Airlines enjoying huge price break in refining costs

FORT WORTH, Texas — Amid the doom and gloom of the collapsing travel market, a bright spot for the major airlines has emerged that could save the industry billions of dollars this year.

The price of refining crude oil into jet fuel has plummeted in recent weeks as demand for fuel drops and suppliers try to unload excess inventory, analysts say.


Last year, the cost of refining jet fuel added about $25.50 to the price of a barrel of crude oil, on average. So if oil cost $100 per barrel, the same amount of jet fuel would cost $125.50.

But the difference between the cost of a barrel of oil and a barrel of jet fuel — dubbed the “crack spread” in industry jargon — has dropped substantially since the end of the year. According to a report by FTN Equity Capital Markets, the spread averaged $21 in January and $15 in February.

It dropped even further this month, and March 10 it fell to only $4 per barrel.

“The crack spread has cracked,” said FTN airline analyst Michael Derchin.

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