Increased U.S. air travel is beginning to increase jet fuel demand

The number of U.S. air travel passengers has increased in recent weeks, which may be the result of normal seasonal increases, easing COVID-19 restrictions, and rising vaccination rates. Air travel passenger levels serve as a leading barometer of jet fuel demand, which increased consistently in late March and early April. Increasing U.S. air traffic will likely continue through the rest of the year as more people are vaccinated and as U.S. travelers become more comfortable with air travel.

The Transportation Security Administration (TSA) tracks and publishes the number of passengers that move through TSA airport checkpoints daily, estimating how many people are flying in the United States each day. In February 2020, just before responses to the COVID-19 pandemic resulted in substantial reductions in air travel, TSA processed an average of 2.2 million air passengers per day. In April 2020, however, when the impact on air travel was at its highest, TSA passenger throughput fell to 0.1 million passengers per day (Figure 1). TSA passenger throughput increased gradually from April through July 2020, but from August 2020 through February 2021, passenger throughput was relatively flat, remaining between 0.7 million passengers per day and 0.9 million passengers per day. In March 2021, average daily TSA passenger throughput reached 1.2 million, the highest monthly average throughput since the onset of the COVID-19 pandemic. Passenger throughput in April 2021 has continued to increase, rising to an average of 1.4 million passengers per day as of April 20.

According to EIA’s Weekly Petroleum Status Report (WPSR), the four-week average demand for jet fuel (measured as product supplied) was 1.3 million barrels per day (b/d) on April 9 and April 16, 2021, up 0.2 million b/d compared with the four-week average for March 26 (Figure 2). In contrast, the four-week average for March 26, 2021, was 0.1 million b/d lower than the four-week average for February 26, 2021. Jet fuel demand, as reported in the WPSR, can appear to lag behind increases in passenger travel, possibly because airports sometimes draw on jet fuel inventories held onsite, which we consider secondary storage and do not account for in our WPSR inventories. As airports move to refill their onsite capacity, they draw from primary storage sites such as refineries or bulk terminals. We account for these volumes in our product supplied data.

The relatively large increases in the volume of U.S. domestic air travel has contributed to continued growth in overall air travel despite ongoing international travel restrictions and concerns about rising COVID-19 case counts in other countries. According to Bureau of Transportation Statistics (BTS) data available through December 2020, the growth in U.S. air traffic has mostly occurred in domestic air travel. Prior to the COVID-19 outbreak, most air travel in the United States was on domestic flights, accounting for 74% of U.S. available seat miles in February 2020 (Figure 3). Available seat miles are a measure of air traffic that considers both the number of seats per flight and the total distance of flights. In April 2020, when responses to the COVID-19 pandemic were at their most severe, domestic flights accounted for 93% of U.S. available seat miles and continued to account for more than 90% of available seat miles until July. By December 2020, the domestic share of available seat miles accounted for 79% of total available seat miles compared with 72% in December 2019.

Because of the large U.S. domestic air travel market and increasing numbers of vaccinated Americans, air traffic and jet fuel demand will likely continue to increase. Rising passenger throughput and air travel in the United States in March and April has led to increasing expectations for higher North American air travel through the end of the year, according to regional forecasts from the International Civil Aviation Organization (ICAO). According to its latest economic impact assessment in April, the ICAO expects air travel seat capacity in North America for 2021 to average between 29% and 25% below 2019 levels. This forecast is a substantial upward revision from March, when air travel seat capacity was estimated at between 36% and 28% below 2019 levels for the year, which had also been an upward revision over February.

According to the April release of our Short-Term Energy Outlook, we expect U.S. jet fuel consumption to average 1.3 million b/d in the second quarter of 2021 and to continue to increase into the third and fourth quarters (Figure 4). We expect annual 2021 jet fuel demand to average 1.4 million b/d, a 26% increase over 2020 but about 22% less than 2019 levels. We forecast U.S. jet fuel demand to continue increasing into 2022 yet average 5% below 2019 levels.

U.S. average regular gasoline price increases, diesel price decreases

The U.S. average regular gasoline retail price increased nearly 1 cent to $2.86 per gallon on April 19, $1.04 higher than the same time last year. The Rocky Mountain price increased more than 2 cents $2.97 per gallon, the West Coast price increased 2 cents to $3.53 per gallon, and the Midwest price increased nearly 2 cents to $2.77 per gallon. The Gulf Coast price decreased more than 1 cent to $2.57 per gallon, and the East Coast price decreased less than 1 cent, remaining virtually unchanged at $2.75 per gallon.

The U.S. average diesel fuel price decreased nearly 1 cent to $3.12 per gallon on April 19, 64 cents higher than a year ago. The Rocky Mountain price decreased more than 2 cents to $3.23 per gallon, the Midwest price decreased nearly 1 cent to $3.05 per gallon, and the East Coast and Gulf Coast prices each decreased less than 1 cent, remaining virtually unchanged at $3.10 per gallon and $2.92 per gallon, respectively. The West Coast price increased by less than 1 cent to $3.65 per gallon.

Propane/propylene inventories decline

U.S. propane/propylene stocks decreased by 0.1 million barrels last week to 40.5 million barrels as of April 16, 2021, 8.8 million barrels (17.8%) less than the five-year (2016-2020) average inventory levels for this same time of year. Gulf Coast and Rocky Mountain/West Coast inventories decreased by 0.5 million barrels and 0.1 million barrels, respectively. Midwest and East Coast inventories increased by 0.3 million barrels and 0.2 million barrels, respectively.

For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.