Airline fuel is overpriced, and the underlying cost of oil should sit around $52 per barrel, Tim Clark, President of Emirates told CNBC Friday.
“I am one of these people that says it is hugely overpriced. If you are at $77 or $83 dollars (per barrel) it should be at $52. That’s where it needs to be,” Clark said in an interview with CNBC’s Joumanna Bercetche on the side-lines of The Aviation Festival in London.
“Those people, those countries, those entities that say they can’t make money on $52, they need to be doing something else,” he added.
The oil price has risen about 20 percent in 2018, and on Friday morning, Brent crude futures traded at around $76.48. U.S. West Texas Intermediate (WTI) crude futures sat at $67.76.
Clark added that as spot prices for oil were now roughly matching the futures price, the market had sensed the oil price was unlikely to rise further from this point.
“I think fuel is now capped out. The forward curve is flat,” he said before adding “There’s a certain amount of flakiness going forward that fuel will rise above where it is today. That’s my view,” Clark said.
Emirates, which employs approximately 25,000 cabin crew staff around the world, has seen growth hampered by a prolonged period of lower oil prices in recent years — a key driver of wealth in the Gulf region.
Clark said fuel prices for his airline were now running at roughly 44 percent higher than the same time last year. However, he warned however that many oil producers weren’t exhibiting a traditional response to a higher price.
“As the oil producing countries, largely in the Middle East get a benefit of that, historically there was an uptick very rapidly in demand, but we are not seeing that,” Clark said.
He added that many emerging markets and Middle East countries were struggling to match the performance of the United States and global growth looked uncertain.
“One has got to worry a little bit about what is driving all of this. Whether it is an inordinate amount of debt creation and that is likely to take its toll. We saw that ten years ago,” he said.