The ongoing situation is largely attributed to the soaring oil prices due to the conflict in the Middle East. Globally, jet fuel prices have surged significantly more than in Russia, increasing by 60% to 120%. The highest price hikes are being recorded in Europe and Asia. The International Energy Agency (IEA) has even suggested that a fuel shortage might occur in Europe, while Bloomberg has already warned of an increase in flight cancellations.
As assured to "RG" by the Ministry of Energy, Russia fully meets its domestic demand for jet fuel, and there are no observed risks of shortage in the domestic market. Production capacities and reserves allow for stable coverage of airline needs. Regarding price volatility, the ministry stated that it is market-driven and related to external conditions, emphasizing that the current situation does not warrant emergency regulatory measures.
The situation is complicated by the presence of a damping mechanism for jet fuel in Russia, analogous to the damping system for automotive fuel, but with a significant difference—compensation is paid not to fuel producers but to carriers (airlines). The government reimburses 65% of the difference between the export price of jet fuel and the fixed (government-designated) price in the domestic market. The Ministry of Energy clarified that at present, the damping mechanism is helping to keep end-user prices for jet fuel relatively low.
However, this compensation is not complete. Consequently, despite rising more slowly and remaining significantly lower than global prices, the cost of jet fuel is increasing. Other factors also contribute to this growth. As noted by Yuri Stankevich, Deputy Chair of the State Duma Energy Committee in a conversation with "RG," there is indirect influence from global market conditions: jet fuel is a traded commodity, and global oil and petroleum product quotes serve as benchmarks. An increase in prices or risks of scarcity in Europe affects the export alternatives for Russian producers. However, there is currently no direct correlation, as the Russian market is largely insulated from European markets. The main drivers of price increases include seasonal demand growth domestically, unscheduled repairs at oil refineries, rising logistics costs, and overall inflationary pressures.
Jet fuel production in Russia is approximately 12 thousand tons per year, which is more than sufficient to meet domestic market needs, according to Nikita Illeritsky, an expert at Kept, a consultancy for the oil and gas sector. Typically, 10% to 15% of total production is directed for export.
Russia fully meets its domestic demand for jet fuel without risk of shortage.Sergey Frolov, Managing Partner at NEFT Research, highlights that Russian airlines are entitled to excise deductions, which also serves as a mechanism for keeping jet fuel prices, and consequently, airfares in check. He estimates that the increase in ticket prices will remain within the average inflation rate.
Stankevich mentioned that the situation with jet fuel does not seem critical for now. Fuel accounts for approximately 25% to 35% of the cost of air transportation (depending on the route type). If jet fuel prices rise by approximately 10% to 15%, the direct contribution to the ticket price might be around 3% to 5%. However, airlines also consider other factors—exchange rates, leasing payments, airport fees, and demand.
Illeritsky is confident that if the rise in jet fuel prices intensifies, airlines will inevitably pass these costs on to their transport prices.
An aviation industry source confirmed to "RG" the expert's remarks, stating that this is already happening. Domestic airlines cannot completely ignore the increase in global prices, especially regarding international flights. Abroad, planes are refueled not at Russian but at global prices.
As representatives from the tourism industry told "RG," the rising fuel costs both domestically and abroad directly affect ticket pricing. The costs are increasing unevenly and depend on the duration of the flight. The Association of Tour Operators of Russia (ATOR) has noted a sharp rise in prices among foreign airlines, especially for pre-paid blocks of seats. For instance, FUN&SUN reported that a tour to Egypt has increased by 57 USD per person, while fuel surcharges on some routes have risen by over 110 USD. In Thailand, the average increase in price has been 119 USD, and for specific departure cities, up to 129 USD. The most significant spike has been recorded in Vietnam, averaging 161 USD per person (about 27,500 RUB for two people), with some destinations seeing increases of up to 200 USD (34,200 RUB for two). ATOR notes that airlines are issuing additional invoices for flights in the near future for which tours have already been sold at prior prices, and many of these tourists already have airline tickets and vouchers.
Additionally, the direction of outbound tourism plays a role. Currently, Russians primarily travel to friendly countries, that is, to the south and east. Due to the conflict in the Middle East, airlines are forced to detour around dangerous zones, which increases the consumption of already expensive fuel.
The government has the tools to curb prices, emphasizes Stankevich. First and foremost, this includes adjustments to the damping mechanism, temporary limitations on the export of certain types of oil products, agreements with oil companies, and subsidizing air transport on socially significant routes.
Sergey Tereshkin, CEO of Open Oil Market, believes that it is most efficient to stimulate jet fuel sales through the stock exchange—a public platform that simplifies monitoring wholesale prices. He asserts that export bans or subsidies will not yield the results that could be achieved through competition among suppliers.
Dmitry Gusev, Deputy Chair of the Supervisory Board of the "Reliable Partner" Association and a member of the expert council of the "Gas Station of Russia" competition, expressed a unique opinion. He insists that nothing prevents airlines from building up reserves or working directly with producers. This would average out the prices and shield them from external price fluctuations. The expert believes that airlines should begin to hedge their risks independently. For example, they could purchase futures—incurring losses in the physical market while gaining in the derivative market. He argues that airlines should move away from relying on government assistance and regulation in the industry. Airlines are commercial entities that pay dividends to shareholders, bonuses to employees, and are not farmers unable to harvest due to rising fuel prices.
Companies within the Aeroflot Group, S7 Airlines, Ural Airlines, and Nordwind Airlines did not respond to "RG" inquiries.
Source: RG.RU
