Major Characteristics
|
- Aviation Turbine
Fuel (ATF) or jet fuel is a specialized type of petroleum-based fuel
used for powering jet and turbo-prop engined aircraft. ATF is clear to
straw coloured blend of hydrocarbons and also contains additives such
as antioxidants, metal deactivators, anit-static agensts, corrosion
inhibitors etc.
- In crude oil
refining, it is classified as a middle-distillate along with diesel
and kerosene. Jet fuel is actually a highly refined grade of kerosene.
- Jet A-1 and Jet A
are two main grades of turbine fuel used in civil commercial aviation.
Both of them are kerosene type fuels and are produced to an
internationally standardized set of specifications.
- Jet A, which is
mainly used in the United States, must have a freeze point of -40ºC or
below, while Jet A-1 used in almost all other countries must have a
freeze point of -47ºC or below. The only other jet fuel, commonly used
in civilian turbine engine-powered aviation is called Jet B, which is
a fuel in the naphtha-kerosene region and is used for its enhanced
cold-weather performance.
- The other aviation
fuels include military jet fuels (predominantly JP-4, JP-5 and JP-8),
which too are kerosene type fuels. Aviation gasoline is used in
spark-ignition aviation engines.
- Aviation fuels are
derived from crude oil and its price shows high correlation with crude
oil prices (96% in 2008). Airline industry and crude oil refineries
are two largest sectors facing huge price risk owing to the high
volatility in prices.
- The global airline
industry's fuel bill is estimated to total US$114 billion in 2009
(accounting for 25% of operating expenses at US$61.8/barrel Brent of
oil).
|
|
Global Scenario
|
- The total global production
of aviation fuels in 2007 is estimated to be 1765 million barrels in
2007, which is 6.3% of total global production of refinery products in
2007.
- It is estimated that
in 2007, global consumption of jet fuel was around 5.1 million barrels
a day. U.S. consumers are estimated to have utilized approximately
1.63 million barrels per day.
- However,
Asia-Pacific region is showing the most growth currently. The
International Air Transport Association (IATA) estimates that in 2009
Asia-Pacific travelers totaled 647 million against 638 million who
travelled within North America (including domestic markets). By 2013
an additional 217 million travelers are expected to take to the skies
within Asia-Pacific.
- US is the largest
refiner of crude oil holding 20% of the total world refining capacity
of 87,700 kilo barrels per calendar day, followed by China (8.9%),
Former Soviet Union (8.8%), Japan (5.3%) and India (4.1%).
|
|
World Kerosene Markets
|
- Tokyo Commodity
Exchange (TOCOM) and C-COM
|
|
Indian Scenario
|
- The growth of the
Indian economy, rising incomes of the country's middle class and entry
of private players in India's aviation industry has lead to a sharp
increase in domestic consumption of ATF in recent years. Despite the
rising demand, the country is self-sufficient and even exports a
significant quantity of ATF.
- India's production
of all petroleum products has shown a sharp improvement in the
previous two decades, aided by the setting up of new refineries and
increased capacity utilization. The production of ATF in 2008-09 is
estimated at 59.2 million barrels.
- India's consumption
of ATF in 2008-09 is estimated to be 32.6 million barrels in 2008-09,
which is sharply up by 58% from 2004-05 consumption of 20.6 million
barrels.
- ATF exports from
India have also been rising, with it increasing from 20.7 million
barrels in 2005-06 to 25.6 million barrels in 2008-09.
- In India, kerosene
is sold through three channels - public distribution system (PDS) for
domestic use, industrial kerosene and as ATF. The prices of industrial
kerosene and ATF are revised dynamically by domestic refiners in
tandem with international prices. Thus, volatility in crude oil prices
spills over to domestic ATF prices.
|
|
Market Influencing Factors
|
- Globally, ATF prices
are highly correlated with crude oil prices as it is produced by
distilling crude oil. Thus, all factors influencing crude oil prices
have a profound influence on ATF prices too. These factors include,
supply-demand, global economic scenario, natural disasters, currency
fluctuations, geo-political tensions, interest rates, prices of other
assets, commodities etc.
- The demand from the
aviation industry is the next important influencing factor. Growth in
air traffic - passengers / cargo, global economic scenario, global
industrial production, international trade, improvement in aircraft
fuel-burning efficiency and a variety of other variables influences
the demand from aviation sector.
- Disruptions in
production due to extreme weather or other unforeseen events can lead
to prices picking up.
|
|
Measurement
|
1 US Barrel = 42 US Gallons
1 US Barrel = 158.98 litres
1 MT = 7.33 barrels
Note: Measurement of barrels per tonne vary from origin
to origin
|
|