Experts Fear Fuel Shortage Will Only Get Worse

Rising oil prices are having a ripple effect across the Canadian travel industry as multiple airlines add fuel surcharges and industry experts are fearing it will only get worse.

Fuel remains one of an airline’s largest operating costs and when those costs go up for an extended period of time, increased ticket prices and / or reduced capacity on routes happen. That can be compounded by a drop in consumer demand in the months ahead.

For reference, jet fuel prices have more than doubled since the war on Iran began, soaring to around $1.92 per litre.

WestJet has added a temporary fuel surcharge of $60 on all bookings made with a companion voucher, Air Canada has added a $50 per-passenger surcharge to new ACV bookings and Porter Airlines has added a temporary surcharge on VIPorter flight redemptions.

“This is probably the greatest energy crisis of a generation,” Dan McTeague, gas analyst and president of Canadians for Affordable Energy told CTV News.

Because of the Iran war, a key oil delivery channel – the Strait of Hormuz – has been blocked to shipments and regional attacks on oil refineries have led to a shortage that experts say will take many months to recover.

“There is no spare capacity,” McTeague told CTV News. “Asia and Europe are in big trouble, and that can only mean the next domino will fall here, in North America.”

Tour operators and travel advisors may feel the impact as packaging becomes more complex. Higher air costs can tighten margins or require re-pricing of packages, particularly for all-inclusive and long-haul itineraries.

Destinations that rely heavily on long-haul airlift from Canada, such as in Europe and parts of Asia, could see softer demand if pricing rises significantly. On the contrary, Caribbean and Mexican markets could see a boost in visitation simply because of their location and the amount of flights serving the area. The cruise industry could also be impacted as though the ups and down of fuel prices doesn’t usually affect travellers directly, it can impact how travellers get to the port and which ones they choose.

John Gradek, an aviation lecturer at McGill University told CTV News, said he hasn’t seen “this type of impact in aviation in the last 50 years. It is going to impact summer travel, it will be chaos. It will be turmoil.”