Why flying less won’t do much to ease the oil crisis

IT IS often said that the best cure for high oil prices is high oil prices: they reduce demand and rebalance the market. And already some users of oil are pulling in their horns.

Airlines including Lufthansa, the US’ Delta, Hong-Kong-based Cathay Pacific and Australia’s Qantas have reacted to the doubling of jet fuel prices by cutting flights. The snag is that the peculiar rigidities of oil mean that this will do little to bring prices back down to earth.

When a refiner “cracks” a barrel of crude oil, the result is a barrel’s worth of products spanning from butane to bitumen, with petrol, jet fuel, diesel, naphtha and fuel oil in between. These emerge in fairly fixed proportions – in other words, a refiner has little ability to prioritise one over the others.