Jet Fuel Shortages Are Already Starting...
Video: Jet fuel shortages, what stocks can take advantage of it?
Transcript
The closure of the Straight of Hormuz is already leading to jet fuel shortages in Asian countries, as a majority of the energy exports from the Gulf states did end up in Asia. That’s already bad enough. But Europe is already starting to see disruptions as well.
Airlines in Italy and the UK are already starting to ration fuel or cancel flights. Just recently, Lufthansa, the second largest European airline by passenger numbers, canceled 20,000 flights to ration fuel.
This is just the beginning…
Let’s discuss just how bad the fuel shortages are starting to get, and possible investment options to benefit from the chaos…
Everyone is talking about oil prices oscillating around $90 to $100 per barrel in the futures market, but jet fuel markets are being hit even harder. We’ve already seen jet fuel prices double to nearly $200 per barrel, according to the International Air Transport Association (IATA).
Oil refining capacity was already tight before the war started… and this crisis is only making things worse. Kuwait is a major producer of jet fuel, especially for Europe. The UK gets roughly a quarter of its aviation fuel from Kuwaiti sources. Kuwait is, of course, one of the Middle Eastern countries getting hit hard by Iran’s retaliatory strikes.
Diving into who got hit the hardest… it’s obviously Asian countries since 80% of the oil that transits the Strait goes to Asian buyers.
Vietnam Airlines has suspended some domestic routes indefinitely. Korean Air went into emergency management mode. There are hundreds of daily flight cancellations across Asia and the Arabian Gulf states.
China ordered all major domestic refiners to stop accepting new fuel export contracts.
Australia’s prime minister went on national television to urge citizens to take public transit to preserve fuel, both Australia and New Zealand have lucked into receiving some fuel shipments. But reserves are still only set to last around a month.
Things are getting dire in the region. and Europe is next.
The UK is likely the worst off. They’re the most exposed major economy in Europe. Kuwait has an outsized market share in UK jet fuel supply.
British Airways’ parent company IAG reportedly has five to six weeks of fuel reserves before shortages start affecting operations. That was reported around April 1st. So we’re looking at serious issues by mid-May.
Ryanair’s CEO estimates… if 10%-20% of fuel supply disappears during peak summer, airlines across Europe will be forced to cut capacity. He predicted 5%-10% of flights would be canceled this summer if the Strait stays closed. We will see how the numbers play out.
Either way, we know how jet fuel prices are looking, and as long as the war continues… it seems unlikely that prices would come down. At least in the short-term. So, what are our investment options?
When looking at the space, the reality is there aren’t any pure-play, literal jet fuel refining stocks that produce primarily jet fuel itself. In the traditional sense.
Jet fuel, which is typically kerosene, is only around 10% of the average oil refinery’s output. Kerosene is a by-product of the distillation process used to produce refined gasoline and diesel.
The U.S. refining record for the percentage of the end product being kerosene was only 11%, in 2024. Jet fuel prices skyrocketing via shortages will still benefit them, but if you’re going to take advantage of a trend… the best stocks tend to be pure-play producers. That’s why I always try to prioritize straightforward investment options with a relatively un-diversified product mix…
Interesting Oil Refiner Play
Before we talk about those options, if you want an established refiner to invest in, Par Pacific (PARR) would be an interesting stock to look into. Market cap of $3 billion.
They are estimated to have jet fuel sales revenue impact their product mix more than other refiners. Granted, it’s still not a crazy percentage. Jet fuel production could be up to 20%+ of their revenue.
Par’s Kapolei refinery produces 94,000 bpd, and is the largest and most complex refinery in Hawaii. It supplies roughly a third of the state’s refined products. Par has historically disclosed a Hawaii yield of roughly 67% combined distillate and low-sulfur fuel oil, with jet fuel being the single largest component of that distillate pool rather than diesel (which is the case for most mainland refiners).
Jet fuel likely accounts for 30–40% of Kapolei’s product yield, or roughly 28,000–38,000 bpd from that refinery alone. Which is an extraordinary concentration compared to the approximate 10–13% industry average. The Kapolei refinery was specifically configured for island demand in Hawaii, which calls for jet fuel, as tourism is such a large part of their economy.
Par also has a refinery in Tacoma, Washington, that refines 42,000 bpd, with a pipeline directly to Joint Base Lewis-McChord (formerly McChord Air Force Base). Other refining assets include one in Wyoming that processes 18,000 bpd and another in Montana that refines 63,000 bpd.
They also have some sustainable aviation fuel projects in the works. So, they are a traditional refining play that will do well in this pricing environment. Since oil prices are rising across the board, but they also have a slightly higher exposure to jet fuel price increases.
If your investment focus is purely on who will directly supply the European markets, your main options are really just the diversified oil giants. So, in my opinion, that does dilute the extent to which the share price will be impacted by jet fuel pricing itself. But if you’re interested in O&G majors with significant refining operations in Europe, you’re looking at TotalEnergies, Shell, and BP.
Besides buying oil refiners like Par, the other clear investment options would be sustainable aviation fuel (SAF) producers. SAF is produced from renewable waste or biomass and can be blended into traditional jet fuel. The price of SAF will rise accordingly, moving in tandem with traditional petroleum-based fuels.
Common examples of fuels used to make SAF would be cooking oils, ethanol, or wood waste.
SAF Producers - Investment Options
Investors can choose from three varying large public players in the SAF industry…
Neste is the world’s largest SAF producer with production capacity on three continents. They have a U.S. ADR with the ticker NTOIY and a market cap of $24 billion. They have SAF facilities or new projects in Singapore, the Netherlands, Finland, and California. The goal is to have renewable fuels production capacity targeting roughly 2.2 billion gallons annually by 2027, by far the highest SAF production in the world. They should benefit nicely from increasing SAF prices as the war with Iran rages on.
Calumet, ticker CLMT is the second player on our list. $2.6 billion market cap. Its Montana Renewables subsidiary is North America’s largest SAF producer at ~30 million gallons/year, with the MaxSAF expansion on track for mid-2026, boosting capacity to 150 million gallons/year. Set to scale to 300 million gallons by 2028. A $1.4 billion DOE loan guarantee was used to back the expansion. Calumet also operates specialty products (oils, solvents, waxes), so it’s not purely jet fuel, but SAF is its primary growth engine.
Gevo is the third stock, with a market cap of $430M. They are building the world’s first large-scale ethanol-to-jet fuel commercial facility (Net-Zero 1 in South Dakota), backed by another $1.5 billion conditional DOE loan guarantee. It has contracted demand for ~350 million gallons/year of SAF. Gevo achieved positive adjusted EBITDA in Q2–Q3 2025 from its ethanol and carbon capture operations, but is pre-revenue on SAF, making it higher risk.
There are some other pre-revenue companies that are looking to ramp up operations, but it would be preferable to invest in stocks that can actually take advantage of price increases over the next year and beyond. So, these are the top three I would find interesting if looking for a jet fuel investment option.
The Strait of Hormuz closure since early March 2026 has removed roughly 300,000 barrels per day of jet fuel from European supply chains, about 50% of the continent’s imports. Bloomberg estimates Europe has enough jet fuel through April, but we could see serious shortages in May. As we already discussed, various airlines are already starting to cancel flights…
It seems like we are no closer to seeing the Straight of Hormuz open as negotiations have backfired again and ships are being attacked for trying to leave. So, the situation is starting to look bleak with few options left to get the Straight back open. I am not optimistic.
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Great article man, actually interesting
Subscribed, would love to have you along too🙂🙌
Thank you for this. How do you see e.g. Neste's economic model playing out? They are still 45% revenues from crude oil refining, according to their website, and there could also be rising prices for renewable feedstocks, in light of increasing competition with their use in food. Do you see this mainly as a thesis about costs rising, but margins rising even further?