Author

Qatar’s first and one the region’s largest solar plants was inaugurated by HH the Amir, Sheikh Tamim bin Hamad al-Thani at Al Kharsaah Tuesday. The multi-billion dollar 800MW Al Kharsaah Solar PV Power Plant (KSPP) was constructed on a 10 square kilometer land area and can provide the national grid with about 10% of peak electricity demand. KSPP includes more than 1,800,000 solar panels that utilise sun tracking technology to follow the movement of the sun to ensure the most efficient use of land and to maximise daily production. It utilises robotic arms and treated water to clean the solar panels at night in order to enhance the plant's production efficiency. The Al Kharsaah Solar PV Power Plant is owned by a joint venture between affiliates of QatarEnergy Renewable Solutions (60%), Marubeni (20.4%) and TotalEnergies (19.6%). The plant inauguration ceremony at Al Kharsaah was attended by HE the Prime Minister and Minister of Interior, Sheikh Khalid bin Khalifa al-Thani and HE the Minister of State for Energy Affairs, Saad Sherida al-Kaabi among other dignitaries. Speaking at the inauguration ceremony, al-Kaabi highlighted some of Qatar’s efforts towards achieving its sustainability targets. “Al Kharsaah plant is one of the country's strategic initiatives to build projects that contribute to reducing gas and thermal emissions, thus achieving about a million-ton reduction in annual carbon dioxide emissions,” al-Kaabi stressed. Al-Kaabi highlighted some of the environmental efforts and sustainability requirements that were taken into account in building this landmark plant, saying, “The site of Al Kharsaah was chosen following extensive scientific studies to determine the sites with the best possible operational efficiency and maximum economic value, placing great consideration to the geological, environmental, and social impacts of establishing this station.” Al-Kaabi thanked QatarEnergy’s partners in the project, namely, Japan’s Marubeni, France’s TotalEnergies, as well as the project’s contractors for their efforts to deliver this project. The minister also expressed his thanks and appreciation to QatarEnergy, Qatar Electricity and Water Company, and the President, management, and employees of Kahramaa for their continuous efforts to meet the country’s electricity and water needs with the highest standards. "I am honoured to present ample thanks and gratitude to His Highness the Amir, Sheikh Tamim bin Hamad al-Thani, for his unlimited support and wise guidance, without which we would not have accomplished such a project,” al-Kaabi added. KSPP started supplying electrical power to Qatar’s electricity grid last June, marking the startup of the 400 MW first phase of the 800 MW plant. Full capacity was reached by the end of the second phase. The KSPP can provide the national grid with about 10% of peak electricity demand. Building this plant comes as part of implementing QatarEnergy’s updated Sustainability Strategy, which re-emphasises its commitment, as a major energy producer, to the responsible production of clean and affordable energy to facilitate the energy transition. In addition to increasing solar capacity to over 5GW, the strategy targets reducing greenhouse gas emissions, and deploying carbon capture and storage technology to capture over 11mn tons per year of CO2 in Qatar by 2035. It also aims to further reduce the carbon intensity of LNG facilities bolstering Qatar’s commitment to responsibly supply cleaner LNG at scale in support of the energy transition.

Qatar inflation rates are expected to gradually ease over the coming months; Oxford Economics said and noted the country’s inflation will fall to 2.1% in 2023 from 4.3% this year. In its latest update, Oxford Economics said: “In Qatar, rental and recreation and culture costs pushed inflation up to 6%, the highest since December 2021 and more than we expected, following a slower rise the previous two months.” Oxford Economics has made an upward revision of its forecast of Qatar's fiscal balance. The researcher now says Qatar's fiscal balance has been forecast at 9% of GDP this year and 9.3% in 2023. Similarly, the country’s current account surplus, according to Oxford Economics, will be upwardly revised to 16.8% of its GDP this year and 14.9% in 2023. Qatar’s real GDP growth has been forecast at 3.6% this year and 3.5% in 2023. According to Oxford Economics, the “IMF expects Mena region to sidestep global gloom and the fund retained its optimistic view on Mena, lifting 2022 and 2023 GDP growth projections a tad in its latest outlook, to 5% and 3.6%, respectively, and echoing our expectations of the region's continued outperformance next year.” That said, we think the worsening global backdrop will limit growth in Mena to 3.2% in 2023, with a sharp deceleration in some GCC countries given the decision by Opec+ to cut oil production quotas. Inflation data for September showed prices rising in Egypt, Qatar, Saudi Arabia, and Tunisia, while staying stable in Jordan. Tunisia's central bank tightened policy as price pressures persist, and we expect Egypt to follow suit and raise rates by at least another 100bps before year-end. Moody's upgraded the outlook on Oman's Ba3 sovereign credit rating to positive, reflecting improvement in public debt metrics. “We see the government maintaining a budget surplus this year and next, and for the debt-to-GDP ratio to drop to around 45% in 2023, from 63.6% in 2021,” Oxford Economics noted.

Qatar is set to cross a major milestone when the 800MW Al Kharsaah solar plant will be inaugurated at a high-profile event on October 18. The project represents a milestone in Qatar’s energy history and it set to meet 10% of its peak electricity demand at full capacity and reduce CO2 emissions by 26mn metric tonnes over its lifespan. It is also a major step towards Qatar’s goal of achieving production of 5GW of solar power by 2035, QatarEnergy had said earlier. Al Kharsaah Solar PV Independent Power Producer (IPP) Project is the country’s first large-scale solar power plant and is set to significantly reduce the environmental footprint. The project is owned and operated by Siraj 1 SPV, a consortium jointly owned by TotalEnergies & Marubeni (40%) and Siraj Energy (60%), the latter being a joint venture between QatarEnergy and QEWC (Qatar Electricity and Water Company). Set to become the world’s largest solar power plant equipped with high-efficiency, half-cut bifacial solar modules, the 800MWp Al Kharsaah Solar PV IPP Project will cover 10 square kilometres (the equivalent of roughly 1,400 soccer fields) and will feature 2mn modules mounted on trackers. This will enable substantial power gains by taking full advantage of the region’s exceptional sunshine. In addition, the use of 3,240 installed string inverters will further increase annual yield by allowing for better tracking of the maximum power point at the string level. The plant will also feature a semi-automated cleaning system for the solar modules that cleans the dust and sand off every single module once every four days. In terms of power generation, the Al Kharsaah plant has a full capacity of 800MWp that will be built in two phases of 400MWp each. During its first year of operation (P50 Year 1), it is expected to generate almost 2,000,000MWh, the equivalent energy consumption of approximately 55,000 Qatari households. According to the International Energy Agency’s Sustainable Development Scenario, renewable energies will represent more than 35% of the world’s energy mix in 2040. In London recently, HE the Minister of State for Energy Affairs, Saad bin Sherida al-Kaabi highlighted Qatar’s role in reducing gas emissions and carbon footprint and cited the inauguration of the Al Kharsaah solar power station.

Shipping by air is a fast and efficient means of transport for goods. Airlines transport in excess of 52mn metric tonnes of goods a year, representing more than 35% of global trade by value but less than 1% of world trade by volume, according to IATA, the global body of airlines. That is equivalent to $6.8tn worth of goods annually, or $18.6bn worth of goods every day. However, the effects of Covid-19 on the industry dramatically affected the air industry including air cargo. Available cargo tonne-kilometres fell industry-wide by 21.4% year-on-year in 2020. However, by the end of the year, industry-wide cargo tonne-kilometres had returned to near pre-Covid values. In 2021, air cargo generated $155bn, up from $129bn in 2020 and $101bn in 2019. Air cargo therefore contributed more than a third of airline revenues in 2021, over double its contribution in 2020. Recent data for global air cargo markets demonstrated the industry’s resilience amid economic uncertainties, IATA noted. Global demand, measured in cargo tonne-kilometres (CTKs), fell 8.3% compared to August 2021 (-9.3% for international operations). This was a slight improvement on the year-on-year decline of 9.7% seen in July. Capacity was 6.3% above August 2021 (+6.1% for international operations). This is a significant expansion over the 3.6% year-on-year increase in July. Global goods trade expanded slightly in August this year and the additional easing of Covid-19 restrictions in China will positively impact cargo markets. While maritime will be the main beneficiary, air cargo will receive a boost from these developments. Also, inflation levels in G7 countries slowed for the first time since November 2020. Oil prices stabilised in August and the jet fuel crack spread fell from a peak in June. New export orders, a leading indicator of cargo demand and world trade, decreased in leading economies in all regions except the US. That said, global supply chain congestion is contributing to an inflationary environment and causing challenges for air cargo. Air cargo crews still face hardships navigating Covid-19 restrictions in many countries, and operations are being adversely affected by shortages of human resources and facilities. Air cargo is the backbone of global supply chains. The efficiencies and advantages of transporting goods by air were highlighted during the Covid-19 pandemic, with the delivery of life-saving personal protective equipment, medical supplies, and vaccines. The passenger side of the air transport business, conversely, dimmed as countries closed their borders and added to their travel restrictions. Air cargo revenues have nevertheless been the bright story for airlines during the pandemic. They rose nearly 75% in 2021 compared with 2019 on the back of strong demand and record cargo yields. That, however, was far from enough to offset the fall in passenger revenues, which in 2021 were still more than 60% under their 2019 level. This left overall airlines revenues in 2021 fully 57% below revenues for 2019. Amid greatly diminished international passenger traffic, particularly as the pandemic took full effect, passenger aircraft belly capacity declined substantially. To compensate, airlines temporarily converted some of their passenger aircraft to freighters, which are dubbed “preighters”. The result was record air cargo load factors and yields. The air cargo load factor hit a peak in mid-2021 before falling as a result of lower demand and increased capacity. Air cargo yields also fell in the second half of 2021 until Omicron, labour shortages, and other disruptions sent them to new heights at the outset of 2022. IATA’s director general Willie Walsh said: “Air cargo continues to demonstrate resilience. Cargo volumes, while tracking below the exceptional performance of 2021, have been relatively stable in the face of economic uncertainties and geopolitical conflicts. Market signals remain mixed. “August presented several indicators with upside potential: oil prices stabilised, inflation slowed and there was a slight expansion in goods traded globally. But the decrease in new export orders in all markets except the US tells us that developments in the months ahead will need to be watched carefully.” Pratap John is Business Editor at Gulf Times. Twitter handle: @PratapJohn    

* Former US secretary of state, Rex Tillerson, among the winner * Former managing director of QEWC Fahad Hamad al-Mohannadi gets award for advancement of Qatar’s energy industry Former United States’ secretary of state, Rex Tillerson, was among the winners at the ‘Abdullah Bin Hamad Al-Attiyah International Energy Awards for Lifetime Achievement’, which were distributed at a high-profile event in Doha on Wednesday night. More than 200 dignitaries attended the prestigious event where six exceptional individuals were recognised for lifetime achievements in their fields of work and policy. The individuals recognised for their exemplary careers in the energy industry included Charif Souki, Executive Chairman of the Board of Tellurian, who collected the Advancement of Natural Gas prize; Alexander Kemp, Professor of Petroleum Economics and Director at the University of Aberdeen, who picked up the Advancement of Education for Future Energy Leaders gong; Professor Martin Green, Scientia Professor at the University of New South Wales, who won the Advancement of Renewables award; and John Kingston, Director of Global Market Insights for S&P Global, who was recognised with the Advancement of Energy Journalism accolade. The Advancement of Qatar’s Energy Industry and the Advancement of International Energy Policy and Diplomacy awards were collected by Fahad Hamad al-Mohannadi, former managing director of QEWC, and Tillerson, the former chairman and chief executive officer of Exxon Mobil Corporation. To ensure only the worthiest industry leaders receive the prestigious Lifetime Achievement award, in the months before the event the Al-Attiyah Foundation creates an International Selection Committee to submit a list of outstanding candidates. The committee independently scores every nominee in the six award categories for their performance based on criteria such as impact, leadership and partnership, innovative and creative thinking, and long-term vision. This year’s committee comprised of previous winners of the award, and they cast their votes in their respective fields. At the gala dinner, HE Abdullah bin Hamad al-Attiyah said: “The Abdullah bin Hamad Al-Attiyah International Energy Awards for Lifetime Achievement has always been one of the highlights of the year. It gives me great pleasure to recognise exceptional and talented individuals for their contributions to the energy industry. “It is with a sense of satisfaction that we now induct our winners into the Alumni of the Abdullah bin Hamad Al-Attiyah International Energy Awards for Lifetime Achievement, whom we fondly regard as accomplished Energy Elders. Together with our energy elders, the Al-Attiyah Foundation and its members will continue to plot and chart the journey to a world powered by sustainable energy,” al-Attiyah added. The Abdullah Bin Hamad Al-Attiyah International Energy Awards celebrates the legacy of HE al-Attiyah by honouring individuals for their lifetime achievements in the fields of work and policy that emulate al-Attiyah’s 40 years of distinguished contributions to the global energy industry. The nominees are recognised for outstanding records of accomplishment in their sector over the span of their careers, acknowledging individuals who have made an exceptional impact on the energy industry with distinct personal achievements for a consistent and prolonged period.    

Oxford Economics sees more dollar strength and more financial pressures on other currencies, which is due in part to timely policy tightening by emerging markets (EM) and, consequently, lower interest rate differentials. Some advanced economies (AE) currency weakness is certainly due to idiosyncratic risks, from the Ukraine war that put the euro and all European currencies under pressure, to the ensuing gas crisis and European fiscal policy responses to it, which placed the British pound under stress last month. September's sterling weakness raised the issue of BoE foreign reserve adequacy, a rare discussion for a reserve currency and almost certainly unfounded. Low AE foreign currency reserves are a norm, but the privilege, it ought not to be forgotten, rests on prudent macroeconomic policy. Fundamentals, moreover, do not point to structural changes in support of dollar strength. While interest rate differentials give muscle to the dollar, the widening US current account deficit and cross-border financial outflows speak in favour of a weaker greenback. Should Europe see further inflationary pressures and fight back with forceful fiscal measures, stronger policy tightening may be necessary down the road, widening the policy rate differential and complicating the risk assessment. That eventually would bring an end to the strong dollar, but would likely lead to greater financial upheavals before that were to happen. Should uncertainty abate or become manageable (whether because of the Ukraine crisis entering a calmer phase, which seems unlikely, or by the European gas crisis being resolved sooner than expected, also unlikely albeit less so), there is reason to believe that the fiscal push in Europe could provide tailwinds for European currencies. “Until that happens, though, we're looking at more dollar strength and more financial pressures on everybody else.” When considered in a global context, EM currencies are holding up well against the dollar, some due to terms-of-trade improvements, some due to tighter policy or lack of proximity to the European crisis. AEs, on the other hand, though traditionally less sensitive to dollar strength, are now facing a slew of financial pressures – on their currencies, their bond yields, and even their sovereign debt sustainability. “On balance, while interest rate differentials support the strong dollar, global financial flows do not. In the short run, more instability in Europe – especially higher energy prices and aggressive fiscal packages that fight it – may ensure the dollar maintains its recent strength and even appreciates further,” Oxford Economics said.

The decision by Opec+ to cut production by 2mn barrels per day (bpd) from its August baseline levels will tighten the market further, according to Emirates NBD. Opec+ does have some merit in trying to anticipate a period of slower growth in oil demand, the regional banking group said in a report. “Risks to oil demand growth are skewed to the negative as economies respond to substantially tighter monetary policy, high inflation, and slower economic activity. While a total collapse like the market endured in 2020 is highly unlikely, a considerable slowdown in the pace of demand growth looks set for next year, though total demand probably won’t shrink,” noted Edward Bell, senior director (Market Economics) at Emirates NBD. However, he said, there is a risk of demand outperforming should China adjust its zero-Covid strategy and activity bounce back sharply from its current doldrums. Cutting production also worsens an already fraught supply picture. Opec+ has been missing targets in aggregate thanks to underperformance by several members, Russia faces a shrinking list of destinations for its exports thanks to sanctions, and investment outside of the Opec+ grouping has been lagging, keeping production from countries like the US at an effective standstill. At the same time, global inventories have been drained as governments responded to high oil prices by releasing strategic reserves: Total US crude oil inventories have plummeted as Strategic Petroleum Reserve (SPR) stocks have been released. By sticking to August baseline levels, the 2mn bpd targeted cuts will be watered down considerably. Of the 19 members of Opec+ that have been participating in production targets (Mexico is included but has not participated), Emirates NBD estimates only seven will actually need to cut production from November onward if using August targets as their baseline. Most members of Opec+ currently have production targets higher than their recent output so will not need to cut. All of the actual cuts will come from producers in the Middle East and Africa with Saudi Arabia, the UAE, Kuwait and Iraq required to make the largest adjustments to hit their target level. Market response to the cuts was relatively mild given that they had been expected and the headline cut was immediately neutralised by sticking to old baselines that don’t reflect existing oil market realities, the report noted. Brent futures have bounced by about 11% since hitting a recent low of $84/b, pushing back up above $90/b, while WTI has also recovered, moving further away from the high $70s handle it had hit recently and closing in on $90/b in response to the Opec+ decision. “We had outlined previously how markets face a strained supply picture and that oil prices will likely push higher going into 2023 and are holding to that view for now,” Emirates NBD noted. Importing nations may choose to respond by releasing more of their strategic reserves with the US administration responding to the cuts immediately by saying they were “disappointed by the shortsighted” decision and that the president will continue to “direct SPR releases as appropriate.” However, further legislative responses — the oft threatened No Oil Producing and Exporting Cartels Act (NOPEC bill) in the US for instance — are unlikely to be effective in prompting more oil from the Opec+ alliance. Draining inventories more may actually keep the market even more anxious and prompt an even bigger bid under near-term oil, steeping out the backwardation in markets, the report noted.

Qatar’s non-oil growth to remain strong despite soft Purchasing Managers' Index PMI in the third quarter, Emirates NBD said and noted Qatar budget surplus will widen to over 10% of GDP this year, rising slightly to 12% in 2023 on the assumption that oil and gas prices will remain high. Qatar’s GDP grew 4.3% year-on-year (y-o-y) in H1, 2022, underpinned by a sharp rebound in building and construction as the country prepares for to host the FIFA World Cup in November and December this year. Building and construction is the largest non-oil sector accounting for 13% of real GDP. The wholesale and retail trade sector posted double digit growth in Q2, while manufacturing output grew 6.2% y-o-y. However, financial and insurance services contracted -5.1% y-o-y in Q2 and -3.7% y-o-y in H1. Smaller sectors such as transport and storage, real estate activities and business services posted strong annual growth, contributing to the 9.7% y-o-y growth in non-oil GDP. Oil and gas GDP was much more modest at 1.2% y/y in Q2 but Emirates NBD expects this to accelerate in the second half of the year. Khatija Haque, head of research & chief economist at Emirates NBD noted Qatar’s PMI data for the third quarter (Q3) point to a sharp slowing in non-oil private sector activity however. The headline PMI fell to 50.7 in September, the lowest reading since the pandemic. The survey shows that business activity continued to rise sharply, likely as ongoing projects are completed, but new order growth has slowed significantly in recent months and declined outright in September. Consequently, private sector employment has declined in both August and September, and purchasing activity has also slowed as firms use up existing inventories. Input costs have increased only fractionally in Q3 but firms have been able to raise selling prices. The World Cup will likely keep business activity strong in Q4 but the pipeline of new work may continue to soften as borrowing costs rise and fewer new projects are launched. “Overall, we expect real GDP growth of 5.1% in 2022, slowing to 2.7% in 2023,” Khatija noted. Inflation in Qatar has slowed this year but remains high relative to other GCC countries at 4.8% y-o-y in August, Emirates NBD said. Housing and food inflation has accelerated in recent months but has been offset by lower healthcare and transport costs. Recreation and culture prices have risen sharply however as the sector rebounds from pandemic-era deflation. “However, we do expect annual inflation to slow to under 4% by year end, bringing average CPI to 4.5% this year, up from 2.3% in 2021,” it said. Money supply growth has accelerated to 12.4% y-o-y in August, the fastest growth since 2018, largely on the back of increased FX deposits. Private sector credit growth has slowed to 6.6% y-o-y in August from a peak of 9.7% y-o-y in February this year. Government and public sector credit growth has declined on an annual basis after double digit growth in 2021, falling to -13.6% y-o-y in August. Qatar’s budget has benefited from the surge in oil and natural gas prices this year, with oil and gas revenues up 67% y-o-y in H1, 2022. Other revenues have also increased sharply this year, with top line revenue up 58% y-o-y in H1. Expenditure growth has been more restrained at 13% y-o-y, focused on capital spending projects. Current spending and wages and salaries have increased 11-12% y-o-y in H1 2022. “We expect the budget surplus to widen to over 10% of GDP this year, rising slightly to 12% of GDP in 2023 on the assumption that oil and gas prices will remain high.”    

* Gross domestic product to touch $216bn and GDP per capita $80,956 this year * GDP to touch $216bn and GDP per capita $80,956 this year Qatar is set to record its “fastest” GDP growth in seven years in 2022, FocusEconomics said and noted the gross domestic product will touch $216bn this year. The researcher has forecast that Qatar’s GDP per capita will be $80,956 this year. Elevated energy prices, reduced impact of the pandemic, improved relations with Arab neighbours and the FIFA World Cup in November-December will be key drivers of Qatar’s GDP, FocusEconomics said. Growth will likely ease in 2023 amid rising interest rates, lower energy prices and faltering external demand. FocusEconomics researchers’ see a 4.5% rise in Qatar’s GDP during 2022, which is unchanged from last month’s forecast, and 2.7% growth in 2023. GDP growth over the next four years has been forecast at 2.7% (2023), 2.9% (2024), 3.6% (2025) and 4.3% (2026). Qatar’s GDP per capita has been forecast at $81,751 in 2023, $85,472 (2024), $91,609 (2025) and $97,833 (2026). The country’s fiscal balance (as a percentage of the GDP) has been forecast at 9.2 this year, 5.8 (2023), 3.5 (2024), 4.0 (2025) and 4.5 (2026). Qatar’s public debt (as a percentage of the GDP) has been forecast at 45.6 (2022), 43.4 (2023), 43.4 (2024), 41.8 (2025) and 40.2 (2026). Current account balance (as a percentage of the GDP), FocusEconomics has estimated at 19.9 this year and 15.1 (2023), 12.3 (2024), 12.0 (2025) and 11.6 (2026). In dollar terms, the country’s current account balance will be $43bn (2022), $32.4bn (2023), $27.3bn (2024), $28.1bn (2025) and $28.9bn (2026). Merchandise trade balance may amount to $82.2bn this year, $79.6bn (2023), $65.2bn (2024), $68.4bn (2025) and $70.9bn (2026). Merchandise exports, FocusEconomics has forecast at $113.6bn this year, $112.1bn (2023), $99.4bn (2024), $105.1bn (2025) and $110.8bn (2026). Merchandise imports, the researcher noted will be $31.4bn this year, $32.5bn (2023), $34.3bn (2024), $36.7bn (2025) and $39.9bn (2026). The country’s international reserves have been projected at $41.7bn this year, $43.4bn (2023) and $44.7bn (2024). Qatar’s unemployment (as a percentage of active population) will remain at a meagre 0.2 between 2022 and 2026, the researcher noted. According to FocusEconomics, Qatar's economy expanded 6.3% in annual terms in Q2 based on recent data. The non-energy sector led the upturn with a near-double-digit expansion, while the energy sector registered softer growth. Turning to Q3, available data suggests ongoing strong momentum. In July-August, the PMI averaged well in growth territory, amid historically strong expansions in output and new orders. Moreover, in July, energy output rose robustly year-on-year and tourist arrivals spiked by 293%. The latest diplomatic developments are positive for the economy too. The country recently signed agreements to boost trade with Egypt and the UK. Moreover, the European Union opened a delegation in Doha in September, and French energy giant TotalEnergies announced it would invest $1.5bn in the North Field gas project, amid European efforts to diversify gas supply away from Russia. Inflation fell to 4.8% in August from 5% in July. The Qatar Central Bank hiked rates by 75 basis points to 4.5% in September, mirroring the US Federal Reserve’s move. Inflation is expected to average roughly double its 2021 level this year due to recovering demand and higher commodity prices. That said, price pressures will ebb heading into 2023. FocusEconomics panellists see inflation averaging 4.5% in 2022, which is unchanged from last month’s forecast, and 2.8% in 2023.

Qatar's fiscal balance has been forecast at 7.9% of GDP this year and 9.3% in 2023 by Oxford Economics. The country’s current account surplus, according to Oxford Economics, will be 15.5% of its GDP this year and 14.9% in 2023. Qatar’s real GDP growth has been forecast at 3.6% this year and 3.5% in 2023. Inflation, the researcher noted, will be 4.3% this year and 2.1% in 2023. Oxford Economics noted that Purchasing Managers' Index (PMI) for Qatar and Saudi Arabia and the UAE showed ongoing expansion in business activity during September. Saudi Arabia will likely be one of the fastest growing economies in the world this year because of the surge in oil prices. Although the PMIs have fallen from August, as inflation and tighter monetary conditions impact demand, they still “indicate a resilient domestic economy that is benefiting from the recycling of oil revenues,” Oxford Economics said. Economic malaise continues for Egypt, with the PMI suggesting output continued to contract in September as high inflation, energy rationing, and import restrictions strangled demand. Opec+ oil production cut has come at a time when the global economy is slowing, Oxford Economics noted. Opec+ has cut production by 2mn barrels per day (bpd), following a 100,000 bpd cut last month. The group wishes to counter the anticipated fall in demand caused by high global inflation and an economic slowdown such that oil prices do not continue to fall. Last month, spot prices fell below $90 for the first time since January. Saudi Arabia is making further unilateral cuts to maintain sufficient excess capacity in case further economic sanctions are imposed on Russia that further constrict oil supply. “A likely increase in oil prices will come at an unfortunate time for most of the world economy as soaring inflation and tightening monetary policy is creating a sharp squeeze on household incomes globally. “As a result, we will be reviewing our Brent oil price forecast and the outlook for Opec+ economies,” Oxford Economics added.    

Beyond the Tarmac Takeoff and landing slot rules at airports around the world are again in the spotlight as the aviation industry recovers from the worst crisis triggered by the Covid-19 pandemic. In view of an expected recovery, many countries including the UK are reportedly considering a review of the airport slot rules and determine the best way forward. The European Commission has also proposed a return to the pre-Covid 80:20 ‘use it or lose it’ airport slot rule in the coming winter season, but with exceptions in the case of significant air-travel disruption. Takeoff and landing slot rules mean airlines must fill at least 80% of their slots in any given season, or risk losing their allocation next time round. At the height of pandemic-related travel restrictions (in 2020 and 2021), many countries had adopted either a partial or full waiver of the usual 80:20 slot rule. Airports say the 20% potential non-use is too high and leads to inefficiency, and they argue that not enough new entrants have access to key airports and so the figure effectively limits competition to the detriment of consumers. But, according to International Air Transport Association (IATA), the evidence contradicts both points. London Heathrow (LHR), Frankfurt, Amsterdam, and Singapore are all slot-constrained airports that operate at more than 95% efficiency, the global body of airlines says. It shows that the balance of the 80-20 slot system hits exactly the right note between optimal efficiency and flexibility. After all, schedules should match demand and demand is never 100%. It varies according to season, public holidays, time of week and much more. As for new entrants, when a small number of slots became available at LHR recently, they went to six airlines with huge route diversity, increasing competition, IATA noted. The Worldwide Airport Slot Guidelines (WASG) is published by IATA to provide the global air transport community with a single set of standards for the management of airport slots at coordinated airports and planned operations at facilitated airports. The management of airport slots is required at some airports where the available airport infrastructure is insufficient to meet the demand of airlines and other aircraft operators while the management of planned operations at facilitated airports allows a degree of scheduling flexibility within available airport infrastructure capacity. The WASG is the industry standard recognised by many regulatory authorities for the management and allocation of airport capacity. “The WASG has worked well at slot-constrained airports for many years and airlines are confident that it can again be a fundamental pillar as the industry recovers,” says Lara Maughan, IATA’s head, Worldwide Airport Slots. “80:20 is fit for purpose for the foreseeable future. It takes time to set up routes and airlines need to have certainty that they can deliver on their network promises sustainably.” Nevertheless, she stresses that potential enhancements to the WASG are always being considered and adopted. Revised definitions for new entrants will give them even greater priority, for example. And performance monitoring has been strengthened to ensure airlines use their slots correctly. Airlines are also open to enhancing guidelines surrounding Level 2 airports to better deal with peak levels. This would be a more efficient option than the creation of a Level 4 for super-congested airports and would preserve the existing system. Brazil was considering moving Congonhas Airport into a completely new Level 4 category, but concluded it wasn’t the right decision. Maughan says airports must also do a better job of managing and declaring capacity. Slots are necessary because existing infrastructure isn’t up to the job. The situation is exacerbated by airports not correctly stating their capacity. “Airports must declare their capacity correctly as that is what the co-ordinator uses, whether it is 10 slots an hour or 60,” says Maughan. “But we see that with some airports the figure hasn’t changed for a decade. That can’t be right when the route mix and fleets change each season.” Industry leaders are stressing the need for a global harmonised system vis-à-vis airport slots. As countries came out of the pandemic, travel restrictions and slot waivers changed. This has led to an enormously complicated situation with one set of rules in the country of departure and another set on arrival. It has highlighted the criticality of a worldwide system. Although an airport has only its own market to consider, it is an airline that must connect all the dots. “We all saw how valuable flexibility in the global system was during the crisis,” says Willie Walsh, IATA’s Director General. “It preserved networks when government decisions made demand disappear. “We still need that flexibility because the world is still far from normal. But even more critically, we cannot let governments forget the importance of a global standard approach for slots,” Walsh added. The aviation industry is crucial for the global economy to recover as quickly as possible once Covid-19 is brought under control. Therefore, governments and regulators around the world should provide relief to the global aviation and travel industry as it faces severe cashflow conditions and challenges on the road to recovery.

* The government segment has been the "key driver" in loans and deposits in August; total assets reach QR1.828tn Qatar banking sector has seen an uptick in its assets, loans and deposits in August, driven mainly by government activities and commodity prices. According to QNB Financial Services, the total assets of the Qatari banking sector increased by 0.7% MoM (0.1% in 2022) in August 2022 to reach QR1.828tn. The sector total loan book went up by 0.6% MoM (0.2% in 2022) and deposits rose by 0.9% MoM (-0.1% in 2022) in August, QNBFS noted. Loans increased by 0.6% during August to reach QR1,218.6bn. The public sector mainly pushed the credit higher (up 1.7% MoM in August). Loans have moved up by 0.2% in 2022, compared to a growth of 7.8% in 2021. Loans grew by an average 7.6% over the past five years (2017-2021), QNBFS said. As deposits gained by 0.9% in August, the LDR declined slightly to 125.2% compared with 125.5% in July. Public sector deposits increased by 3.7% MoM (+14% in 2022) in August, resulting in the overall gains in the Qatar banking sector deposits. Deposits moved up by 0.9% during August to reach QR973.2bn. The deposits surge in August was due to an uptick by 3.7% in public sector deposits. QNBFS said deposits have edged marginally lower by 0.1% in 2022, compared to a growth of 7.6% in 2021. Deposits grew by an average 6.1% over the past five years (2017-2021). The overall loan book went up by 0.6% in August 2022. Domestic public sector loans moved higher by 1.7% MoM (-4.5% in 2022). The government segment (represents nearly 32% of public sector loans) rose by 3.9% MoM (-18.1% in 2022), while the government institutions’ segment (represents nearly 62% of public sector loans) loan book increased by 1.0% MoM (+3.1% in 2022). However, the semi-government institutions’ segment moved lower by 2.6% MoM (+10.7% in 2022). Total private sector loans edged higher by 0.3% MoM (+3.2% in 2022) in August. The real estate segment and consumption and others mainly contributed toward the private sector loan growth for August. The real estate segment (contributes nearly 21% to private sector loans) moved up by 0.8% MoM (+4.9% in 2022). Consumption and others (contributes nearly 22% to private sector loans) went up by 0.5% MoM (+4.5% in 2022). Services (contributes nearly 29% to private sector loans) edged up by 0.04% MoM (+4.7% in 2022), while general trade (contributes nearly 21% to private sector loans) moved up slightly by 0.05% MoM (+0.6% in 2022) during August. Outside Qatar loans went down by 1.4% MoM (-7.2% in 2022) during August. Public sector deposits increased by 3.7% MoM (+14.0% in 2022) in August, resulting in the overall gains in the Qatar banking sector deposits. Looking at segment details, the government segment (represents 31% of public sector deposits) shot up by 8.4% MoM (+1.9% in 2022), while the government institutions’ segment (represents nearly 54% of public sector deposits) leaped forward by 1.4% MoM (+17.6% in 2022). The semi-government institutions’ segment moved up by 2.8% MoM (+31.8% in 2022). However, private sector deposits edged lower by 0.1% MoM (+7.4% in 2022). On the private sector front, the consumer segment declined by 0.6% MoM (+2.4% in 2022). However, the companies and institutions’ segment went up by 0.3% MoM (+13.3% in 2022). Non-resident deposits continued its downward spiral and went down by 1.3% MoM (-25.3% in 2022) in August. An analyst told Gulf Times the government segment has been the "key driver", in both loans and deposits in August. Government segment rose by 3.9% for the loan book and went up by 8.4% on deposits. "Short-term funding requirements for FIFA World Cup 2022 and infrastructure projects could be the reason for the loan growth, while higher commodity prices leading to increased government revenues could be the reason for the deposits increase. On the private sector front, real estate loans went up by 0.8% and could be attributed to increased housing demand leading up to FIFA World Cup 2022," the analyst noted.

Al Kharsaah solar plant will be a major step towards Qatar’s goal of achieving production of 5GW of solar power by 2035. Al Kharsaah Solar PV Independent Power Producer (IPP) Project, which is expected to be inaugurated shortly, is the country’s first large-scale solar power plant and is set to significantly reduce the environmental footprint. The project is owned and operated by Siraj 1 SPV, a consortium jointly owned by TotalEnergies & Marubeni (40%) and Siraj Energy (60%), the latter being a joint venture between QatarEnergy and QEWC (Qatar Electricity & Water Company). The project represents a milestone in the country’s energy history, set to produce 10% of its peak electricity demand at full capacity and reduce CO2 emissions by 26mn metric tons over its lifespan. Set to become the world’s largest solar power plant equipped with high-efficiency, half-cut bifacial solar modules, the 800 MWp Al Kharsaah Solar PV IPP Project will cover 10sqkm (the equivalent of roughly 1,400 soccer fields) and will feature 2mn modules mounted on trackers. This will enable substantial power gains by taking full advantage of the region's exceptional sunshine. In addition, the use of 3,240 installed string inverters will further increase annual yield by allowing for better tracking of the maximum power point at the string level. The plant will also feature a semi-automated cleaning system for the solar modules that cleans the dust and sand off every single module once every four days. In terms of power generation, the Al Kharsaah plant has a full capacity of 800 MWp that will be built in two phases of 400 MWp each. During its first year of operation (P50 Year 1), it is expected to generate almost 2,000,000 MWh, the equivalent energy consumption of approximately 55,000 Qatari households. According to the International Energy Agency’s Sustainable Development Scenario, renewable energies will represent more than 35% of the world’s energy mix in 2040.

* International visitor spend accounted for nearly 14.5% of country’s exports last year, ‘2022 Annual Research’ by World Travel & Tourism Council (WTTC) has shown Qatar recorded international visitor spend of QR52.1bn in 2021, which accounted for nearly 14.5% of the country’s exports last year, the ‘2022 Annual Research’ by the World Travel & Tourism Council (WTTC) has shown. International visitor spending accounted for 87% of the total visitor spend in 2021. Leisure spending totalled QR44.73bn, 75% of the total spending in Qatar in 2021, WTTC data reveal. Nearly 250,000 people were employed in the country’s travel and tourism sector last year, which represented 12% of the total jobs in 2021, the global forum for the travel and tourism industry noted, the research paper showed. In 2021, the travel and tourism sector contributed QR67.6bn to Qatari economy, or 10.3% of the total GDP, it said. On inbound arrivals last year, the WTTC data showed Indians accounted for 8% of the total arrivals, followed by those from Kuwait (4%), Oman (3%), UK (2%) and he US (2%). On outbound departures from Qatar, Turkey topped the list with 14%, followed by Kuwait (12%), Bahrain (11%), Saudi Arabia (10%) and the US (5%). On the global scale, prior to the pandemic, travel and tourism (including its direct, indirect and induced impacts) accounted for one in four of all new jobs created across the world, 10.3% of all jobs (333mn), and 10.3% of global GDP ($9.6tn). Meanwhile, international visitor spending amounted to $1.8tn in 2019 (6.8% of total exports). WTTC said following a loss of almost $4.9tn in 2020 (-50.4% decline), travel and tourism's contribution to GDP increased by $1tn (+21.7% rise) in 2021, the latest annual research has shown. In 2019, the travel and tourism sector contributed 10.3% to global GDP; a share which decreased to 5.3% in 2020 due to ongoing restrictions to mobility. 2021 saw the share increasing to 6.1%. In 2020, 62mn jobs were lost, representing a drop of 18.6%, leaving just 271mn employed across the sector globally, compared to 333mn in 2019. Some 18.2mn jobs were recovered in 2021, representing an increase of 6.7% year-on-year. Following a decrease of 47.4% in 2020, domestic visitor spending increased by 31.4% in 2021, WTTC said. And following a decrease of 69.7% in 2020, international visitor spending rose by 3.8% in 2021. Julia Simpson, president and CEO, WTTC, said travel and tourism GDP is set to grow on average by 5.8% annually between 2022 and 2032, outpacing the growth of the overall economy (2.7% per year). “Our research shows that travel and tourism GDP could return to 2019 levels by the end of 2023. What is more, the sector is expected to create nearly 126mn new jobs within the next decade. While government support has been instrumental throughout this crisis, the swift recovery of the sector will only be possible if leaders and public officials work together and provide clear and consistent rules. “Governments need to focus on co-existing with Covid-19 while enhancing preparedness for future crises, offering safe travel experiences, supporting equitable vaccine distribution, and continuing to ease the conditions of entry to destinations. “The future outlook is positive, and our sector is once again showing its resilience and ability to bounce back. Despite the difficulties the sector has been facing, our projections point to a strong decade of growth,” Simpson noted.

The multi-billion dollar North Field development, the largest ever LNG project in the world, has reached a crucial phase with QatarEnergy beginning to announce partners for NFS project that will further increase Qatar’s liquefied natural gas production capacity from 110mn tonnes per year to 126 mtpy by 2026 or 2027. The North Field South (NFS) has many unique features, the foremost of which is its advanced environmental characteristics. This includes significant carbon capture and sequestration technologies and capacity. North Field development, the largest ever LNG project in the world, has reached a crucial phase with QatarEnergy beginning to announce partners for NFS project that will further increase Qatar’s liquefied natural gas production capacity from 110mn tonnes per year to 126mn tpy by 2026 or 2027. NFS comprises two mega LNG trains with a combined capacity of 16mn tonnes per year. QatarEnergy’s first partner in the NFS project is TotalEnergies, which will have an effective net participating interest of 9.375% out of a total 25% interest available for international partners. QatarEnergy will hold a 75% stake in the NFS project, HE the Minister of State for Energy Affairs Saad bin Sherida al-Kaabi said at a media event in Doha recently. “The other partners in this project will be announced in due course,” HE al-Kaabi said. The minister noted: “We are committing big investments to lower the carbon intensity of our energy products, which constitute a key pillar of QatarEnergy’s sustainability and energy transition strategy.” QatarEnergy targets more than 11 mtpy of carbon capture and storage (CCS) and the production of 5GW of solar power by 2035, HE al-Kaabi said, highlighting Qatar’s commitment to CCS and renewable energy production. “QatarEnergy is moving forward to help meet the growing global demand for cleaner energy, of which LNG is the backbone for a serious and realistic energy transition,” he said. Recently, QatarEnergy announced the Ammonia-7 Project, the industry’s first world-scale and largest blue ammonia project with a capacity of 1.2 mtpy." Blue ammonia is produced when the carbon dioxide generated during conventional ammonia production is captured and stored. It can be transported using conventional ships and then be used in power stations to produce low-carbon electricity. The new plant, which is estimated to cost $1.156bn, will be located in the Mesaieed Industrial City (MIC) and will be operated by Qafco as part of its integrated facilities. In August, QatarEnergy’s affiliates, QatarEnergy Renewable Solutions (QRS) and Qatar Fertiliser Company (Qafco) signed the agreements for the construction of the Ammonia-7 project, the industry’s first world-scale as well as the largest blue ammonia train, which is expected to come into operation by the first quarter of 2026. The North Field Expansion Project, comprising NFS and the North Field East (NFE) expansion projects, is the industry’s largest ever LNG project. It will start production in 2026 and will add more than 48 mtpy to the world’s LNG supplies. Five partnership agreements have been signed in June and July this year covering the NFE project, which comprises four mega LNG trains with a combined capacity of 32 mtpy. "Most project contracts have been awarded, while the onshore EPC contract is expected to be awarded in early 2023," HE al-Kaabi noted.

With the right government incentives, the airline industry could see 30bn litres of Sustainable Aviation Fuel (SAF) by 2030, noted IATA’s Global Head of Cargo Brendan Sullivan. “SAF is the key to achieving net zero emissions. Airlines used every drop that was available in 2021. And it will be the same this year. The challenge is SAF production capacity. The solution is government incentives. With the right incentives, we could see 30bn litres of SAF by 2030. That would be a tipping point by 2030 towards our net zero ambition of ample SAF quantities at affordable prices,” Sullivan said at the 15th World Cargo Symposium (WCS). (IATA) highlighted four priorities to build resilience and strengthen air cargo’s post-pandemic prospects. The priorities, outlined at the 15th World Cargo Symposium (WCS), in London are achieving net zero carbon emissions by 2050, continuing to modernise processes, finding better solutions to safely carry lithium batteries and making air cargo attractive to new talent. “Air cargo had a stellar year in 2021 achieving $204bn in revenues. At present, however, social and economic challenges are mounting. The war in Ukraine has disrupted supply chains, jet fuel prices are high and economic volatility has slowed GDP growth. Despite this, there are positive developments. “E-commerce continues to grow, Covid restrictions are easing, and high-value specialised cargo products are proving resistant to economic ups-and-downs. Going forward, achieving our net zero commitment, modernising processes, finding better solutions to safely carry lithium batteries, and making air cargo attractive to new talent are critical,” said Sullivan. In 2021 the aviation industry agreed a balanced plan to achieve net zero CO2 emissions by 2050. A potential scenario for this is: •    65% through Sustainable Aviation Fuel (SAF) •    13% from hydrogen and electric propulsion •    3% from more efficient operations •    19% through offsets and eventually through carbon capture, as an out-of-sector solution while technology develops “People are the core of any improvement in what air cargo can deliver. Sadly, we saw thousands of jobs leave the industry during Covid-19, especially cargo handlers. We are now competing for talent in a very tight job market. And when we do find the right and willing talent, training and longer-than-usual security clearance processes delay their entry into the workforce,” said Sullivan. IATA called for governments to accelerate clearance processes, including those for security, as a short-term solution and longer term to do a better job of attracting, onboarding, and retaining talent. The association also encouraged more cargo carriers to sign on to the industry-wide 25by2025 initiative to promote gender diversity. “The need to create equal opportunities for the female half of the world’s population is highlighted by the situation today where the industry is struggling to attract sufficient talent. Achieving an equal gender balance must be core to any long-term talent strategy,” said Sullivan.

Qatar had the highest contribution of travel and tourism to GDP (10.3%) in the GCC region in 2021, according to an Alpen Capital study. Majority of travel and tourism spending in Qatar was in the leisure segment ($12.3bn), which constituted 75% of total travel and tourism spending in the country last year, Alpen Capital noted. Travel and tourism spending in Qatar was valued at $16.5bn in 2021, the researcher noted. Prior to the Covid-19 pandemic, travel and tourism had become one of the most important sectors in the world economy, accounting for 10.3% of global GDP ($9.6tn) and more than 333mn jobs (10.3% of all jobs) worldwide as of 2019. Qatar had the highest contribution of travel and tourism to GDP (10.3%) in the GCC region in 2021, says Alpen Capital; Majority of travel and tourism spending in Qatar was in the leisure segment ($12.3bn), which constituted 75% of total travel and tourism spending in the country last year In 2020, the global travel and tourism sector suffered a loss of almost $4.9tn with GDP contribution dropping to 5.5% due to the ongoing travel restrictions. Total spending declined 51.9% y-o-y to $2.9tn with business spending declining by 61% and leisure spending falling by 49.4% during 2020. As restrictions to mobility eased during 2021, the global travel and tourism sector’s contribution to GDP revived to 6.1%. Total spending improved 26.1% y-o-y to $3.7tn with business spending recovering by 30.9% and leisure spending rising by 25.1% during 2021. Domestic visitor spending increased by 31.4% y-o-y, while international visitor spending rose by 3.8% y-o-y during 2021. According to Alpen Capital, the GCC too witnessed a swift recovery in travel and tourism revenues as contact-intensive services key to the sector were boosted by reopening of the borders and effective crisis management strategies adopted by the regional governments. The sector’s contribution to GCC GDP increased from 6.1% ($98.3bn) in 2020 to 6.6% ($108.8bn) in 2021. The contribution to GDP increased by 10.7% in 2021 compared to the previous year. Total spending increased by 39.1% y-o-y to $77bn during 2021. Notably, the share of business spending in 2021 increased to 19.6% from 18% the previous year, and higher than the global share of 18.2% during the year. Domestic visitor spending in the GCC increased by 27.6% y-o-y to $34.4bn, while international visitor spending rose by 12.6% y-o-y to $42.7bn. Due to the fall in international tourist arrivals in the region, the share of domestic spending increased from 41% in 2020 to 45% in 2021. The share of total employment generated by the sector in the GCC improved from 9.2% of all jobs in 2020 to 9.8% in 2021, representing an y-o-y increase of 5.9%. Prior to the pandemic, total travel and tourism spending in the GCC grew at a CAGR of 14.1% between 2016 and 2019. Prior to the pandemic, total business spending in the GCC grew at a CAGR of 16.1%, while total leisure spending grew at a CAGR of 13.6% between 2016 and 2019, Alpen Capital said. However, the GCC countries have not been immune to the pandemic with both the business and leisure spending witnessing a windfall in 2020. As economic and health conditions improved across the globe, total business spending in the GCC recovered by 51.2% y-o-y and total leisure spending rose by 36.4% y-o-y in 2021, both higher than the global averages. The UAE accounted for 42% of the total business tourism spending in the region during 2021, the highest in the region, as the country hosted the EXPO 2020 Dubai. It was followed by Qatar (27.6%), and Saudi Arabia (10.6%). The share of business tourism in these three GCC nations have been witnessing significant rise, largely driven by the governments’ efforts to promote themselves as a leading destination for meetings, incentives, conferences, and exhibitions (MICE). On the other hand, UAE also accounted for the highest share of 34.1% of the total leisure tourism spending in the region during 2021, followed by Saudi Arabia (33.2%), and Qatar (19.8%). Within Saudi Arabia, the share of leisure tourism stood to be highest (93%) amongst all the GCC nations during 2021, primarily driven by the government’s ongoing initiatives to broaden its scope beyond religious tourism.

Beyond the Tarmac The oil price has been sliding on concerns of global economic slowdown hurting energy consumption, but the airline industry has little to cheer given elevated prices for jet fuel. Rising energy prices will have an impact on the airline industry’s bottomline as fuel bill accounts for 20-30% of its operating costs. Latest IATA data show the global industry would have to churn out $131.6bn on fuel costs in 2022. So far this year, jet fuel price averaged $142/barrel, the global body of airlines noted. Fuel is a major cost component of operating an airline, which means a rise in energy costs will force airlines either to reduce costs elsewhere or increase fares. “In the current operating environment neither is easy,” points out OAG, a UK-based global travel data provider. Jet fuel prices have long driven airline profitability and the aviation industry as a whole, representing between 14% and as much as 31% of airline operating costs in the past decade, an IATA estimate shows. One report, however, suggests 40% of the raw material cost in any airline, is for jet fuel or aviation turbine fuel (ATF). Consequently, airlines hedge a large portion of their annual fuel consumption at lower oil prices in order to protect themselves from the volatility in oil prices. But given the global economic uncertainties, it is easier said than done. “Because of oil price volatility, we cannot hedge anymore as banks are not ready to hedge. This is because they don’t know where the price is going – north or south,” Qatar Airways Group Chief Executive HE Akbar al-Baker said in Doha recently. “That said, oil price is not in the hands of anyone – it is based on demand and supply and the political climate around the world,” he said. Al-Baker also urged the oil industry to invest more in alternative fuel that will protect the environment. “As I stated, I have no issue in paying a bit more, but I cannot pay four of five times the price of the normal Avgas (aviation gasoline), because it will not be affordable to us. And if we are pushed to do that… you as a passenger are going to pay for it. “This is because airlines’ operate with very low margin. I don’t think there is any other industry in the world that operates with 4% or 5% margin.” In 2021, Qatar Airways committed to using sustainable aviation fuel for at least 10% of combined fuel volumes by 2030, provided that a few suppliers produce more SAF. Speaking on the sidelines of the 41st General Assembly of ICAO, IATA Director General Willie Walsh said: “I think everyone will be familiar with the rising oil price and the impact that energy prices will have on consumers. Starting at the beginning of this year, we saw what we call the crack spread, the difference between Brent (crude price) and the price of jet, widened very significantly. “Although we have seen crude prices ease in recent months, we are still seeing elevated prices for jet fuel, and some of that is understandable, given that the demand reduced significantly in 2020 and 2021. So refining capacity moved away from jet. As that capacity came back online, we would have expected to see this crack spread narrow significantly.” It is still at rates that are significantly elevated from historical rates, which you can see there going back to 2015. Between 2010 and 2019, the average spread was about 18%, so Brent averaged $80 a barrel throughout that 10-year period. “We have seen that spreads go over 60%. At the end of September, it was at 56%. Now it has eased a little bit, but still a very big difference between crude prices and jet prices, which means that we will see costs continue to challenge the industry in 2022, and in 2023,” Walsh noted. Gasoline prices have seen a sustained downtrend over the past three months. Gas prices fell for 13 consecutive weeks, a fresh record. Meanwhile, the Airline Association of Southern Africa (AASA) warned that higher fuel costs and supply shortage may lead to flight disruptions and cancellations in the continent. “The escalation of jet fuel rations throws into sharp focus South Africa’s vulnerability because of its reliance on imported jet fuel,” said AASA. The group called on government and fuel suppliers to move with urgency and put in place a robust and resilient plan to ensure sufficient stocks of aviation fuel are always available. Kirby Gordon, chief marketing officer at FlySafair, said that jet fuel has increased by around 220% over the last year and makes up about 50% of total operating costs – up from 30% previously. “This is a huge deterrent for airlines to expand flights and operations, especially because they have to fly further between economic hubs in South Africa,” he said.