Increasing oil and gas prices provide a stark reminder of transport’s dependency on fossil fuels. Selwyn Parker reviews the developing situation and the possible impacts on greener mobility options.
Just when we thought it was safe to travel again by air, road, sea and rail after some two years of pandemic-forced immobility, the war in Ukraine has thrown a spanner in the works by sending fuel costs sky high.
In a stark demonstration of how all forms of transport continue to remain dependent on fossil fuels, drivers are already paying more at the pump, air travel is set to rise in price, cruise ships are contemplating fare increases (as well as slashing itineraries), and numerous rail networks have been forced to cut routes.
In mid-April, spooked markets had sent the price of a barrel of Brent crude, one of the key benchmarks, to over USD 100 compared to around USD 40 in the same month of 2021. Most experts expect prices to stay at that level, while some forecast USD 140 in the event of a complete embargo against Russian hydrocarbons.
Even if and when peace in Ukraine is restored, it will probably take years for governments to find enough oil and gas to replace Russian supplies. The problem in Europe, the region with the most-affected countries, is a pre-existing dearth of energy. As the Oxford Institute for Energy Studies points out in a paper published in March on the short-term situation, “the European market is already very tight” and warns that a worsening geopolitical context could “make a challenging market situation even tighter, with price surges to new record highs the inevitable outcome.”
In short, Europe has little room for manoeuvre – with obvious implications for all forms of travel.
Already, then, we’ve clearly got an energy shock on our hands, probably the most serious since the 1970s when the oil-producing nations of OPEC turned off the taps: between October 1973 and November 1974, the price of a barrel crude rose five-fold.
Back in the seventies, most western countries responded with all kinds of fuel-saving measures, for instance, by legislating slower speeds on roads. The British government, for example, appealed for citizens to take public transport and handed out fuel rationing books (although they were never actually used).
In the half-century since, aviation has become a voracious user of fossil fuels – and now faces yet another setback as it struggles back from the pandemic. The airline association IATA notes that “jet fuel prices rose sharply since the start of the conflict”, reaching USD 150 a barrel in late March – up 39 per cent in just one month and 121 per cent year-on-year. As sanctions against Russia bite deeper – or indeed are extended – the outlook will become even more dismal, fears IATA.
The cost of jet fuel accounts for about a quarter of an airline’s operating expenses, and ticket prices inevitably reflect this. Although some airlines have hedged against the rising cost of jet fuel, others are fully exposed. So far, bookings to most destinations are rising as travel-starved passengers get back in the air, albeit from low pandemic levels. But fares aren’t yet reflecting the latest fuel costs.
Unfortunately, it’s too early for the next generation of sustainably produced jet fuels (sustainable aviation fuel, or SAF) to come to the rescue of the airline industry. Although airlines are using it in small amounts as a “drop-in” fuel, there is not enough of it, and it’s too expensive. As European SAF leader Neste tells me, “the main challenge for the development of SAF is the cost at three to five times more than conventional jet fuel.”
That’s because the commercialisation of SAF is in its infancy and because the cost of raw materials and the production process is high. However, at the current high price of jet fuel, the economics of SAF look better. The price difference is down to around three times that of conventional fuel. That would add around 4 to 15 euros to the price of a fare over a conventionally fuelled flight, Air France-KLM has found.
The International Transport Forum recently organised a webinar to explore the development of flagship SAF policies in leading aviation markets (USA and EU) and emerging aviation markets. Aviation experts explained the current SAF sector’s output and mid- and long-term targets. The meeting discussed policies to scale up volumes and economic and regulatory instruments to support airlines’ switch to SAF.
Meantime down on the earth, 1970s-style measures may yet be enforced for road transport if fuel shortages increase. The International Energy Agency (IEA) has just provided a blueprint. Its “Ten-Point Plan to Cut Oil Use” would slash oil demand by 2.7m barrels a day in just four months if fully carried out in advanced economies, the IEA says. That amount is equivalent to the oil demand of all the cars in China.
Along with greater use of high-speed and overnight rail and virtual meetings replacing air travel, the plan calls for lower speed limits (at least 10km/h less on highways), cheaper public transport and car-pooling. All of these seem very dated, except for Zoom meetings.
Faced with such restrictions, road users will probably opt for electric vehicles. Indeed sales of EVs and hybrids are already up just about everywhere. Commuters could also jump on bikes. The Dutch government has just decided to pump an extra EUR 240m into a cycling-to-work programme between now and 2024. If other countries follow suit, expect an even bigger boom in e-bikes than we’ve already got.
Selwyn Parker is an independent journalist and author of Chasing the Chimney Sweep about the first Tour de France of 1903.
ITF’s 2021 report “Decarbonising Air Transport: Acting Now for the Future” provides an overview of technological, operational and policy measures that can accelerate the decarbonisation of aviation.
Learn more about ITF’s work on cutting carbon emissions from transport through more ambitious policies around the globe. See the ITF’s Decarbonising Transport initiative