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Not just gasoline — experts expect oil price spike to soon impact cost of plane tickets, too – CBC News

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Drivers are very much aware of the higher price to fill up as of late, and experts say air travellers should expect a similar sticker shock soon.

The cost of jet fuel is subject to the same forces that have caused gasoline prices to rise to their highest price in years.

A Bloomberg index of U.S. jet fuel prices shows the price of jet fuel has risen to top $4 US a gallon ($1.35 Cdn per litre) this week — more than twice what it went for as recently as December, and four times the cost prior to the pandemic.

Jet fuel is one of the biggest costs that airlines bear, so experts say that surge will affect the price that travellers pay to fly, if it hasn’t already.

“In terms of airfares, I can’t say that I’ve seen any impact yet [but] I’m sure it’s coming,” said Christine Latremoille with Uniglobe travel agency in Dorval, Que.

Latremoille said airfares have been ticking higher for a while, as 2022 was setting up to be one of the biggest years for travel on record after two years of delayed vacations during the pandemic.

Anyone who hasn’t booked a flight in a while may be in for a surprise, she said. Canadians are no doubt well aware of high inflation pushing up their cost of living, but record-setting demand for travel has pushed prices up even higher than they might otherwise be.

“The airline industry has suffered such losses over the last year and a half,” she said. 

“At some point or another, they were going to recoup their losses.”

And that was before Russia’s invasion of Ukraine caused the price of oil to skyrocket. Because airlines are so vulnerable to the highly volatile oil price, they often try to limit that risk by what’s known as hedging — locking in a dependable supply of jet fuel in advance, for an agreed-upon price.

That strategy cost them in the pandemic, when demand for all the jet fuel they had purchased plummeted. “Coronavirus-driven lockdowns taught airlines why over-hedging can be dangerous,” Bloomberg Intelligence analyst Conroy Gaynor said, so many of them stopped doing it.

A traveller walks past a sign about COVID-19 testing at Pearson airport in Toronto last year. After two years of suppressed demand for travel, vacation plans have come roaring back, say experts. (Carlo Allegri/Reuters)

While it used to do it frequently, Air Canada hasn’t hedged itself on jet fuel for the past two years, company filings show, which makes the airline vulnerable to price spikes such as this one. But a spokesperson for the airline said it has no immediate plans to add new fuel surcharges, or adjust its pricing due to the conflict.

“There are a number of factors that go into airline pricing apart from fuel costs, including … competition, demand, marketing considerations and the type of traffic that a route serves,” Peter Fitzpatrick said.

“We always say ticket pricing is dynamic and that fares can change frequently, both up and down, for these and other reasons [so] one cannot assign any price movements that may occur to any one particular cause.”

A spokesperson for WestJet said it has not “made any deliberate change to our systems in response to the rising cost of fuel,” and added that it currently does not levy any fuel surcharges.

“We are of course monitoring conditions but have made no decisions at this time,” the airline said.

Re-routing around Russia

Latremoille said fuel surcharges are especially problematic in Europe, where they can be double or triple the base price.

“I expect that to go up,” she said, adding that the issue, compounded by airspace restrictions, is likely going to impact summer travel plans.

WATCH | Travellers, experts say it’s time to drop COVID-19 testing requirements:

Calls to drop all COVID-19 testing requirements for travel

10 days ago

Duration 1:49

To enter the country, Canada now requires travellers to provide a rapid antigen COVID-19 test instead of a PCR test, but many travellers and experts say it might be time to drop testing requirements entirely. 1:49

Many routes from Europe and North America bound for Asia would typically fly over Russian airspace as the most efficient way around the globe. But after Russia closed its airspace, not being able to do that is adding costs in the form of excess fuel needed for less efficient routes. Finnish carrier Finnair warned of exactly that this week, with CEO Topi Manner saying virtually all of the airline’s flights to Asia are no longer feasible.

“Bypassing the Russian airspace lengthens flight times to Asia considerably and, thus, the operation of most our passenger and cargo flights to Asia is not economically sustainable or competitive,” he said.

Air Canada recently rerouted a flight to Delhi so that it would no longer fly over Russian airspace, a move that added more time in air and fuel use to a flight that was already 14 hours, Latremoille said. “I’m starting to see a lack of interest in planning anything too far ahead,” she said.

Analyst Tim James with TD Bank said in a note to clients he thinks Canadian airlines are in a good position to weather the current uncertainty because “pent-up travel demand from Canadians will allow airlines to pass through most of the higher fuel costs.” 

Latremoille said that pent-up demand is unlikely to dissipate, even if travellers have to pay a bit more to scratch that itch.

“I’ve been doing this for 40 years and I’ve never seen anything like this demand,” Latremoille said.

“The constant calls … people need to just literally get away.”

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World shares sink after inflation driven retreat on Wall St – Business News – Castanet.net

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Shares declined in Europe and Asia on Thursday after a broad retreat on Wall Street triggered by worries over the impact of persistent high inflation on corporate profits and consumer spending.

U.S. futures were lower, while oil prices advanced.

Germany’s DAX lost 2% to 13,731.64 and the CAC 40 in Paris declined 1.9% to 6,234.78. Britain’s FTSE 100 shed 1.7% to 3,537.99. The future for the S&P 500 was 1% lower while the future for the Dow Jones Industrial Average sank 0.9%.

The Dow industrials sank more than 1,100 points, or 3.6% on Wednesday, and the S&P 500 had its biggest drop in nearly two years, shedding 4%. That was its steepest decline since June 2020. The tech-heavy Nasdaq fell 4.7%.

The benchmark index is now down more than 18% from the record high it reached at the beginning of the year. That’s just shy of the 20% decline that’s considered a bear market.

“The sentiment in the market is highly negative as traders and investors are largely concerned about an economic downturn and soaring inflation,” Naeem Aslam of Avatrade said in a commentary.

The Federal Reserve is trying to temper the impact from the highest inflation in four decades by raising interest rates. Many other central banks are on a similar track. But the Bank of Japan has stuck to its low interest rate policy and the gap between those benchmark rates of the world’s largest and third-largest economies has pushed the dollar’s value up against the Japanese yen.

Japan reported a trade deficit for April as its imports ballooned 28%. The shift reflects surging energy costs amid the war in Ukraine and a weakening of the yen against the U.S. dollar.

Japan’s exports grew to 8.076 trillion yen ($63 billion) last month, up 12.5% from the previous year, according to Ministry of Finance data released Thursday. Imports totaled 8.915 trillion yen ($70 billion) in April, up from 6.953 trillion yen in April 2021, and the highest since comparable numbers began to be taken in 1979.

The Nikkei 225 in Tokyo lost 1.9% to 26,402.84 and the Hang Seng in Hong Kong dropped 2.5% to 20,120.60. In South Korea, the Kospi shed 1.3% to 2,592.34, while Australia’s S&P/ASX 200 gave up 1.7% to 7,064.50.

The Shanghai Composite index reversed earlier losses, gaining 0.4% to 3.096.96.

On Wednesday, retailer Target lost a quarter of its value after reporting earnings that fell far short of analysts’ forecasts. Inflation, especially for shipping costs, dragged its operating margin for the first quarter to 5.3%. It had been expecting 8% or higher.

The company warned that its costs for freight this year would be $1 billion higher than it estimated just three months ago.

The report comes a day after Walmart said its profit took a hit from higher costs. The nation’s largest retailer fell 6.8%, adding to its losses from Tuesday.

Target and Walmart each provided anecdotal evidence that inflation is weighing on consumers, saying they held back on purchasing big-ticket items and changed from national brands to less expensive store brands.

The weak reports stoked concerns that stubbornly rising inflation is putting a tighter squeeze on a wide range of businesses and could cut deeper into their profits.

Other big retailers also have racked up hefty losses.

The data are not entirely consistent. On Tuesday, the market cheered an encouraging report from the Commerce Department that showed retail sales rose in April, driven by higher sales of cars, electronics, and more spending at restaurants.

Investors worry the Fed could trigger a recession if it raises interest rates too high or too quickly. Worries persist about global growth as Russia’s invasion of Ukraine puts even more pressure on prices for oil and food while lockdowns in China to stem COVID-19 cases worsens supply chain problems.

In other trading, benchmark U.S. crude oil rose 56 cents to $110.15 per barrel in electronic trading on the New York Mercantile Exchange. It dropped $2.81 to $109.59 on Wednesday.

Brent crude, the basis for pricing for international trading, climbed $1.19 to $110.30 per barrel.

The dollar fell to 128.14 Japanese yen from 128.20 yen late Wednesday. The euro strengthened to $1.0481 from $1.0464.

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Gold prices holding at session highs as U.S. existing home sales fall 2.4% in April – Kitco NEWS

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(Kitco News) – The gold market continues to trade near session highs, supported by more disappointing economic data. Rising interest rates continue to cool down the U.S. housing market as fewer consumers purchased home last month, according to the latest data from the National Association of Realtors (NAR).

Existing home sales fell to a seasonally adjusted and annualized rate of 5.61 million units last month, down 2.4% compared to March’s annualized rate of 5.75 million homes, the NAR said on Thursday. Market consensus projections called for existing home sales to fall only slightly to 5.65 million.

For the year, home sales are down 5.9%, the report said.

The gold market has seen some renewed technical buying momentum, which has been supported by weaker-than-expected economic data. June gold futures last traded at $1,842.40 an ounce, up nearly 1.5% on the day.

The U.S. housing sector has faced some challenging headwinds as the Federal Reserve looks to aggressively raise interest rates, which in turn is pushing mortgage rates higher.

“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” said Lawrence Yun, NAR’s chief economist. “It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years.”

Yun noted that the falling sales space is helping to boost the supply of existing homes. The report said that the inventory of homes for sale totaled 1,030,000 in April, representing a 2.2-month supply.

Although sales are down, Yun said that home prices still remain elevated.

“The market is quite unusual as sales are coming down, but listed homes are still selling swiftly, and home prices are much higher than a year ago,” he said.

The report said the median existing-home price for all housing types in April was $391,200, up 14.8% from April 2021.

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Ford recalling 350,000 SUVs due to unexplained engine fires, including some sold in Canada – CBC News

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Ford is asking the owners of 350,000 SUVs from the 2021 model year to take them to dealers for repairs because the engines can catch fire.

Ford says in U.S. government documents posted Thursday that it doesn’t know what’s causing fires in some Ford Expedition and Lincoln Navigator SUVs from the 2021 model year.

2863 of the vehicles were sold in Canada: 2,354 Expeditions, and 509 Navigators.

Owners are being advised to park them outside if possible because engine fires have been reported even when the vehicles were not in use.

Ford has reports of 16 fires under the hood, 12 of which started when the engine was off. One person was burned.

Trying to notify customers

So far it hasn’t developed a repair for the fires, which appear to start at the back of the engine compartment on the passenger side.

Ford says it’s treating the recall urgently and will use apps and mail to notify customers as soon as it develops a list of vehicle owners and addresses.

“We are working around the clock to determine the root cause of this issue and subsequent remedy so that customers can continue to enjoy using their vehicles,” Jeffrey Marentic, general manager of Ford passenger vehicles, said in a statement.

Ford began investigating fire reports on March 24. It says the fires appear to be limited to SUVs built from Dec. 1, 2020 to April 30, 2021. The company says it has no fire reports from vehicles built before or after those dates.

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