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Jet fuel prices on East Coast spike to due to tight supply

Yahoo Finance's Ines Ferré discusses why jet fuel prices are soaring and the outlook for crude oil.

Video Transcript

[OPENING SHUTTER] - Welcome back to Yahoo Finance Live, everyone. One analyst is saying that higher fares are going to hit some of the customers as they are looking to plan for some of their summer travel, especially on the East Coast. Let's bring in Yahoo Finance's own, Ines Ferre, for more on the story. Ines, help us break this down even further. INES FERRE: Yeah. Brad. Well, basically, what we've seen over the last week are jet fuel prices on the East Coast, absolutely skyrocketing more than in other parts of the country. So this morning, you had jet fuel at $6.75. That is a record high for fuel. And I spoke to one analyst, Tom Kloza. He's co-founder of Oil Price Information Service. And he told me he has never seen that price before for jet fuel, and just that price action. A couple of reasons why this is happening. First of all, you have had oil refiners that during COVID were making more, producing more diesel than jet fuel, just because there wasn't that much of a need for jet fuel. And then you also have had the Ukraine war. The Russian invasion of Ukraine, basically sending oil prices higher. And also a supply crunch for diesel in Europe, but also here in the US. So that has created a sort of disbalance, so to speak. But you also have had on the East Coast-- he believes, this analyst is saying, there must be something that's been happening on the East Coast. Either a short covering or some arrears of delivery. Some supply that didn't reach its destination, of why you're seeing this price action with New York Jet fuel. And he's saying, this is absolutely unsustainable. These prices are unsustainable. They're not going to last. Now, as far as the plane is concerned, a 737 carrier will burn about 750 to 770 gallons of jet fuel per hour. If you do the math, it's about $5,200 an hour of burning fuel. And he's saying, book your tickets now. Because you may be seeing some big price increases, especially for flights originating out of the North-East. And we know that the airlines have said that there is a high demand and that they are able to pass along the rising jet fuel prices. But now, these prices are absolutely astronomical. The ones that we're talking about the East Coast jet fuel prices. One other note I should say is that Kloza is saying that this is definitely a supply issue. This is not a demand issue. It's a supply issue which is sending these prices just astronomically higher. - And Ines, in terms of the recently announced oil reserves, what sort of relief are they providing, or do you expect them to provide? INES FERRE: Well, most analysts that I've spoken with, believe that crude oil may come off slightly, but it's not something that long-term. It's a temporary sort of relief. I will add that there is a cargo of jet fuel that was supposed to go to Spain, and it was diverted. It will now be reaching New York sometime around April 9. So that should create a bit of relief. As far as prices of jet fuel, anywhere between $6 to $7. Again, Kloza is saying that those prices won't be sustained for long. However, he does see jet fuel trading at around $4 per gallon for some time now. And that is considerably higher than what it was trading at in January of 2021. - Yahoo Finance's own, Ines Ferre, with the breakdown there. We're going to be watching closely to see how this impacts the prices, especially going into the heavy summer travel season. Thanks so much, Ines.