EDITOR’S
WELCOME
MISSION
STATEMENT
Oil and trouble
During the week before ALI went to press, the news headlines
were not guaranteed to raise a smile. Saudi Arabia’s Crown Prince
Mohammed bin Salman took the spotlight, intimating that if
attacks on refineries in his country were to persist, then the price of oil
might reach hitherto unseen levels.
As one of the main OPEC producers, Saudi Arabia cannot be
overlooked. But, one has to ask, would a stifling of production there
adversely affect the cargo sector?
Whilst on the face of it the outlook is bleak, against this has to be offset
the vagaries of the freight business. Readers will all be aware of the tough
operating climate that has typified 2019: Asia has been hit by trade tariffs
but in overall terms, globally, the physical demand for cargo has been
slipping since the start of the year.
Air freight, rather than passenger volumes, continues to be the
economic bellwether of the market as a whole, and anything that impacts
the cargo sector is studied with interest. Demand for passenger travel
hasn’t dipped, though; rather, its growth rate has slowed down. Lower
fuel prices since the oil price tumble back in 2014 have assisted carriers in
selling seats – but any sudden hike in the price of a barrel of crude could
have a negative effect on that sector’s travel plans. And there is already
talk of a frequent flyer tax…
Ironically, there is actually plenty of oil tucked away. For example,
reserves are such that the US has over 1.1bn barrels, while the Saudi
Arabian figure is put at 188m barrels. And equally ironically, according to
industry monitor S&P Global Platts, this ongoing slide in global demand
for air freight could actually be a harbinger of weaker jet fuel prices: this,
despite the current firm aviation fuel values on resilient spot demand.
However, at the time of writing, oil prices had dropped back to the levels
of those prior to the time of the attacks.
Carriers, though, tend to be shrewd when it comes to forecasting
expenditure, particularly that which concerns fuel: hedging ahead one
to two years isn’t uncommon. It will thus be interesting to see how the
situation plays out if things should turn sour in the Middle East.
Alwyn Brice, Managing Editor
ALI comes from the
same team responsible
for the well-established
titles of Ground Handling
International and Ramp
Equipment News. As
such, it builds on over
20 years of industry
experience and, with
a comprehensive and
skilled team of writers
based in both Europe
and the US, aims to bring
the reader up to date
with the world of air
transportation.
4 October 2019 www.airlogisticsinternational.com
/www.airlogisticsinternational.com