A McKinsey report has projected that the jet fuel crack spread could exceed USD 50 per barrel in 2026, a significant jump from historical averages of around USD 20 per barrel. This surge, driven by geopolitical disruptions and refinery constraints, may lead to a 20-25% increase in airfares, as fuel costs typically account for about 30% of an airline ticket's price.
Geopolitical and Supply Factors Driving Crack Spreads
The report highlights that jet fuel prices have risen primarily due to crude oil trends, but supply constraints have exacerbated the situation. Reduced refinery production from major Gulf-region and Asian exporters—which together supply 40% of the world's jet fuel—has tightened the market. China, India, and South Korea have partially restricted exports following geopolitical conflicts, limiting the ability of Asian countries to bridge the supply gap.
According to McKinsey, "In recent history, the jet fuel crack spread has tended to linger around USD 20 per barrel or less, but in 2026, it could end up averaging more than USD 50 per barrel." This measure reflects the difference between crude oil prices and the refined fuel products, and its rise indicates higher refining margins.
Potential for Volatility and Inventory Rebuilding
The report notes that while increased tanker traffic through the Strait of Hormuz could ease immediate price pressure, jet fuel prices and crack spreads are likely to remain volatile until inventories are rebuilt and supply chains normalize. Several global refineries were already operating at high utilization before the conflict, leaving little spare capacity to boost output further.
"Existing inventories have been doing heavy lifting to bridge the supply gap," the report states. Even if tanker traffic resumes, prices may stay elevated for months as countries restock and extend strategic storage.
Impact on Airfares
With fuel costs representing roughly 30% of an airline ticket's price, a doubling of fuel costs—if mostly passed through—could lead to fare increases of 20-25%, the report adds. This projection underscores the potential financial burden on travelers amid ongoing supply chain disruptions.
