Australians considering upcoming travel plans are bracing for a significant financial impact as airline ticket prices are set to soar, compounded by a reduction in available flights. This is due to a tightening in the supply of jet fuel and export restrictions from China. Starting tomorrow, Cathay Pacific will impose an additional $800 fuel surcharge on return flights from Sydney to London, a steep increase from the standard fare. Qantas has already implemented a 5% rise in international ticket prices, while Virgin Australia is following a similar path with fare hikes. Meanwhile, Jetstar is discreetly canceling 10% of its scheduled flights in New Zealand for May, and Air New Zealand has cut approximately 1,100 flights. According to the International Air Transport Association, the price of global jet fuel has shot up by 11.2% in just a week, reaching $175 per barrel, marking an 80% increase since late February.

Commonwealth Bank’s Head of Commodities and Sustainable Economics, Vivek Dhar, notes that the increase in flight costs is inevitable for the duration of the current crisis. “Travelers will undoubtedly feel the pinch, and air freight could also face heightened costs and reduced capacity under these circumstances,” Dhar explains. “If airlines struggle to secure fuel for cargo operations, we may witness disruptions and cancellations affecting the availability of certain goods,” he adds. Dhar predicts that this disruption will last several months, allowing time for supply chains to realign. “We anticipate elevated jet fuel prices as this situation unfolds,” he concludes. Australia’s vulnerability to rising airfare costs is pronounced due to its significant dependency on imported aviation fuel, with China accounting for roughly 32% of its supply.

In March, China imposed an immediate ban on refined fuel exports, sparking fears of a global shortage. According to industry insiders who spoke to Reuters, this restriction has been extended into April, with limited oil exports to Southeast Asian countries still under discussion. Energy Minister Chris Bowen indicated that shipments are expected to continue through late April or early May; however, the outlook beyond that remains uncertain. As the deadline approaches, airlines are increasingly concerned about securing fuel in the coming months. Compounding these challenges, South Korean airlines have urged their government to prioritize domestic fuel needs, further straining the global supply.

David Leaney (pictured), a supply chain specialist at the Australian National University, said the government has already moved to secure alternative supplies in case Chinese shipments are cut further. ‘What’s happened is, because we normally buy so much from China, we’ve negotiated with other suppliers, and we’re buying more via Singapore,’ he said. ‘That’s mainly diesel and petrol, but it does include some aviation fuel.’ Mr Leaney said Australia’s natural gas exports was a key advantage, which could be used as leverage to secure fuel supplies. ‘We can say to some of those big players in the region – Japan, South Korea, Singapore, China – if we guarantee you supply of natural gas, you can guarantee us supply of fuel,’ he added. He said the crisis also offers an opportunity to build up resilience in Australia’s own supply chain, with less reliance on China. ‘The more you can diversify, the more you can put in options, then the more robust and easy to recover your supply chain becomes,’ he said.

Global aviation expert Geoffrey Thomas warned the situation is being worsened by pressure within supplier countries to keep fuel at home. ‘The airlines in South Korea are lobbying their government not to export the jet fuel,’ he told the Daily Mail. ‘We supply South Korea the majority of their liquefied natural gas, and their coal, which they absolutely have to have. ‘I would imagine there will be some serious discussion about, If you’re going to cut off our jet fuel supply, we might cut off your LNG.’ The same would apply to China.’ Mr Leaney said aviation fuel may face supply pressure, but the distribution network is more stable than retail fuel, with less risk of panic buying. ‘If necessary, if you’re running an international flight from Australia to Europe, you can fill up in Europe,’ he said.

Over the weekend, Prime Minister Anthony Albanese and Bowen announced they would underwrite ‘shiploads of fuel’ to secure supply in Australia. ‘The government has stepped in to help the petroleum industry purchase cargoes on the high seas,’ Mr Thomas said, adding these shipments typically include crude oil, refined petrol or aviation fuel. ‘There are tankers out there on the high seas looking for the highest bidder. ‘It’s going to be a mix of two things, government-to-government negotiations, and probably buying additional cargoes on the high seas at a more elevated price.’