West Coast jet fuel margins fell in August because of high inventories

More jet fuel has been in U.S. West Coast inventories than over the previous five years for 29 out of 35 weeks so far in 2024, according to our Weekly Petroleum Status Report (WPSR). High inventories helped reduce Los Angeles regional crack spreads for jet fuel to an average of 5 cents per gallon in August, lower than any point in the last five years, including during the onset of the COVID-19 pandemic in 2020. Crack spreads represent the price difference between products and crude oil and can be used to determine the relative value of various petroleum products for refineries to produce.

West Coast jet fuel inventories reached an annual high of more than 12 million barrels in the week ending September 6 and have exceeded the previous five-year average by 20% or more every week since July 12. More jet fuel in West Coast inventories this year primarily reflects increased refinery production, as well as reduced demand for jet fuel compared with pre-pandemic levels.

Demand for jet fuel on the West Coast was higher for the first half of 2024 than for the last four years, according to our Petroleum Supply Monthly. Still, jet fuel product supplied—our proxy for consumption—remains less than it was in 2019. Some factors reducing consumption may be a slower recovery in international air travel to Asia, a slower recovery in West Coast air travel relative to the U.S. average, and the effects of increased aircraft fuel efficiency compared with 2019.

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