26 November 2018

Lab Chat

The cost of fuel is a topic of debate across the world. Whether it’s to fuel your small car or power a jumbo jet, fuel prices are a touchy subject for many. Recently, Emirates airline’s president Sir Tim Clark labelled the price of airline fuel as ‘hugely overpriced’. But is this the opinion of just one airline owner? Or will a reduction in fuel costs reduce airline prices for us all?

Capping fuel costs

In an interview at the Aviation Festival in London, Sir Tim Clark said that he believes fuel costs should be capped and should be priced unanimously at $52 a barrel. Typically, jet fuel will cost between $77-83 per barrel, but Clark doesn’t think that costs will rise in the future. Clark estimates that fuel prices at Emirates are now around 44% higher than they were this time last year and show no sign of dropping back down.

Global increase

It’s not just Sir Tim Clark and Emirates that have noticed an increase in jet fuel costs, it’s occurring across the globe. Airlines around the world are talking of increasing ticket prices to account for the sharp increase of fuel prices. So, its not just the airlines that will suffer, its travellers and fliers too.

Jet fuel isn’t the only fuel that’s rising, either. Over the past decade, we have seen a significant increase in the cost of diesel in the United Arab Emirates (UAE). Diesel prices today stand at 2.87 United Arab Emirates Dirham (AED) per litre – an increase of almost 25% from 2.30 AED in 2012. Since fuel prices were liberalised around 2 years ago, the costs move with the market, becoming significantly less stable.

What causes the increase?

As for the reason behind the constant rising of fuel costs, there are several factors involved. Increased demand, low supply, international relations and exchange rates are just some of the impacting factors on the cost of oil.

Sanctions imposed on Iran – OPEC’s third biggest oil producer – have also raised concerns about the availability of oil, causing prices to sky rocket.

Cause for concern?

According to Sir Tim Clark, the cost of jet fuel has ‘capped out’ and is unlikely to continue to rise, which is good news for airlines and travellers alike. Whether this stands true, and just how the increased costs will affect the public remains to be seen. Perhaps it’s time to start considering alternative fuels.

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