Tuesday , 16 August 2022
Aircraft on the tarmac

Jet fuel scarcity bites harder as oil marketer explains reasons airlines suffer

  • Says Russia’s war, forex access, others impacted price, availability
AIRLINES have continued delaying and cancelling flights due to the disruption caused by unavailability or high cost of Jet A1 also known as aviation fuel and this current situation may not abate anytime soon as most airlines seem unsure when normalcy will return.

Meanwhile an oil marketer who spoke exclusively to NigerianFLIGHTDECK says the recent price of crude globally has stirred the local market and airlines that are efficiently run and clear their credit on time will get the product faster than airlines that owe after purchasing the product on credit.

Yesterday a lot of airlines put out apologies stressing that the price of the product now sells between ₦590-₦625. Air Peace in a statement titled scarcity of jet fuel said it and other airlines have been facing scarcity of jet fuel supply.

The airline said it has tried to minimise the effect of the situation on its passengers travel plans but the scarcity is is making serious impact on its operations.

Arik Air which lamented it equally shared the same sentiments stressing that the commodity is unavailable and where it is available sells between ₦590- ₦625 per litre. READ ALSO: Jet A1 skyrockets, hits N599 per litre in Lagos, N607 in Kano as airlines groan over commodity price, availability

It said it had to delay all its March 8, 2022 flights across networks while others were cancelled.

They both explained that passengers might experience of flight disruptions in the coming days until the situation improves.

Chief Executive Officer and Executive Secretary, Major Oil Marketers, Mr. Clement Isong while explaining the situation attributed what was happening to local airlines to the rise of crude in the international market, access to foreign exchange in Nigeria as well as better payment terms for the marketer.

Speaking particularly on domestic airlines’ inability to get the product and why it is higher he said, “Different airlines have different payment history. Some airlines make payment on time but there are some who have a history of owing, the airline’s who pay up ontime on their credit are likely to receive favourable terms from their suppliers against airlines who owe.

“Some airlines will do better than others because they are efficiently run and airlines not managed well will struggle. Marketers importing this product are not hoarding aviation fuel, they want to sell but remember the sale is not complete until the money is collected.

“And there is even something else the supply chain suffers, if you buy product a $10 and sell at $11 you make a profit of $1 and when you want to buy it now cost $12/$13 you need to find that money to buy at $13 and so some charge their customers in advance while others go and borrow from banks, if you go and borrow from the banks it becomes high.

Mr. Isong also addressed the problems of high cost of crude in the market and difficulty in accessing foreign exchange, stressing that suppliers are more liable to deal with people willing to pay in advance

He said, “The problem is two pronged: forex is expensive in Nigeria and the oil price in the international market is high and even if you had the money to pay, if you are a supplier and have someone to pay in advance and give you cash to pay and you have another that requires credit, you’d give to the person who has cash to pay in advance.

“For example, if you pay in advance, you’re better off than people who take credit, this is how business world everywhere and in international trade that is what happens.

“You now have a choice: you can buy on credit which makes the commodity more expensive or you can pay cash advance which brings the price down. So what traders who bring in the product do is, they need the cash to pay for supply in advance or get better payment terms to get lower prices and so that is reflected on the customers. If you pay in advance they are able to pay their own suppliers in advance; if you base on your credit you will still get the product but at a significantly higher rate because there is time value for money and you have to factor in the market.

He continued,”Also remember, payment is not made in naira, it is dollarized and it is impacted on your ability to access forex at a reasonable exchange rate, not everyone can access forex cheap.

On the impact of Russia’s war with Ukraine and how it drove prices up further, Mr. Isong said,”When Russia attacked Ukraine, you are aware of the significant increase in crude. It means that all derivatives from crude, their prices have gone up. So first of all, with the sanctions against Russia and disruption all over, you will agree that it affects price as well as product because in the international market the traders will take it to where they get better deals in terms of price and better payment terms.

“If Russia say it is finished with the war and the world rescinds it’s sanctions, it would impact on the international crude price but realistically crude price was already high at over $80 per barrel. Will it go back to that? I don’t know but remember during the pandemic, crude went as low as $20 so if there is a demand price go up, without demand it goes down.

About NigerianFlightDeck

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Nigerianflightdeck is an online news and magazine platform reporting business stories with a bias for aviation and travel. It is borne out of the intention to inform, educate as well as alter perceptions with balanced reportage.

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