The Oil Market's Brightest Spot Is Aviation Fuel

Among my many quirks is a fascination with planes: Tracking flights and reading crash-investigation reports are some of my guilty pleasures. The enthusiasm — or obsession — came in handy during the pandemic, when aviation shut down and quashed oil demand. Now, it’s equally useful for investigating the final piece in the oil-recovery jigsaw.

Five years after Covid-19 emptied the skies, global jet-fuel demand has yet to recover to its pre-pandemic level. Meanwhile, global consumption of every other category of petroleum refined products — gasoline, diesel, liquefied petroleum gas, naphtha and fuel oil — has already surpassed 2019 levels.

Still, I’m bullish on jet-fuel consumption. Perhaps because of my enthusiasm for planes, perhaps because I fly a fair bit for work, I’m typically upbeat about the future of aviation. No matter how much I hear about staycations, heat waves or anti-tourist protests, I’m convinced people will continue to take to the air for holidays. And when it comes to the climate threat, I believe most travelers overlook it -- or salve their conscience by purchasing carbon credits, despite the fact that most of them are meaningless in protecting the environment.

I also tend to look at the world through a different glass: I care less about airports like Heathrow in London and John F. Kennedy in New York, instead focusing on emerging hubs like Guangzhou in China, Hyderabad in India, Istanbul in Turkey, Jeddah in Saudi Arabia and Bogota in Colombia. Those are where, increasingly, the next generation of travelers are departing and landing.

Put simply, the more the global middle class grows, the more people will fly. Meanwhile, large electric planes remain a dream; hydrogen is a chimera; and so-called sustainable aviation fuel, derived from cooking oil and animal fat, is a hope rather than a reality. Thus, I’m not only bullish about jet-fuel demand now, but also in the future. Aside from plastics, the brightest spot for global oil consumption is air travel. How long can jet fuel offset a decline in gasoline consumption? Probably another five years, if not longer.

Since the pandemic ended, jet fuel has struggled to recover not because people aren’t traveling as much as before — spoiler: they are — but because the shock of lockdown and the high oil prices after Russia invaded Ukraine forced the industry to retire old, gas-guzzling planes. Their replacements are far more fuel efficient.

The narrow-body flagship models from Airbus SE and Boeing Co., introduced shortly before the pandemic, are about 20% more parsimonious with fuel than the models they replaced, on the back of better aerodynamics like wingtips, lighter materials and better engines1. On top, a portion of what the industry typically calls jet fuel isn’t consumed by planes. Instead, it’s the kerosene that fuels stoves and furnaces. While kerosene only accounts for 10% of the wider pool of jet fuel, its declining consumption is another headwind2.

Still, the recovery is on course. Flight counts — and passenger numbers — are well above 2019 levels. Despite early worries that traffic was going to subside this year, so far it’s continued growing, albeit slower than during 2023 and 2024. The share prices of major airlines have also recovered from their drop in March, when concern about summer bookings and business travel was the talk of the industry.

Measured by the so-called revenue-passenger-kilometers benchmark, which combines both the number of people flying and how far they travel, the aviation industry last year clocked 9,037 billion RPKs, surpassing for the first time the 8,688-RPKs peak in 2019. This year, the aviation industry expects another increase to 9,500 billion. And everything suggests that, barring another crisis, the indicator will keep increasing in 2026 and beyond. We shouldn’t be surprised: every other crisis was a mere blip on flying’s long rise. Whether it was the Gulf War in 1990-1991 or the global financial crisis in 2008, every setback has proven temporary.

Despite the surge in flights, jet-fuel demand remains below pre-pandemic levels due to those more efficient planes. The International Energy Agency estimates consumption will reach 7.7 million barrels a day this year, below 2019’s 7.86 million but still posting the strongest annual growth of any refined-oil product. By next year, the headwind of aircraft improvements will start to vanish, with jet-fuel appetite nearly matching pre-Covid levels — something already seen in Europe and North America, where kerosene plays a smaller role.

From 2026 onward, demand should be setting new all-time highs every year. Until when? We have good visibility at least until 2030, when the need is likely to top 8.5 million barrels a day.

What about beyond 2030? My guess is that demand will keep growing, even if gasoline and diesel drop. Turn to Asia for clues: Its fragmented geography, including islands, is well suited for air travel, disposable income among the middle class is rising and, as their counterparts in Europe and America did from the 1960s onwards, the new wealthy Asian urbanites will want to take to the skies. The global use of jet fuel will continue to fly.