Global Jet Fuel Market Could Reach US$655 Billion by 2029
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Global Jet Fuel Market Could Reach US$655 Billion by 2029

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Antonio Gozain By Antonio Gozain | Senior Journalist and Industry Analyst - Tue, 03/21/2023 - 16:16

The global aviation fuel market is projected to grow to US$654.79 billion by 2029. While a key component of Mexico’s aviation industry, the local jet fuel market is dominated by a few major players, limiting competition. Mexico's Federal Economic Competition Commission (COFECE) identified five barriers to competition in the jet fuel value chain that could indirectly impact final consumers in the prices of air transportation services.

The global jet fuel market is an important aspect of the aviation industry. Jet fuel is a specialized type of fuel used by aircraft to power their engines. The demand for jet fuel is largely driven by the growth of the aviation industry, which in turn is influenced by factors such as economic growth, tourism and globalization. The global jet fuel market is highly competitive, with major players such as Shell, ExxonMobil, BP and Total dominating the market. The prices of jet fuel are influenced by a range of factors, including crude oil prices, geopolitical tensions and supply and demand dynamics. The global aviation fuel market size was valued at US$177.32 billion in 2021 and is projected to grow from US$351.85 billion in 2022 to US$654.79 billion by 2029, exhibiting a CAGR of 9.3% during the forecast period, according to Fortune Business Insights.

In Mexico, the jet fuel market is a key component of the country's aviation industry, which is one of the largest and fastest-growing in Latin America. The Mexican jet fuel market is dominated by a few major players, including the Airports and Auxiliary Services Network (ASA), which is the main supplier of jet fuel in the country. National oil company PEMEX has long dominated Mexico’s oil and gas market, including derivatives such as jet fuel, even after the constitutional reform that favored a more competitive marketplace.

The barriers that Mexico’s jet fuel market faces, according to COFECE, generate restrictions to the efficient operation of the primary and secondary commercialization markets, internal and external storage and the sale of jet fuel, the main input for air transportation. Jet fuel represents between 25% and 30% of the operating expenses of airlines and contributed 3.08% of Mexico's transport GDP in 2021, according to INEGI.

The first barrier identified by COFECE (B-1) refers to the primary commercialization market, where the prior import permit regime limits the entry and permanence of economic agents. Barrier B-2 refers to the external storage market, where a shortage and lack of access to the external storage infrastructure for jet fuel inhibits the ability of current and potential participants to compete in the commercialization markets. Furthermore, barrier B-3 is also within the external storage market, where most of the capacity in the country is contracted with PEMEX Transformación Industrial and there are no maximum limits to its capacity reserve, limiting the entry of competitors.

Barrier B-4 is found at the secondary commercialization and supply markets, where ASA is vertically integrated in several segments of these relevant markets and has not completed its functional, operational and accounting separation, which restricts competition in secondary marketing and supply. Finally, barrier B-5 is located within the internal storage and dispatch market, where some concession titles for the operation and administration of airports contain exclusivity clauses in favor of ASA, which indirectly limit competition to new entrants in the supply.

Sustainable Aviation Fuel: The Future of Aviation

Sustainable aviation fuel (SAF) is becoming increasingly important in the aviation industry as concerns about climate change and carbon emissions continue to grow. SAF is produced from renewable sources, such as agricultural waste or algae, and has the potential to significantly reduce the carbon footprint of the aviation industry.

SAF gives an impressive reduction of up to 80% in carbon emissions over the lifecycle of the fuel compared to traditional jet fuel it replaces, depending on the sustainable feedstock used, production method and the supply chain to the airport, according to BP.

The use of SAF can help airlines meet their emissions reduction targets and comply with regulations. However, the implementation of SAF faces several challenges, including the high cost of production, limited availability of sustainable feedstocks and the need for significant investment in infrastructure to support the production and distribution of SAF. Despite these challenges, the aviation industry is working to increase the production and use of SAF, with some airlines committing to using SAF for a certain percentage of their fuel needs and governments providing incentives to support the development of the SAF industry.

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