Jet fuel price volatility threatens supply companies’ viability, warns CITA Energies Chief

Unstable global pricing for aviation turbine kerosene (ATK), commonly known as jet fuel, seriously threatens the financial stability and long-term viability of jet fuel suppliers.

Without robust risk management and strategic pricing frameworks, marketers face significant exposure to structural operating losses.

CITA Energies Limited Chairman and Chief Executive Officer Dr Thomas Ogungbangbe delivered this warning during the company’s 20th Anniversary celebration.

Speaking to Aviation Metric on the sidelines of the event to celebrate two decades of CITA Energies’ operational excellence, Ogungbangbe provided a deep dive into the complex economics governing jet fuel procurement, distribution, and supply chain dynamics.

Ogungbangbe highlighted that jet fuel pricing is heavily anchored to international benchmarks such as Platts, Brent crude futures, and refining crack spreads, combined with local freight, foreign exchange (FX) differentials, and handling logistics.

However, because global benchmarks fluctuate unpredictably due to geopolitical tensions, supply chain disruptions, and shifts in refinery capacity, rigid or mismatched formula pricing models severely compress marketers’ margins.

“Jet fuel marketing operates on thin, high-volume margins where timing is everything”, Ogungbangbe stated.

“When global benchmark formulas swing wildly between the time of procurement, transit, storage, and eventual discharge into aircraft wing tanks, jet fuel companies absorb the margin deficit. If the pricing formula does not dynamically adjust for FX volatility and replacement costs, companies end up selling inventory at rates below its current replacement value, a direct pathway to catastrophic financial losses.”

The CITA Energies Chairman outlined the critical vulnerabilities exposed by volatile formula pricing.

He said fixed-price or delayed-index contracts with airlines often prevent marketers from passing on sudden spikes in benchmark prices, forcing them to restock inventory at significantly higher rates than they realised from sales, stressing that in markets where jet fuel is imported in US dollars but contracted or settled in local currencies, sudden devaluations dismantle pre-calculated formula margins.

He also noted that supply chain bottlenecks and longer holding periods in marine tanks increase exposure to market backwardation—where future spot prices fall below current prices, which can devalue stored inventory overnight.

Reflecting on CITA Energies’ 20-year milestone, Ogungbangbe credited the company’s sustained market leadership to disciplined risk management, infrastructure investment, and agile pricing strategies.

He said that over two decades, CITA has grown from a visionary entry in the downstream aviation sector into one of Africa’s premier aviation fueling service providers, operating across major airport hydrants and depots.

He emphasised that navigating the next decade of energy supply requires aviation fuel marketers to adopt sophisticated hedging tools, real-time formula adjustments, and collaborative partnerships with domestic refiners to mitigate offshore price shocks.

He concluded his address by urging airlines, supply companies, financial institutions, and regulatory bodies to work toward balanced, transparent, and flexible contracting frameworks that protect both fuel suppliers and air carriers.

“As we celebrate 20 years of fueling aviation and empowering connectivity, our priority remains safeguarding supply security,” Ogungbangbe remarked.

“To ensure sustainability, the industry must move toward intelligent pricing mechanisms that account for global market instability while protecting the capital of supply companies.”

Founded 20 years ago, CITA Energies Limited is a leading energy solution provider specialising in aviation fuel handling, depot operations, and in-plane fueling services across multiple international and domestic airports.

Wole Shadare