New $800 Fuel Surcharge Shocks Australian Travelers

Australians eager to travel are facing a significant setback as airfare prices are poised to climb sharply, and airlines are reducing flights due to a tightening supply of jet fuel, exacerbated by China’s decision to limit exports. Starting tomorrow, passengers booking return flights from Sydney to London with Cathay Pacific will encounter an additional $800 fuel surcharge on top of the standard ticket price. Qantas has already implemented a 5% hike on international fares, while Virgin Australia is following suit with price increases. Jetstar is discreetly canceling 10% of its flights in New Zealand for May, and Air New Zealand has already cut approximately 1,100 flights. Experts predict that the situation will worsen, with global jet fuel prices spiking 11.2% in just a week, reaching $175 per barrel—a rise of over 80% since late February, as per the International Air Transport Association.

“Air travel is going to get pricier—that’s likely the new norm for the duration of this crisis,” remarked Vivek Dhar, Head of Commodities and Sustainable Economics at Commonwealth Bank. He noted that not only will travelers feel the pinch, but air freight could also see increased costs and decreased capacity due to the shared reliance on jet fuel. “Should airlines struggle to secure fuel for cargo operations, we might witness disruptions and cancellations affecting the availability of some goods,” Dhar explained. He anticipates the disturbance to persist for months, requiring time for supply chains to adapt and stabilize. “We foresee jet fuel prices remaining high until this issue is resolved,” Dhar added. Australia is particularly vulnerable to airfare hikes because of its significant dependence on imported aviation fuel, with China being a major supplier, providing roughly 32%.

In March, the Chinese government ordered an immediate suspension of refined fuel exports, sparking fears of a worldwide supply shortage. Sources within the industry revealed to Reuters that the ban would extend into April, with ongoing talks about restricting oil exports to Southeast Asian nations. Energy Minister Chris Bowen indicated that shipments might continue until late April or early May, but the situation beyond that remains uncertain. As this deadline nears, apprehensions are rising regarding how airlines will secure fuel for the coming months. Concurrently, South Korean airlines, another key supplier, are urging their government to prioritize domestic fuel needs, further straining the supply chain.

David Leaney (pictured), a supply chain specialist at the Australian National University, said the government has already moved to secure alternative supplies in case Chinese shipments are cut further. ‘What’s happened is, because we normally buy so much from China, we’ve negotiated with other suppliers, and we’re buying more via Singapore,’ he said. ‘That’s mainly diesel and petrol, but it does include some aviation fuel.’ Mr Leaney said Australia’s natural gas exports was a key advantage, which could be used as leverage to secure fuel supplies. ‘We can say to some of those big players in the region – Japan, South Korea, Singapore, China – if we guarantee you supply of natural gas, you can guarantee us supply of fuel,’ he added. He said the crisis also offers an opportunity to build up resilience in Australia’s own supply chain, with less reliance on China. ‘The more you can diversify, the more you can put in options, then the more robust and easy to recover your supply chain becomes,’ he said.

Global aviation expert Geoffrey Thomas warned the situation is being worsened by pressure within supplier countries to keep fuel at home. ‘The airlines in South Korea are lobbying their government not to export the jet fuel,’ he told the Daily Mail. ‘We supply South Korea the majority of their liquefied natural gas, and their coal, which they absolutely have to have. ‘I would imagine there will be some serious discussion about, If you’re going to cut off our jet fuel supply, we might cut off your LNG.’ The same would apply to China.’ Mr Leaney said aviation fuel may face supply pressure, but the distribution network is more stable than retail fuel, with less risk of panic buying. ‘If necessary, if you’re running an international flight from Australia to Europe, you can fill up in Europe,’ he said.

Over the weekend, Prime Minister Anthony Albanese and Bowen announced they would underwrite ‘shiploads of fuel’ to secure supply in Australia. ‘The government has stepped in to help the petroleum industry purchase cargoes on the high seas,’ Mr Thomas said, adding these shipments typically include crude oil, refined petrol or aviation fuel. ‘There are tankers out there on the high seas looking for the highest bidder. ‘It’s going to be a mix of two things, government-to-government negotiations, and probably buying additional cargoes on the high seas at a more elevated price.’