US border policy could curb travel amid already weak jet fuel demand

Uncertainty surrounding the Trump administration's efforts to harden the US border could cut into business travel demand this year at a time when jet fuel demand is already quite weak, at least according to travel agents surveyed in the US and Europe this month.

Winter is typically a slow time for air travel anyway, but recent Energy Information Administration data for product supplied shows demand for jet fuel has been trailing off more dramatically than usual.

The latest EIA data showed jet fuel supplied in the US rose 242,000 b/d to 1.42 million b/d for the week ended February 17. However, that was down from 1.49 million b/d during the same week in 2016.

The prior week's data showed an even more precipitous fall. EIA reported 1.17 million b/d of jet supplied for the week ending February 10, a 24% year-on-year drop in demand to its lowest level in 22 years, when it plunged to 1.15 million b/d in April 1995.

The result of this stifled demand has been higher differentials for Gulf Coast jet fuel. Platts assessed the benchmark 54 grade at NYMEX ULSD futures minus 8.70 cents/gal on February 23, 2017, a significant jump from the NYMEX minus 12 assessment on February 23, 2016.

US traders were mostly dubious on whether the drop in jet fuel demand could be attributed to President Trump's policy, but at least one agreed with the theory. "It doesn't take much to change the balance of the market, so I suspect there was an effect," said the trader.

Courts have halted President Donald Trump's January 27 executive order banning travel from seven Muslim-majority countries, but the White House is expected to issue a revised order.

Travel agents surveyed by the Global Business Travel Association in Washington said they see potential impacts three to 12 months out.

"With the uncertainty and the additional screening, it was causing trips clearly to be canceled and future bookings to be impacted," GBTA Executive Director Michael McCormick said in a recent interview.

In a survey of its members, GBTA found that 49% of European travel professionals expect the policy to reduce business travel in the first three months and 33% expect lower demand six to 12 months out. Among US travel professionals surveyed, 31% expect lower demand in the first three months and 28% within six to 12 months.

US business travel transactions had increased 1.2% in the week before the travel restrictions were imposed but fell by 2.2% the week after, according to GBTA data. The group was forecasting a 4.4% increase in business travel for 2017 before Trump announced the policy.

McCormick said the implementation of the policy, not its goal of bolstering airline safety, caused the problem. He said agencies carrying it out needed more time to get measures and staff in place so that travelers could understand how it affects them.

"Now the uncertainty we're currently in is just as bad in a sense," he said. "Future bookings are on hold. Meetings that involve foreign nationals in any way are at risk.

"The problem with business travel is that when a business trip is canceled, you don't take up two next week to make up the one you canceled today. It's most often a trip that's forever canceled and won't be replaced."

McCormick said the group was collecting more data on the potential longer-term impacts and asking US members to contact their representatives in Congress.

"If you're holding anything other than a US passport, would you leave the country in this environment not knowing what the restrictions will be?" he said.