It is hurricane season in the Atlantic and it is often true that what hits the US later arrives on the shores of Britain, albeit with much more of a whimper. Is this how we should greet news of American fuel prices? The cost of a gallon at the pumps edged down to just below $4 yesterday (Wednesday 10 August), having hit record levels of over $5 in mid-June, in the fastest decline since the 2008 recession. Inevitably this should (eventually) lead to a reduction of inflation on the far side of the Pond.
The multifarious upheavals in the oil market has been caused, at least in part, by the war in Ukraine, as well as an inability to agree to market compensations elsewhere, but there has even been a reduction in the UK. Prices are down 8 per cent to £1.76 a litre according to the RAC. Heavier taxation here and in the EU, coupled with the strength of the dollar, mean the drop has been shallower than in the US, but it is a drop and we will take pretty much any positive sign right now.
As you fill your tank spare a thought for the airlines. They are rushing around below the sightline trying to deleverage their balance sheets from billions of dollars in debt accumulated during the Covid-19 crisis. Ten of the leading airlines in the US and Europe have built up $193 billion in gross debt between them over two years, up from $109 billion in 2019. Some airlines with weaker balance sheets have already stumbled. Earlier this month Scandinavian airline SAS filed for bankruptcy protection in the US to allow it to restructure its finances, following rival Norwegian, which went through bankruptcy and debt restructuring in 2020 and 2021.
Many airlines have the deadweight of debts sitting on their balance sheet liked a packed Airbus 380, and although some have been able to pass these on to customers through higher ticket prices the International Air Transport Association say that European airlines which have hedged their future fuel requirements will probably face higher costs when these run out in 2023. This is a bit of a relief, as it was starting to get hard to see where the next hike in inflation was going to come from.
Back to Earth, well to sea, surely shipping lines must be having a better time. Absolutely. Container shipping lines are set for another bumper year of earnings as supply chain snarls show little sign of subsiding, to the misery of just about everyone else. Operationally the shipping crisis has been a disaster for the box carriers that underpin global trade: schedule reliability hit a record low of 32 per cent in December, with vessels arriving over a week later than planned on average, according to Sea-Intelligence, a consultancy.
The lack of a discernible trend towards normality is supported by a new indicator, made by Swiss logistics group Kuehne + Nagel. It shows the overall time cargo ships are waiting to berth at major ports around the world taking into account their size. For example, a ship capable of carrying 10,000 20 feet boxes waiting for three days counts as 30,000 TEU waiting days. On Thursday, the global total hit 12.5 million TEU waiting days. Which is a lot more ...
