Jet Fuel Demand and Costs Soaring as Aviation Industry Expands

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At a recent China-U.S. workshop on aviation fuel, experts forecasted that the demand for jet fuel in China’s booming civil aviation sector would reach 15 to 17 million tons by 2010, nearly double the record 9.3 million tons consumed in 2005, reports Xinhua News. China’s jet fuel consumption has increased at an average annual rate of 14.8 percent since the 1990s, said Wang Changshun, deputy director general of the country’s General Administration of Civil Aviation (CAAC). He made the comments at an April 11 workshop in Beijing held by CAAC and the U.S. Federal Aviation Administration.

As oil prices soar, the price of jet fuel in China has risen as well. On March 28, the National Development Reform Commission (NDRC), the country’s pricing authority, announced a fourth increase in the fuel’s factory price since 2005, from 4,740 yuan (US $592) per ton to 5,040 yuan ($629) per ton, though this is still 1,300 yuan ($162) below the price on the international market. The sale price of jet fuel, meanwhile, rose from 5,220 yuan ($651) per ton to 5,520 yuan ($688) per ton, reports China AV News. Jet fuel cost Chinese airlines 45.1 billion RMB ($5.6 billion) in 2005—14.8 billion RMB ($1.8 billion) more than in 2004—and is their largest single expense, accounting for nearly 35 percent of operational costs, according to CAAC’s Wang.

To offset the impact of rising prices, the Chinese government recently imposed a levy on jet fuel on domestic routes of 20–40 yuan ($2.50–5.00) per passenger, depending on the distance. And China’s newly updated consumption tax policy stipulates a tax of 0.1 yuan (1.25 cents) per liter for aviation fuel, further increasing the jet fuel surcharge.

At the April 11 workshop, experts called on domestic airlines to increase their fuel efficiency and develop fuel-saving strategies. Studies have shown that every 1 percent reduction in aviation oil consumption would save 10,000 tons of jet fuel, or around 500 million RMB ($62 million). China Airlines, China Southern, and China Eastern have all recently adopted fuel-saving strategies, including more precise methods of fuel filling, use of more direct or higher altitude routes, and stricter controls on baggage weight.

Globally, the world’s airlines consume some 205 million tons of aviation fuel each year, accounting for 20 percent of companies’ operating costs and representing their second largest expense after labor, reports researcher Zoë Chafe in the Worldwatch Institute’s Vital Signs 2005 report. Aviation is also a key contributor to greenhouse gas emissions, generating 2 percent of all human-caused carbon dioxide emissions and nearly all the world’s emissions of nitrogen oxide, a compound that contributes to the formation of ground-level ozone.