Higher crude prices linked to geopolitical tensions could increase airline operating costs and airfares.

OIL PRICE SURGE DRIVES FUEL COST INCREASES

Retail gasoline and diesel prices in the United States have risen sharply following disruptions to global energy supplies linked to conflict involving Iran and resulting instability in the Middle East. Oil prices climbed to around US$90 per barrel during the week, the highest level in several years.

The increase has added pressure on consumers already facing elevated living costs. The United States remains the world’s largest oil producer, but it also imports significant volumes of crude to meet domestic demand due to its high level of energy consumption.

According to data from the American Automobile Association (AAA), the national average price for regular gasoline reached US$3.32 per gallon, representing an 11% increase over the previous week and the highest level since September 2024. Diesel prices rose to US$4.33 per gallon, up 15% in a week and the highest level since November 2023.

REGIONAL PRICE INCREASES ACROSS THE UNITED STATES

Fuel price increases have been particularly noticeable across the Midwest and Southern United States since the escalation of tensions involving Iran.

Fuel tracking platform GasBuddy reported that retail gasoline prices in Georgia increased by an average of 40.1 cents per gallon over the past week. Similar increases were recorded in Indiana and West Virginia, where prices rose by approximately 44 cents.

Market analysts say geopolitical tensions in the Middle East, particularly disruptions affecting shipping routes such as the Strait of Hormuz, have increased international demand for U.S. crude oil exports, contributing to higher domestic refining costs.

Denton Cinquegrana, chief oil analyst at the Oil Price Information Service (OPIS), noted that although the United States is less dependent on Middle Eastern crude than in the past, Asian and European refineries remain reliant on supplies from the region. Increased global demand for U.S. exports has therefore pushed up prices on the international spot market.

DIESEL MARKETS AND GLOBAL SUPPLY PRESSURE

Diesel prices have risen even more sharply following disruptions to shipping in the Strait of Hormuz. Global diesel inventories have remained tight due to strong demand for heating, electricity generation and industrial activity during a prolonged winter period.

Diesel fuel plays a central role in freight transport, manufacturing, agriculture and global shipping. As costs increase, analysts say higher diesel prices can feed through into the cost of goods ranging from food to consumer products.

Patrick De Haan, head of petroleum analysis at GasBuddy, said that if oil prices continue rising and supply disruptions persist, the national average gasoline price in the United States could increase to between US$3.50 and US$3.70 per gallon.

IMPLICATIONS FOR THE AVIATION INDUSTRY

Higher crude oil prices are also expected to affect airline operating costs, as jet fuel remains one of the largest expenses for carriers.

Industry executives have indicated that airlines may introduce fuel surcharges or raise ticket prices to offset the impact of rising energy costs. United Airlines CEO Scott Kirby said fare increases could begin quickly if fuel price spikes have a meaningful impact on operating costs.

Analysts warn that sustained increases in fuel prices could influence airline capacity decisions. If fuel costs rise sharply or remain elevated for an extended period, some routes could become less economically viable.

International flights may also face operational pressures if airspace closures or conflict-related restrictions require longer routing, increasing fuel consumption and crew duty times.

POTENTIAL IMPACT ON GLOBAL AIRFARES

Jet fuel prices have already shown regional variation. Reports indicate retail jet fuel prices have reached around US$10 per gallon at some business aviation hubs in the northeastern United States and approximately US$7 per gallon in Los Angeles.

Airlines in Asia and Europe are considered more exposed to supply disruptions in the Middle East, as many refineries in those regions rely more heavily on crude shipments passing through the Strait of Hormuz.

While some international carriers use fuel hedging strategies to stabilise costs, many U.S. airlines no longer hedge fuel purchases and are therefore more immediately exposed to market price fluctuations.

As oil prices continue to climb, analysts expect the primary impact for travellers to be higher ticket prices and potential adjustments to airline networks as carriers manage rising fuel costs.