The jet fuel market has been on a wild ride the past two-plus years. First, demand for the refined product took an unprecedented, COVID-induced nosedive in February and March 2020. By May 2020, Gulf Coast prices for jet fuel had plummeted to less than 50 cents/gal (from just under $2 at the start of that year) and refiners had slashed production to 505 Mb/d (from just under 1.9 MMb/d). It was a tough few months — the recovery from the market’s bottom was neither quick nor consistent. Domestic air travel is finally back, but with international travel slower to rebound, total jet fuel supply and demand are still off of their pre-pandemic levels. Jet fuel prices are taking off, though, last week hitting their highest mark since July 2008. In today’s RBN blog, we discuss the jet fuel market: how it’s rebounding, how it works and how it’s changing.
Jet fuel is produced from crude oil at refineries through atmospheric distillation, the most basic of refining processes, in which crude oil (after being pre-treated to remove salt and water) is heated to between 600 and 750 degrees Fahrenheit (°F) by piping it through a heater. The resulting hot liquids and vapors are discharged into a distillation tower, within which the liquids and vapors separate into fractions, according to their weight and boiling point. The lightest fractions (LPG and other NGL gases, light naphtha and heavy naphtha) vaporize and rise to the upper end of the tower, where they condense back to liquids. Middle distillates, including kerosene (jet fuel) and diesel, rise to the middle of the column, and heavier liquids, called atmospheric gas oils, separate lower down. The heaviest fractions with the highest boiling points, called atmospheric bottoms, settle at the bottom.
After emerging from the distillation tower, kerosene goes through various treatments to remove unwanted elements such as sulfur, nitrogen and metals, resulting in a pure, clean-burning fuel. “Jet A” is the jet fuel specification used in the U.S.; it has a freezing point of minus 40°F; almost everyone else uses “Jet A-1,” which has an anti-static additive and whose freezing point is minus 47°F. The U.S. is by far the world’s largest producer of jet fuel, with production averaging 1.72 MMb/d in 2019 — the last “normal” year not impacted by COVID — according to the Energy Information Administration, or EIA. (We’ll discuss the ongoing recovery in U.S. jet fuel production in a moment.) Other countries that produce significant volumes of jet fuel include China, South Korea, India, the Netherlands and Japan.
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