Shell Says European Refineries Run Flat-Out to Make Jet Fuel

(Bloomberg) -- Shell Plc said Europe’s oil refineries are working flat-out to make jet fuel as airlines warn of a supply crunch, with the aviation industry fast becoming a primary pinch point because of the Iran war.

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The company’s own plant, Europe’s biggest in the port of Rotterdam, is now churning out as much of the fuel as it can, Frans Everts, head of the company’s Dutch business, told journalists on Wednesday at the site. He didn’t elaborate on what those levels were.

“Very clearly every refinery in Europe is on what we call max jet mode,” he said.

Europe is heavily reliant on imports of jet fuel, having lost its main source of external supply due to the closure of the Strait of Hormuz. While airlines now face eye-watering prices for fuel, the conflict has also pushed up the cost of crude on international markets, eroding margins for oil processors and raising questions as to how hard they run their fuel-making plants.

The Shell Pernis refinery in Rotterdam has been forced to look for alternatives to crude grades from the Middle East where some of the world’s biggest oil producers have been forced to cut production. The near full closure of the vital Hormuz energy channel has choked off millions of barrels of supply since the end of February. European refineries are already running on oil that had been stockpiled for emergencies.

“We’re looking at different sources and the market, of course, completely needs to reorient itself,” Everts said.

The shortage of jet fuel is causing havoc for the airline industry globally, with carriers starting to count the costs. EasyJet Plc estimates that the Middle East conflict added £25 million ($34 million) in fuel costs in March. Alaska Air Group Inc. this week suspended guidance for the full year and forecast a deeper loss than Wall Street was expecting for the second quarter.

Dutch carrier KLM has said it will operate fewer flights from Amsterdam’s Schipol airport, which is supplied from Pernis. Deutsche Lufthansa AG said this week it will also scrub flights this summer to save on fuel.

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