The vulnerability of Europe's energy supply has once again been thoroughly exposed. Over the past decade, the accelerated closure of European refineries, coupled with its heavy reliance on Middle Eastern fuel, has left Europe particularly vulnerable to sudden geopolitical conflicts.

Europe's refining capacity continues to shrink, and dependence on the Middle East is creating hidden dangers.

For years, European consumers have repeatedly encountered temporary strikes by ground staff and flight crews during the summer travel peak. However, this year, the strikes may be just a minor incident, with a more serious crisis emerging in the weeks: a jet fuel supply crisis that could lead to widespread flight cancellations and a sharp rise in airfares.

The conflict in Iran has directly cut off most of Europe's jet fuel import channels, while Europe's domestic jet fuel production has been declining for nearly two decades, mainly due to the permanent closure or conversion of dozens of refineries to produce biofuels.



The conflict in Iran and the closure of the Strait of Hormuz have severely hampered jet fuel supply to Europe, with prices now soaring to over $200 per barrel. The last shipments of Middle Eastern oil tankers that transited the Strait of Hormuz before the conflict have arrived in Europe, forcing Europe to turn to the United States for alternative supplies. However, the volume of US cargoes is far from sufficient to fill the gap left by the Middle East losses.

Worse still, Europe is facing fierce competition from Asia. Asia was the first to be impacted by disruptions to Middle Eastern crude oil supplies, leading to reduced operating rates at Asian refineries and fuel export restrictions imposed by many countries to prioritize domestic supplies, further reducing shipments of US jet fuel to Europe.

Over the past two decades, more than a quarter of oil refineries have closed, leading to a significant increase in import dependence.

In 2009, nearly 100 refineries were still operating in Europe. According to data from the European Fuel Manufacturers Association, since 2009, 28 refineries have been closed or upgraded, representing more than 25% of the total number of refineries at that time and 16% of total refining capacity. Driven by both a decline in overall European fuel demand and stringent emissions reduction policies, the wave of refinery closures continued, directly leading to a deepening of Europe's dependence on imported energy.

The sudden disruption of Middle Eastern supplies has presented Europe with its second major energy security challenge in just four years. The 2022 Russia-Ukraine conflict had already led to a significant disruption in Russian gas supplies, and now the jet fuel crisis is sounding the alarm once again.

Data from the International Energy Agency (IEA) shows that about one-third of the jet fuel consumed in Europe last year was imported, with 75% of that coming from the Middle East. IEA Executive Director Fatih Birol issued a clear warning this week that Europe's current remaining jet fuel stocks "may only last for about six weeks."

Birol stated, "If we cannot reopen the Strait of Hormuz... soon we will see news of some flights from city A to city B being forced to cancel due to a lack of jet fuel."

Northwestern Europe was hit hardest, and alternative US supplies became unsustainable.

Northwest Europe is one of the regions most severely affected by the current jet fuel crisis. In his latest analysis, Vortexa market analyst Ernest Censier points out that jet fuel imports to Northwest Europe this month have already fallen significantly below historical normal levels, and this downward trend is expected to accelerate further in the coming weeks as more and more U.S. jet fuel shipments are shifting to Asian markets rather than Europe.

Sensil stated that European jet fuel imports fell by 15% in April, "which fully reflects the structural dependence on Middle Eastern supplies—about half of Northwest Europe's jet fuel imports typically pass through the Strait of Hormuz." He added that the voyage from Mina Abdullah, Kuwait to Rotterdam takes only about 21 days, meaning that supply disruptions can quickly translate into increased import volumes across the European region.

While the United States has become a major alternative source to compensate for supply losses in the Middle East, this substitution effect is unlikely to be sustainable in the long term. Currently, U.S. jet fuel and kerosene exports are shifting significantly towards the Pacific region, with exports this month reaching a seven-year high, accounting for more than 30% of total U.S. jet fuel exports. Sensil points out, "This redistribution reflects a broader strategic shift in U.S. refined petroleum product exports towards the Pacific Basin."

Lufthansa's move has increased pressure on the European aviation industry.

Faced with soaring fuel costs, Lufthansa, Europe's largest airline, has taken the lead in taking measures. The company announced on Thursday (April 16) that due to fuel prices more than doubling compared to before the Iran conflict, coupled with additional cost pressures from labor disputes, it will accelerate flight reductions and retire some aircraft ahead of schedule.

Lufthansa Group Chief Financial Officer Till Streichert said: "Given the sharp rise in fuel costs and geopolitical instability, accelerating the implementation of fleet adjustments and capacity optimization is inevitable."

Summarize

This jet fuel crisis has once again highlighted the deep-seated vulnerabilities of Europe's energy system. The loss of production capacity due to prolonged refinery closures, over-reliance on Middle Eastern supplies, and the ripple effects of current geopolitical conflicts are all pushing the European aviation industry to a severe test. Whether the European air travel market can remain stable in the coming weeks will depend on the development of the situation in the Strait of Hormuz, changes in US export flows, and the strength of Europe's own contingency measures. Analysts generally believe that if the crisis continues, the cost and convenience of travel for Europeans will be significantly affected.