand. Jet fuel prices in Europe were further influenced by the possibility of extended Russian bans on motor fuel exports, which in turn created a shortage in diesel fuel.

Notably, the United States, China, India, and Russia reign as the world's leading producers of jet fuel. In July 2023, the U.S. produced around 1,773.8 thousand barrels per day, while India, a prominent exporter in this category, shipped out 208,433 barrels per day as of June 2023. On a global scale, average export volumes rose from 1.58 million barrels per day in the first three quarters of 2022 to approximately 1.85 million barrels per day in the final quarter of the same year, indicating a gradual recovery in demand.

Sustainable aviation fuels derived from renewable sources are not only matching the performance of traditional petroleum-based jet fuels but are also significantly reducing the industry's carbon footprint. This eco-friendly approach empowers airlines to take bold steps in addressing greenhouse gas emissions, marking a pivotal move toward environmental sustainability. Companies, like Honeywell International, are actively involved in pioneering technologies to create lower-carbon aviation fuels, tapping into carbon dioxide and green hydrogen captured from industrial processes, thus contributing to reduced greenhouse gas emissions from aviation.

In this landscape, airlines emerge as the primary buyers of jet fuel, enjoying moderate to high bargaining power as they navigate negotiations with multiple suppliers to secure favorable pricing. However, the scope for substitutes remains limited, and the cost of fuel constitutes a substantial portion of an airline's operational expenses, providing suppliers with some leverage.

The production of jet fuel involves a multitude of cost components, including raw materials (crude oil), labor, machinery, transportation, marketing, taxes, and more. Crude oil, as a raw material, stands out as the most significant cost driver, accounting for over 40% of the total expenses. The refining costs, in particular, exhibit sensitivity to fluctuations in fuel prices, directly affecting the bottom line of the airline industry.

In the realm of jet fuel procurement, a hybrid model takes the spotlight, blending in-house efforts with comprehensive outsourcing services. Some businesses lean towards a partial outsourcing strategy, where specific operations like refining and distribution are outsourced. Conversely, an entirely internal approach, spanning from crude oil extraction to refining and transportation, can offer its own advantages. In either case, strong supplier partnerships and the maintenance of a reliable and traceable supply chain remain pivotal in sourcing within this category.

Key companies profiled - Exxon Mobil, Chevron, Shell, Valero Energy, BP Plc, Total Energies, Neste, Bharat Petroleum, Honeywell International, Allied Aviation

Jet Fuel Procurement Intelligence Report Scope

Jet Fuel Category Growth Rate - CAGR of 8.4% from 2023 to 2030

Pricing Growth Outlook - 4% - 5% (annual)

Pricing Models - Volume based Pricing; Competition based pricing

Supplier Selection Scope - Cost and pricing, volume, production capacity, geographical presence, and compliance

Supplier Selection Criteria - Quality of jet fuel, product range, contract terms, delivery option, safety and environmental compliance, location and presence of supplier, and others

Report Coverage - Revenue forecast, supplier ranking, supplier matrix, emerging technology, pricing models, cost structure, competitive landscape, growth factors, trends, engagement, and operating model