Drop in oil prices good for growth, says IATA
The price of Brent crude oil has dropped to around $72 per barrel, marking a 21% decline from this year’s peak of $91 per barrel and reaching its lowest level since late 2021.
While some might interpret this as a signal of a potential global recession, the story is more complex, and is a positive step for the aviation industry, according to IATA.
Lower oil prices are expected to stimulate economic growth, help curb inflation, and may even encourage central banks to ease monetary policy.
This, in turn, is contributing to the weakening of the US dollar, which is near its lowest point in 2024.
The aviation sector stands to benefit, as cheaper fuel, which accounts for about 30% of airline operating costs, could boost profits and improve the industry’s slim 3% net profit margin forecast for 2024, the industry body said.
“Lower oil prices are good for growth,” IATA said in its latest briefing note.
However, the lower oil price raises questions about the attractiveness of investments in Sustainable Aviation Fuel (SAF) production.
With oil and gas producers enjoying nearly 20% net margins, SAF projects may still require strong policy support to remain competitive.
