• Jet fuel prices in New York and Los Angeles hit $4.95 and $4.91 per gallon, respectively, their highest levels since March and April, as Ukrainian strikes on Russian refineries and Middle East supply disruptions tighten global fuel markets.
  • U.S. diesel inventories have fallen to record seasonal lows, adding pressure to jet fuel markets and airline operating costs.
  • The surge is driven by a global refining squeeze, not just rising crude oil prices, with crack spreads exceeding levels seen after Russia's 2022 invasion of Ukraine.

Refining Squeeze Hits Home

U.S. jet fuel prices are approaching $5 a gallon, driven by a global refining shortage that has curtailed capacity by as much as 10%, according to Dallas Fed economists. The squeeze stems from Ukrainian strikes on Russian refineries and disrupted Middle Eastern shipments, which have removed an estimated 6 million to 8 million barrels a day of refining capacity since late spring.

As of October 8, Airlines for America's Argus index—a simple average for Chicago, Houston, Los Angeles, and New York—stood at $4.71 per gallon. The headline figures, $4.95 in New York and $4.91 in Los Angeles, mark the highest levels since March and April, respectively, according to Bloomberg. The Argus index is a spot-market benchmark and may not reflect prices airlines pay under individual supply contracts.

Diesel's Domino Effect

The pain extends beyond aviation. U.S. distillate inventories, which include diesel and heating oil, fell by 2.2 million barrels to their lowest seasonal level on record. This tightness reinforces pressure on jet fuel prices, even where enough aviation fuel remains physically available. Kpler distillates analyst George Shaw warned in September that increasingly tight diesel markets would keep jet fuel expensive.

The key indicator is the crack spread—the difference between crude oil prices and the wholesale price of refined fuel. Dallas Fed economists say these spreads have exceeded levels seen after Russia's 2022 invasion of Ukraine. Consequently, cheaper crude or improved tanker access would not necessarily produce an immediate, proportionate decline in jet-fuel prices.

Industry and Consumer Impact

Airlines are already adjusting. Ryanair (RYAAY) has reduced its winter schedule and lowered its full-year passenger target from 216 million to 214 million to limit fuel-cost exposure. Chief Executive Michael O'Leary said on October 8 that he expects adequate European jet-fuel availability through winter and summer 2027, barring an unforeseen event. However, he anticipates the unusually large premium over crude to persist for another 12–18 months due to refinery attacks, tanker constraints, and limited refining capacity.

For travelers, higher fuel costs mean expensive tickets and potentially fewer flight options, though a fuel-price surge does not automatically mean widespread cancellations. Average airfares remained elevated even after the Argus U.S. jet-fuel index fell from an early-April peak of $4.88 per gallon to $2.70 in June, illustrating why consumers may not see immediate fare relief when fuel prices temporarily decline.

The diesel shortage also raises concerns for freight, farming, and heating. Harvest-season diesel demand and colder-weather heating-oil demand add pressure to already low inventories. On October 9, the European Union approved $45.4 million in French assistance for transport businesses and agricultural, fishery, and aquaculture firms affected by rising fuel prices.

Geopolitical and Policy Responses

The price surge connects two conflicts. Ukrainian attacks on Russian refineries have intensified, while Russia has restricted refined-fuel exports to alleviate domestic shortages. Dallas Fed analysis, citing the International Energy Agency, puts the combined decline in Russian crude processing and refined-product exports at about 1.5 million barrels a day. In the Middle East, refinery damage and restricted tanker movements have reduced regional crude processing by about 2 million barrels a day from February levels, according to preliminary IEA August data cited by the Dallas Fed.

The G7 agreed to accelerate the release of 100 million barrels from strategic reserves. The IEA clarified that these were remaining barrels from the emergency release agreed in March—not a new additional allocation—and that diesel was a priority; no specific jet-fuel release was announced. Releasing crude reserves can ease crude scarcity, but it cannot by itself repair damaged refineries or eliminate finished-fuel transport bottlenecks.

Looking Ahead

Prices are likely to remain volatile while inventories are thin and refinery availability uncertain. Resumed Chinese refined-fuel exports after the Golden Week holiday could offer some relief, and alternative import routes and accelerated emergency-stock releases may ease pressure. However, continuing infrastructure damage limits the speed of recovery.

Dallas Fed economists expect damaged Middle Eastern facilities to need months to recover and warn that Russian outages could persist. If constraints continue, the market may increasingly rebalance through reduced consumption, higher prices, and greater volatility rather than rapid supply expansion. Restoring shipping alone will be insufficient: refinery repairs and replenishment of usable, locally accessible inventories are essential to a sustained normalization of fuel prices.

The central distinction is between fuel availability and fuel affordability: alternative supplies may keep aircraft operating, while damaged refining infrastructure keeps their fuel—and potentially passenger travel—expensive.