Worldwide demand for jet fuel currently stands at about 7.45 million barrels a day. By 2040 that total will rise by more than 27% to more than 9.5 million barrels a day, driven by demand from Asia and a booming market for freight carriers.
That’s the assessment in a new report from analytics firm IHS Markit released Tuesday. Citing data from the International Air Transport Association (IATA), the firm noted that the IATA expects passenger traffic to increase by 7.0% year over year in 2018, following increases of 7.4% in 2016 and 8.1% in 2017. Demand from freight carriers is forecast to rise by 4.0% this year, following a blistering gain of 9.7% in 2017 and a more modest gain of 3.6% in 2016.
Louise Vertz, director, refining and marketing research at IHS Markit and lead author of the IHS Markit analysis, said:
Thanks largely to low oil prices and strong growth in air travel, particularly in Asia, jet fuel is a fast-growing product, with global jet-fuel demand growth comfortably exceeding 4 percent in the last two years. In a refined-fuel market that has had sluggish annual growth of just shy of 1.5 percent overall, that is a bright spot for refiners, and is one of the few refined products we expect to see gain consistent demand growth through 2040. However, there are some potential challenges that could inhibit that demand growth, particularly increased market penetration of sustainable aviation fuels and increased fleet efficiency.
Efficiency gains are expected to increase by more than the recent average of about 1% annually due to more efficient aircraft, particularly engines. As crude oil rises in price, carriers are likely to increase their purchases of new, more fuel-efficient aircraft.
A new set of rules governing carbon emissions goes into effect in 2021. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) rules represent a United Nations climate initiative and market-based measure to lower emissions from the international air transportation sector.
Low-carbon, sustainable aviation fuels are being produced from sustainable oil crops. The most common is biojet that can be mixed with conventional jet fuel and reduce carbon emissions by as much as 80%. Although these fuels currently cost about twice as much as conventional jet fuel, governments are expected to create policies and incentives that force air carriers to use the cleaner-burning fuels.