Jet fuel prices – don’t relax yet: Shell Aviation

Speaking last week in Singapore at Outlook 2007, Mike Lumley, a marketing executive with Shell Aviation’s aviation services arm, noted that although recent jet fuel price reductions have provided some relief, the fundamentals suggest future rises are highly likely. “It’s too early to call it the beginning of the end,” he said.

Mr Lumley, a marketing manager for the company, which supplies jet fuel to about 1,100 airports in more than 90 countries, says supply constraints will result in upward movement in prices, although when is less certain. “Spare capacity is tighter than it’s ever been,” he explained, a situation exacerbated by underinvestment in extraction and refining infrastructure.

Price movement depends on so many variables – notably including the winter weather in the US – that forecasting is a difficult exercise. The only certainty, Mr Lumley cautioned, is that “the future holds a very high level of uncertainty and volatility, and if you don’t manage your risk, you’re speculating.”

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