The current status of global oil reserves and its impact on the aviation industry

Since late February, war between Iran on one side and the United States and Israel on the other has repeatedly put the Strait of Hormuz, the shipping corridor through which around a fifth of the world’s oil moves, at risk. A mid-June framework briefly promised a 60-day truce and the reopening of the strait, but by early August it had collapsed: Strikes between the United States and Iran resumed, and the confrontation widened beyond the strait itself, with Houthi attacks in the Red Sea and a declared maritime embargo against Saudi Arabia threatening further oil-transport corridors. For aviation, renewed instability raises an important question: What would another major disruption to jet fuel supply mean at a time when global oil reserves are already at their lowest level in decades?

For airlines, this is more than just another price shock – this time, the threat is to availability. For decades, jet fuel has been treated as a cost that fluctuates with some degree of volatility depending on the overall economic and geopolitical situation, but that is almost always available. This is the assumption that the coming months will put to the test. The focus is shifting from the price of fuel to its availability. Airlines that incorporate fuel supply risk into their operational planning, rather than treating it solely as a cost, will be better prepared for future disruptions. The scale of the challenge becomes obvious when looking at the measures governments have already taken to keep global oil markets supplied.

This is no longer “business as usual” volatility. We are firmly in a period of elevated fuel prices – one that will last for some time to come, and airlines must adapt in the interest of their future survival.

The supply squeeze is unprecedented

The US Strategic Petroleum Reserve (SPR) stood at 289.7 million barrels as of late August, its lowest level since 1982, having slipped below the 300-million-barrel mark for the first time in over four decades earlier in the month. Since the conflict began at the end of February, the SPR has diminished by roughly 125 million barrels. This drawdown is the clearest sign of the stabilization effort preventing a wider oil shortage. In March, Washington authorized a 172-million-barrel release as its share of a 400-million-barrel intervention coordinated by the International Energy Agency across 32 member states. Roughly 45 million barrels of that authorization remain. At the current pace of 3–6 million barrels a week, the program could run out by the fall.

What happens after that is the question nobody in the industry has adequately answered.

Another release of this scale is highly unlikely because strategic petroleum reserves cannot be replenished quickly. The Gulf Coast salt caverns that store the US SPR, for example, degrade with every drawdown cycle. Having already drawn so heavily on the SPR and other strategic oil reserves, governments could bridge the next disruption for only a fraction of the time needed compared to the first crisis.

For airlines, the timing could hardly be worse: The supply shortage is arriving during the peak summer travel period. IATA expects 5.1 billion passengers in 2026 (a figure already revised down from the 5.2 billion projected before the conflict), and although projected demand growth has been cut from 4.4% to 2.1%, global air travel demand has remained generally robust. Summer traffic is arriving largely on schedule, just as the strategic reserves that would normally cushion a supply shock have fallen to their lowest in decades, leaving little to absorb the next one.

The cost consequences are already visible in airline financials. Data from airline intelligence provider Skailark suggests that the average global fuel cost per available seat kilometers (CASK) in the period March – June 2026 stood at 3.1 cents, up 57% from the same period in the previous year.

Fuel cost currently represents almost 40% of total operating expenses for airlines worldwide, compared with around 30% last year.

Price signals give a false sense of security

In the first week of August, Brent crude fell more than 10% to around $79 – after President Trump canceled a planned strike on Iran and reports emerged of a possible 60-day agreement to reopen the Strait of Hormuz. Yet nothing had fundamentally changed: No agreement had been signed, and oil continued to flow through the strait as before. When Houthi forces later attacked a Saudi vessel in the Red Sea, prices quickly rebounded. The market was reacting to headlines rather than actual changes in supply. Since February, oil prices have been driven more by geopolitical developments than by underlying market fundamentals.

For airlines, this creates a specific and expensive trap. Roughly a third of the expected global consumption in 2026 is hedged industry-wide, while European carriers entered the crisis with around 70% coverage. But almost all aviation hedges are written against crude, because crude is the liquid market. The exposure that actually hurts is the crack spread, which describes the refining premium for aviation kerosene over crude, and it is running at a historically high $68 per barrel. When diesel and gasoline compete with jet fuel for refinery priority, as they have since Gulf supply tightened, airlines are left exposed to the very cost component that is rising fastest.

Higher prices, however, are the manageable scenario. Airlines have well-developed levers for responding to price rises: passing cost through to customers via fuel surcharges, optimizing capacity through frequency adjustments, and leaning harder on fuel-efficiency measures, as well as assigning the most efficient aircraft to long-haul routes and using economic tankering wherever it pays off. The scenario that now requires attention is the one in which price stops being the allocation mechanism. If the release program is exhausted in the fall and the conflict continues, jet fuel does not simply become more expensive, it increasingly becomes an allocated good, with supply determined by:

• consumer–supplier relationships,
• contractual seniority,
• creditworthiness, and
• physical availability across a carrier’s network.

These dynamics already exist today in parts of the world such as Africa, where a carrier may depend on a single national supplier and where fuel economics are shaped as much by payment terms and credit standing as by the headline price. A further tightening of supply would make them far more consequential.

In that world, the airlines that keep flying are not necessarily the ones with the best hedging strategy. Instead, they are the ones that have already mapped their network-wide, station-by-station supply dependencies and understood their fuel economics before they needed to.

What airlines must do now

Airlines should adopt a number of measures to strengthen their resilience to future fuel supply disruptions.

In the short term, protect liquidity and supply

• Enforce the fuel-efficiency measures already in place: single-engine taxiing, continuous-descent operations, and weight-reduction programs, or expand the use of fuel-efficiency measures and tighten adherence rather than treat them as best-effort.
• Stress-test fuel availability across the network: map station-level dependencies on refineries and supply routes, identify outstations where the loss of a single source would halt operations, and pre-plan where tankering or contractual priority could maintain continuity.

In the medium term, build structural efficiency and downside protection

• Accelerate fleet renewal where economically viable: Newer, more fuel-efficient aircraft permanently reduces both consumption and exposure.
• Adapt hedging to the new risk environment: Hedge the crack spread directly where liquidity allows, since crude hedges leave the refining premium uncovered, and move to dynamic hedge ratios linked to forward sales so coverage tracks actual exposure.
• Build deeper partnerships with airports and fuel-farm operators: For example, leverage long-term leases on off-site storage near major hubs to reduce reliance on spot-market supply.

In the long term, establish strategic alternatives

• Recast sustainable aviation fuel (SAF) as a matter of energy security, not only decarbonization. Long-term offtake agreements carry a premium today, but they act as a structural hedge against fossil-fuel supply and prices. The one exposure that cannot be rationed away is the barrel you do not need to burn.
• Join purchasing consortia such as the Sustainable Aviation Buyers Alliance (SABA) to spread the cost and de-risk individual commitments.

These measures take time to implement and scale, which is precisely why they must be weighed before the next disruption, not in response to it.

The global dynamics of aviation fuel supply remain challenging and may stabilize in the near future. For now, the geopolitical environment remains highly volatile, demand is peaking, and the buffer that absorbed the first shock may not be available for the second. Fuel is no longer just a cost to be managed; it is becoming a critical resource that may not always be available as it was before the recent geopolitical disruption. The airlines that internalize that shift now, and build the supply resilience to match, will be the ones still flying reliably and profitably when the next chokepoint closes.

Author:

Constantin von Jeinsen is Associate Consultant in the Solution Group Network & Fleet Management at Lufthansa Consulting.