As the international conflict in Iran enters its fifth week, oil prices continue to skyrocket, impacting everything from ordinary gas pumps to prominent airlines across the globe.
With the Strait of Hormuz all but shut down in the Middle East, millions of consumers are feeling the effects the sudden oil shortage has had on everyday life. According to CNBC, the ongoing hostilities between Iran and U.S.-Israel forces has led to the largest oil disruption in history, triggering a massive spike in oil and gas prices throughout the world.
According to data collected from Trading Economics, the price for crude oil in late February revolved around $60 per barrel. Within days of the U.S. and Israel's airstrikes against Iran on Feb. 28, that number rose from $65 on March 2 to $98 by March 13.
In total, oil prices have jumped roughly 40% from the start of this year, putting serious strain on worldwide markets and the larger travel industry. As reported by AAA, gas prices have risen upwards of 35%, climbing from an average of $2.98 just last month to $3.98 this past Thursday.
With concerns around oil and gasoline only continuing to grow, most airlines have significantly struggled to contend with mounting fuel costs. New data from the International Air Transport Association shows that jet fuel went from $99 on Feb. 27 to $197 on March 20, putting serious strain on most airlines’ operations.
How Rising Oil Prices Will Impact Travelers
As airlines feel the pressure brought on by these dramatic fuel hikes, most of them have raised the average cost of airfare to get a better handle on the increasingly uncertain economy.
More recently, Scott Kirby, CEO of United Airlines, told ABC News that ticket prices might have to go up by about 20% to help cope with the soaring cost of fuel. If that wasn’t an already grim enough assessment, Kirby said he doesn’t anticipate fuel costs dropping anytime soon.
“Our plans assume oil goes to $175 per barrel and doesn’t get back down to $100 per barrel until the end of 2027,” Kirby shared in a memo to United’s employees.
All this being said, most travelers can expect some challenges ahead when it comes to mapping out any vacations for the near future. Forbes found that airfare for the summer travel season has already risen by 17%.
Additionally, airlines such as United mentioned that they might resort to scaling back on less in-demand flights on their regular schedule. As per Kirby’s memo, this would likely result in a 5% cut for flights such as overnight redeyes and less-popular travel days throughout the second and third quarters of the year. This policy follows the strategy of several other prominent airlines who confirmed they’d likely cut flights should customer demand decrease within the foreseeable future.
“We’re certainly going to be nimble in terms of capacity to make sure that supply and demand stay in balance,” said Robert Isom, CEO of American Airlines.
With this in mind, most travel experts recommend that passengers get a head start on their summer travel schedules, locking in their airfare before there’s any further increases in airline costs. Of course, booking ahead of time also gives travelers ample opportunity to cancel their flight for a full refund if the trip itself doesn’t work out.
“If [travelers] are hesitant to wait because flights might fill up, consider booking a refundable ticket at a slightly higher price point,” said Ken Darrow, luxury travel advisor with Travel Leaders. “That gives them protection — if fares drop, they can cancel and rebook at the lower rate.”
Darrow also suggests that advisors can share with clients the common price of airfare in years past, and allow clients to judge for themselves whether the fees for their designated travel dates are cause for concern.
If fares are within a normal historic range, advise clients to book. And if they are not, advisors can show their value by monitoring pricing and guiding clients on timing.
