US jet fuel output soars amid record-breaking summer travel

This summer has seen oil prices at their highest levels in four years, but you would never guess that by looking at the statistics for US travel or jet fuel market fundamentals data. As Americans have taken to the skies in unprecedented numbers this summer, the US oil complex has churned out record-breaking amounts of jet fuel, supported by favorable production margins.

In the first week of July, the S&P Global Platts assessment for the US Gulf Coast Brent crude to jet fuel cracking margin averaged $11.34/b, the highest that average has been since 2013 and about 31% above the previous four-year average of $8.63/b.

Platts data shows that cracking margins in New York Harbor, Chicago and Los Angeles have followed similar patterns this year, which has helped lift US output to record levels. Nationwide jet production rose to 1.944 million b/d in the week that ended June 29, the highest that figure has ever been since the US Energy Information Administration began tracking it in 1982. This broke the previous all-time high set just a week earlier.

The US Transportation and Security Administration said the Friday before Independence Day, June 29, was the second-busiest day in the history of the agency, with more than 2.67 million individuals screened at checkpoints nationwide, according to a July 3 notice. The week that ended June 30 was also the single busiest week for TSA screenings, and, combined with the two previous weeks, this amounted to the busiest consecutive 21 days on record, the TSA said.

Apart from stoking US jet output, this has led to some nasty waits at the airport. Zach Honig, an editor for travel blog The Points Guy, wrote that he had “never seen a security-line situation anywhere close to what I and countless other frustrated travelers experienced” on July 5 at Newark Airport in New Jersey.

Looking ahead to later in the year, it is possible that security lines could get even worse during the holiday season. EIA data shows that US jet fuel demand – measured as product supplied – hit an all-time high in the week that ended December 15, 2017, as US markets prepared for the busy Christmas and New Year travel period.

Since US jet production also hit a high for the year in December 2017, it is possible that the market may have spare capacity for jet production to a set more records this winter.

NOT THE ROAD LESS TRAVELED

Automotive club AAA forecast that a record-breaking 46.9 million Americans would travel away for the Fourth of July holiday, which would equate to the highest travel volume seen in 18 years since AAA first started tracking this data, the company said on June 21.

But of those 46.9 million travelers, AAA estimated that a strong majority would take their cars and trucks.

Indeed, Americans still appear to love traveling in their automobiles. According to polling in early June completed by Morning Consult, Americans overwhelmingly prefer to take vacations in their cars, as compared with planes, trains and buses. Despite gasoline breaching $3/gal in some areas of the country, 82% of the poll’s respondents said they thought automotive travel was “appropriately priced” compared with just 49% for airplanes.

Perhaps this preference helps explain why US gasoline demand -- measured as product supplied – hit a new all-time high of 9.879 million b/d in the first week of June, according to the EIA.

It’s unclear whether there is capacity for the US gasoline demand record to be broken again this year, but any way you slice it, this is shaping up to be one hot American summer for travel.