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- [00:00]
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- [00:58]
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- [01:54]
The Economist Host
The economist.
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Rosie Blore
Hello and welcome to the Intelligence from the Economist. I'm Rosie Blore.
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The Economist Host
And I'm Jason Palmer.
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Rosie Blore
Today on the show, how airlines are coping with the fuel shock and why some Caribbean islanders label Colombia a colonizer.
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Narrator/Reporter
But first,
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Rosie Blore
This week, Britain's Prime Minister, Sir Keir Starmer, is battling for his political future.
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Keir Starmer
I know that people are frustrated by the state of Britain, frustrated by politics, and some people frustrated with me. I know I have my doubters and I know I need to prove them wrong. And I will.
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Rosie Blore
The Labour Party performed even worse at last week's local elections than some were expecting. MPs are circling. One has already said she'll try to trigger a challenge if no current cabinet ministers do so in a speech this Morning, the Prime Minister hit every spot on the bingo card of political leadership reset.
- [03:18]
Keir Starmer
We're battling reform and the Greens, but at a deeper level, we're battling the despair on which they prey.
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Rosie Blore
Fighting words, most of which we've heard before. But it'll be hard to talk his way out of the events that precipitated this crisis.
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Owen Winter
Labour suffered a catastrophic set of elections last week, probably some of the worst local elections in the party's history. The Conservatives also did quite badly, and Reform uk, Nigel Farage's party, were the biggest beneficiaries, along with the Green Party.
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Rosie Blore
Owen Winter is a political correspondent for the Economist.
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Owen Winter
It's felt for a long time, like Keir Starmer is on borrowed time. He's felt incredibly weak for months and months. So whether he goes this week or in six months time, or even in three years time, it's looking increasingly likely that someone else will lead the Labour Party into the next general election.
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Rosie Blore
Just remind us what these elections were actually for and how devastating a night it was. First of all, for Labour and the
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Owen Winter
Conservative Party, the elections last week were for local elections in England. So those are local councils which control things like bin collections and social care and other local policies, as well as devolved parliaments in Scotland and Wales. For Labour, they were particularly painful because the party did so badly in traditional heartlands, so places like Wigan, Salford, Halton, places that the Labour Party has held for decades, if not centuries. The party lost virtually all their councillors, so around 1500 councillors in England. They also lost pretty spectacularly in Wales. So Eleonid Morgan, the First Minister, lost her seat, which is quite a historic moment, given that the party has held Wales since 1922 and they've held the devolved parliament there since its inception in 1998, both in political terms, in terms of how many councils they control and how much power they have in devolved government. These were bad elections for Labour. But on an emotional level, I think Labour politicians will be reeling from some of the places that have a kind of emotional resonance for the Labour Party that they've lost.
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Rosie Blore
And the Tories also lost over 500 seats. So where have all those seats gone from the two big parties?
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Owen Winter
Yes. So the biggest beneficiaries of this election were Reform uk. To some extent, that's to be expected. When most of these elections were last contested, Reform UK was virtually non existent. Since 2022, they have surged in the polls. They're now in first place in opinion polls, so we knew that they were going to be on for a good night. But the scale of their victories, I think, is quite impressive. They've won areas where a predecessor, the Brexit party or Ukip, never had any seats at all. And Nigel Farage is now saying that this shows they're on track for a Parliament parliamentary majority. I would maybe take that with a pinch of salt. The results weren't necessarily a landslide, so political scientists estimate this figure, which they call the national equivalent vote, which is a kind of measure of what would happen if these local elections were held everywhere in the country. And they reckoned that Reform UK won somewhere around 26 or 27% of the vote. So that's far ahead of the other parties, but it's not an overwhelming popularity. And then the other main beneficiaries of this week's elections were the Green Party. So they've done particularly well in inner London, in hipsterish, educated, diverse young wards in the centre of the capital. They've won dozens of seats off Labour and won for the first time, elected mayors in Hackney and Lewisham.
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Rosie Blore
And how much do the defeats in Scotland and Wales actually matter?
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Owen Winter
So Labour's defeat in Wales is probably the most historic because Plaid Cymru, which is Wales Nationalist Party, has won the election in Wales for the first time in Welsh history. So this is a big step forward for Welsh nationalism. They defeated native Reform uk, who were hoping to do well in Wales by consolidating the left. They will probably form an administration there with a Plaid Cymru First Minister. In Scotland, things were slightly less interesting. Everyone really expected the SNP to win the election. That's not because the Scottish Nationalist Party is particularly popular. Their vote share fell quite substantially. But the Unionist parties in Scotland are fragmented and divided, particularly with the arrival of Reform uk, who were challenging Scottish Labour for second place, which meant that the SN could cruise to victory even with a reduced vote share.
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Rosie Blore
Now, Owen, as you said, this is devastating, particularly for the Prime Minister, Keir Starmer. There was already a massive amount of pressure on him.
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Narrator/Reporter
Is it over for him?
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Owen Winter
Well, that's the million dollar question, and I don't think we can say at the time of recording he is still in post. So far, I think around 30 to 40 Labour MPs have called for him to resign. A lot of those are the kind of usual suspects, left wing MPs who didn't particularly like Keir Starmer to begin with. But there are starting to be some noises from different wings of the party that Keir Starmer should consider resigning. In Parliament and in Cabinet, there are potential leadership candidates who are positioning themselves ready for a potential leadership election. So under Britain's parliamentary system, that doesn't necessarily mean there'll be a general election, but there could be an internal process within the Labour Party to pick a successor to Keir Starmer.
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Rosie Blore
And whether he survives the week or not, it's going to be clearly a very rocky ride this week. What can we expect to see?
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Owen Winter
Well, so much of this depends on the emotional response of Labour MPs to what is a traumatic election loss. So MPs will return to Westminster on Wednesday, and you can expect the Tea Rooms and the bars of Parliament to be full of gossip and planning and backstabbing and leadership campaign planning. So, you know, it's hard to say at the outset how that will turn out, but what tends to happen in these situations is MPs will, once they decide to move, things will move very quickly. So it could be that Keir Starmer looks secure one day and is not the next. Or perhaps he will defy expectations and survive much longer. But it's looking increasingly likely that someone else will lead the Labour Party into the next general election.
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Rosie Blore
Owen, thank you very much.
- [09:32]
Owen Winter
Thank you.
- [09:43]
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- [10:40]
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- [11:57]
The Economist Host
It's not just the price at the petrol station pump that's gone up because of the Iran war. You ever seen the bill for topping up an Airbus A320?
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Simon Wright
Since the conflict with Iran began, the cost of filling up a plane has roughly doubled.
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The Economist Host
Simon Wright is our industry editor.
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Simon Wright
That's put pressure on airlines everywhere. We've seen one in America, Spirit Airlines finally go out of business. Other airlines have put up ticket prices, added fuel surcharges and cancelled flights that would no longer have been priced profitable.
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The Economist Host
So we have of course talked a lot on the show about oil and what's happened with prices. Talk me through how it's different with jet fuel, how the jet fuel market works.
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Simon Wright
Well, jet fuel is not unlike oil in that it's produced locally but also globally traded demand is about 7.8 million barrels a day in 2025, according to Society General Bank. And of that, 2 million was internationally traded and 360,000 barrels a day were coming through the Straits of Hormu. So that's one element that has now been taken out the equation. But also because much of the crude oil that comes through the Straits of Hong Roos goes to Asian refiners who would turn that crude partly into jet fuel. That's created a further shortfall of perhaps 800,000 barrels a day in May. And if you add those two together, that adds up to roughly 15% of total demand.
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The Economist Host
And that is enough to put pressure on airlines because fuel is their biggest cost. You've told me in the past.
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Simon Wright
Pretty much, yes. And it differs between airlines. For network airlines, it's probably 20, 25%. For low cost airlines, it's a much bigger part of their bill. And there's a long list of airlines that have cut flights all over the world. In Europe, Lufthansa and Air France, KLM and America, United and Delta, VietJet and AirAsia in Southeast Asia have all announced cuts to schedules. In fact, in the second half of April, the volume of global seats scheduled for May fell by 2 million to 130 million. But there's a strange twist to this tale. According to Goldman Sachs, the number of flights is still set to increase by 3 to 6% in the summer compared with last year, which is less than would have been scheduled, but still an increase. And you might ask yourself, what's going on? If the airlines can foresee a shortage of jet fuel, why are they still scheduling these flights?
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The Economist Host
Well, let me ask you that then. Why are they?
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Simon Wright
Well, the main explanation is that airlines really don't know what's going to happen in the future. It's very hard to tell what's going to happen with jet fuel. But at the same time, the last thing they want to do is look like they're not optimistic because they need to keep selling tickets to maintain cash flow and to keep their customers and investors happy. The first airline that says, right, we're going to cut lots of flights because we're a little bit unsure about fuel, will be eaten up by competitors who won't do that. But what also remains unclear is where shortages will hit first and where they'll hit hardest.
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The Economist Host
Why is that? What's the geographic spread of where the pain is coming?
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Simon Wright
Well, it's because there's a combination of factors going on here. One is that some countries produce oil and refine their own jet fuel within those countries. But also other places rely much more heavily on traded fuel. America, the world's biggest aviation market, is likely to remain well supplied. The country's a big oil producer and refiner. But even then it's not entirely immune because stocks are running down on the West Coast. That area is not connected to the web of jet fuel pipelines between refineries and airports and suppliers east of the Rocky Mountains. Some 85% of the imports, in fact, come from South Korea. The impact on Europe and Asia, which are more exposed in America, is also slightly uneven. Again, Europe burns 1.6 million barrels a day of jet fuel, but imports around a third of its needs, and three quarters of that had come from the Gulf. But again, it's a very mixed picture. Whereas Britain imports around 65% of the jet fuel, Greece and the Netherlands are net exporters. And the outlook in Asia is similarly mixed. China's a large exporter. It introduced curbs on exports. It's sort of uncertain exactly where they lie at the moment, but it's possible that it's going to leave the likes of Australia and Vietnam facing shortages unless they stump up the increased cost of getting jet fuel from elsewhere.
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The Economist Host
Well, about that. What about strategic reserves, about rationing, about changing who gets how Much are we at that stage yet?
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Simon Wright
Well, again, this differs widely, but looking at Europe, it's a sort of a case in point. The continent as a whole holds around 38 days of commercial stocks. That climbs to 57 days once you take into account government reserves. But in individual countries it's sort of different. Britain has no strategic reserves and now the stocks are just 28 js of jet fuel. Portugal figures fall to 23 days. And that's the level at which the International Energy Agency, an intergovernmental body, reckons that rationing starts to be required.
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The Economist Host
And as you say, if it is this sort of uneven around the world, what sort of adjustments can be made in the supplies by, you know, changes in the trade or which ships go where with what?
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Simon Wright
Well, the jet fuel will go to the highest bidder. Shifts in trade flows since the start of the war have complicated matters. Those high prices have incentivised American refiners to start producing more jet fuel. Seaborne exports from the country have grown by 3/5 since the outbreak of hostilities to 280,000 barrels a day. A little under half of that is now coming to Europe, compared with just a trickle beforehand. European airlines are probably typically prepared to pay more for jet fuel on the whole. And American exports to Asia have all but ceased. Carriers in that region might get some relief by tapping Indian refiners, which probably can't supply European customers because of the use of sanctioned Russian crude as a feedstock. But on the other hand, there's talk that the Indian government might start to limit exports itself. And I think as shortages loom, what we'll see is that jet fuel will go to the highest bidder. I talked about Vietnam and Australia earlier. I'm sure Australia will be prepared to pay the higher prices. Vietnam, with low cost carriers, low margins, probably can't afford to pay high prices for jet fuels. Forest airlines and still make a profit. Again, it's a mixed picture.
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The Economist Host
To finish up here, give me your best case and your worst case for how this actually shakes out.
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Simon Wright
The best case scenario is the Strait of Hormuz opens tomorrow, there'll be some minor disruptions. Eventually jet fuel will get back to pre conflict levels and we'll sort of forget any of this happened. I think in the worst case scenario it remains shut. The real problem is there's no visibility for airlines. They note sort of May is probably going to be okay, but the big flying season starts in June and July and it's unclear what the price and availability of jet fuel will be in the worst case scenario, by taking out the amount of jet fuel from the market that's likely to disappear, we will see cancellations of flights around the world. And I think there's a distinct possibility that the financial pressures will force other weaker airlines to the war and indeed join spirit in the afterlife.
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The Economist Host
Simon, thanks very much for your time.
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Simon Wright
Thank you, Jason.
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Narrator/Reporter
The island of San Andres is one of Colombia's most popular tourist destinations.
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Rosie Blore
Claire McHugh writes about the Americas.
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Narrator/Reporter
Last year, more than 1 million people, mostly Colombians, arrived to swim in the sea of seven colors and feast on seafood. Yet most are unaware of the island's mounting problems and the growing discontent of its residents. Just out of sight of those pristine white sand beaches, there's mounds of rubbish piled up. And next door is an overcrowded prison that dumps sewage into the sea, which is a marine protected area. Corruption is rife and unemployment is high. So many locals turn to drug smuggling to make ends. And with drug counts comes violence. The island's Afro Caribbean residents, called the Ricels, blame Colombians from the mainland for their predicament. The activists I spoke to accused Colombia of environmental destruction, of appropriating land that they say belongs to them, of taking scarce jobs and ultimately erasing their cultural identity. English Puritans and enslaved Africans were the first to settle on the archipelago in the 17th century, and the creole speaking Raisals are their descendants. And in the island's main library, I met Sol, who's a bubbly, passionate advocate for ricel culture.
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Sol (Ricel Advocate)
I don't know if the word is independence, but we need to be free from the colonizer. You don't have Colombia, but we need to understand how and what would be the implication of the freedom.
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Narrator/Reporter
In 1991, Colombian's constitution recognized Ricel's ethnic rights and granted them more power and autonomy. Yet the community on San Andres complains of scant improvements.
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Sol (Ricel Advocate)
So we don't need a paper to say you have autonomy to dance. No, we need autonomy to elect or president or whoever you're gonna be.
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Narrator/Reporter
Documents leaked in 2012 revealed that Colombian intelligence had actually been surveying rice or leaders on the basis of national security. And that report emphasized the need to keep the islanders in the minority. Such information fuels radical ideas. One is that San Andreas might detach itself from Colombia and make a free association with another Caribbean nation. That seems unlikely. The majority of San Andreas is not Raisal but Spanish speaking Colombian. And they would would not support dumping Colombia. Colombia's left wing president, Gustavo Petro, is sensitive to the Reissel's demands, but during the course of his presidency, has wanted to decolonize the country. So this makes the Reissel's demands, who say that Colombia is the colonizer, rather awkward. In 2023, Petro appointed five Reichsler vessels as Colombia's ambassadors to Caribbean nations, recognizing their historical ties with the region. That was not enough for activists like Seoul, but it is probably as much as she can hope for.
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Rosie Blore
That's all for this episode of the Intelligence See you back here tomorrow.
- [24:14]
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