Recent headlines noting gasoline prices dipping below $3 a gallon have caused many pilots to wonder why avgas prices—which stubbornly remain above $6 a gallon in many locations—aren’t also declining as the price of crude oil frequently settles below $80 a barrel. According to Airnav, the average national price of avgas was $5.82 in mid-November.
There are many reasons why the price of avgas is higher than gasoline, and why avgas prices don’t respond the same way to market changes as gasoline. Volume—or the lack of it—is the primary reason for both. A few years ago, the annual volume of avgas consumed was about equal to one day’s worth of gasoline production; it’s probably less now. FBOs generally pay for fuel when it is delivered and it may take weeks or months to sell a load of avgas. Any price declines won’t be reflected until the next load is delivered. Your local convenience store probably goes through multiple tankers of fuel a week.
The presence of lead in avgas complicates and limits delivery options, further increasing costs. Thanks to a lot of work by AOPA and others, by 2018 we will know what new unleaded fuels will be available to us and can begin what everyone hopes is a relatively seamless transition to a lead-free future.
In the meantime, we’re faced with eye-watering avgas prices. The surge in avgas prices over the past couple of years is painful for two reasons. One, you feel it at every flight. You’re handed a receipt with a big number on it. Can’t avoid noting how much it costs. And two, the price of avgas has risen significantly faster than other day-to-day aviation costs—an exception being the price of new airplanes. Stated another way, the cost of fuel as a percentage of overall costs has risen significantly in recent years, while other costs have remained relatively stable. Premiums for aviation insurance, for example, have been steady to sometimes even declining, for several years. The hourly cost of maintenance—at least in the form of the price paid to the maintenance technician—has been relatively steady for the better part of a decade. Hangar fees in most locations have been relatively stable. Insurance, maintenance, and hangar fees are generally paid monthly or annually—well removed from the experience of flight itself—whereas fuel prices are usually paid on the spot after a flight, making it easy to consider whether the experience was worth it.
At the behest of Congress, the Government Accountability Office in September released a new study relating the cost of fuel—for the airlines and general aviation—to changes in aviation activity. The study noted that the cost of fuel to the airlines quadrupled between 2002 and 2013, whereas the wholesale price of avgas tripled from $1.29 to $3.93 during the same period. The study’s goal was to understand the impact of fuel pricing on future contributions to the Aviation Trust Fund.
Looking at general aviation, the study found that increased fuel prices definitely correlate to a reduction in activity. Not surprisingly, as fuel prices tripled during the decade, general aviation activity at towered airports declined by 31 percent.
The GAO study notes several other reasons for the decline in GA activity—based on reports from other studies, including increased hassles related to security, the dour economic times of the past half decade, the decline in the pilot population, reduction in number of student pilots, the aging of the GA fleet, and the declining number of airplanes.
The impact of the reduced operations ripples across the economic pond. Airport activity declines. Business at FBOs also declined, leading to layoffs and consolidations in the FBO market—with FBO chains becoming more prevalent. According to the National Air Transportation Association, the number of FBOs fell from 3,400 in 2007 to 2,900 in 2012.
So where’s the pony in the room? Energy experts are suggesting that gasoline prices should remain flat or perhaps slightly decline in 2015, mostly as a result of flat crude oil prices. The leveling of oil prices is in part driven by increased U.S. production. With that we can expect little pressure to further increase avgas prices, and might even expect slight declines.
One technique for dealing with avgas prices: Fold the receipt and put it in your wallet without looking at it until the credit card bill is due at the end of the month. Buried in with the mortgage, car loan, cable bill, and tuition payments, it doesn’t look so bad. And flying is a whole lot more fun than watching TV anyhow.
Editor in Chief Thomas B. Haines keeps a credit card on file at the FBO and tries to ignore the numbers on the fuel bill.
Social: Follow Tom on twitter @tomhaines29