Why Have the Shares of Royal Caribbean, Carnival and Norwegian Cruise Lines All Blown Up Today?

Carnival Corporation, Royal Caribbean and Norwegian Cruise Line Holdings all saw their stock prices rise in the early hours of Tuesday's trading session.
QUARRY BAY, Hong Kong - May 1, 2022 - PRLog -- The Royal Caribbean was up 4%, Carnival Corporation was up 4.1% and Norwegian Cruise Lines was taking the industry higher with a 5% gain.

Once again, oil is at the root of the problem. Crude oil prices soared over $130 a barrel early last week, crushing cruise line stocks. However, as oil prices have fallen West Texas Intermediate crude (WTI) is down nearly $30 a barrel, or 24%, to $96 since last Tuesday), cruise line stocks have slowly rebounded. WTI prices are down 7% from Monday's closing, while Brent crude prices are down 6.5%.

This is reasonable. Oil for fuel, notably ultra-low sulphur marine diesel is one of the most expensive aspects of running a cruise line, accounting for anywhere from 12 to 19.5% of operating costs. (Carnival, for example, pays up to $2 billion per year for it.) As a result, if oil prices fall, cruise line stocks will benefit. Additionally, as CNBC reported this morning, several airlines raised their revenue forecasts this morning, "saying air travel is rebounding from the earlier slump induced by the spread of the COVID-19 Omicron variant." Because passengers must often fly to their ports before boarding an ocean cruise, a rebound in airline ticket demand could presage improved cruise vacation bookings.

However, don't get too happy about lower oil prices since they won't always or even immediately convert into lower fuel expenditures at the corporate level. According to CNBC, airplane fuel costs have risen by 35% in the first three months of this year. The scenario appears to be similar when it comes to the per-gallon cost of marine diesel, which, as you can see, is still rather expensive.

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