The ongoing conflict with Iran has sent jet fuel prices soaring to their highest levels in years, intensifying financial strain on airlines and renewing interest in sustainable aviation fuel (SAF), commonly derived from used cooking oil, agricultural waste, and captured carbon. Since US-Israeli airstrikes began in late February, tens of thousands of flights have been grounded, and Europe's jet fuel inventories have plummeted by 50 per cent. Goldman Sachs warns that stocks could dip below the International Energy Agency's critical 23-day shortage threshold by June, with the UK deemed most vulnerable.
Financial Fallout for Airlines
Jet fuel now averages $181 per barrel globally—roughly double its pre-war level. Lufthansa has cancelled 20,000 flights through October, while Spirit Airlines collapsed after a government bailout fell through. American Airlines faces an additional $4 billion in fuel costs this year, and Delta anticipates a $2 billion spike in the second quarter alone.
What Is Sustainable Aviation Fuel?
SAF currently accounts for just 0.7 per cent of global kerosene consumption, with around two million tonnes produced last year. The International Energy Agency's net-zero scenario demands at least 250 million tonnes annually by 2050, yet some think-tanks suggest targeting closer to 500 million tonnes. The most accessible feedstock—used cooking oil—is finite, with a maximum global supply of about 20 million tonnes, a fraction of what is needed.
Next-generation SAF from woody waste, agricultural residues, and fermented alcohol is more scalable but not yet commercially viable at meaningful volumes. Frédérique Rigal, co-author of a recent study on aviation decarbonisation, highlights “hard limitations” on scaling up production, including land requirements and existing producers focusing on car fuel rather than aviation. However, the biggest obstacle is airlines' reluctance to commit to purchasing SAF in advance. “Airlines are not moving quickly enough and are not giving enough offtake promises to these projects so that they can be realised,” she says.
Short-Term Responses and Bottlenecks
In the short term, US refiners have ramped up production, with jet fuel exports to Europe surging over 400 per cent to 94,000 barrels per day in April compared to February, according to Kpler data. The European Commission has launched AccelerateEU to optimise distribution among member states. Yet analysts warn that supply chain bottlenecks will persist for months, even if a peace deal is reached. South Korea, which supplies over 80 per cent of the US West Coast's jet fuel imports, has lost crucial crude from the Middle East, threatening West Coast supply.
Electro-SAF: A Synthetic Alternative
Another alternative, electro-SAF or e-SAF, uses green electricity to combine captured carbon with hydrogen from water electrolysis, creating synthetic kerosene. There is no hard upper limit on production, but it remains expensive and constrained by investment and industrial capacity. The EU and UK have set mandates requiring airlines to blend increasing proportions of SAF, with e-SAF submandates starting at 1.2 per cent in 2030. Airlines have called for these targets to be pushed back, citing insufficient supply, but developers disagree. In a collective letter to the European Commission, e-SAF developers stated they “firmly disagreed” with airlines' assessment, noting that “a significant number of eSAF projects are currently under development across Europe” and are progressing towards final investment decisions.
Energy Security and Sovereignty
Mahesh Roy, programme director for SAF at the Green Finance Institute, observes that the crisis has reframed the conversation around SAF from climate change to energy security and sovereignty. The Strait of Hormuz blockade has highlighted the vulnerability of fossil fuel imports. “The energy trilemma—security, sustainability, affordability—now sees security and price driving the debate,” Roy says. Airlines that secured SAF supply agreements before the crisis are now quietly benefiting, as SAF supply chains do not run through the Middle East.
Growing Financial Pressure
Global airline compliance costs under environmental policies—SAF blending mandates, emissions trading systems, and the UN's Corsia scheme—are set to nearly quadruple to $48 billion by 2035, up 256 per cent from 2026, according to BloombergNEF research. European carriers face the heaviest burden, with Ryanair's unit operating costs projected to rise 38 per cent from environmental policies alone by 2035, pushing its margin per available seat-kilometre into negative territory. Airlines may pass higher costs onto passengers, reduce capacity, or reroute long-haul flights from European hubs to avoid compliance costs—a shift that could increase emissions by lengthening journey distances.
Investment and Timeline
The investment required to close the supply gap is staggering. According to the ATAG Waypoint 2050 report, total cumulative capital expenditure for new renewable fuel plants over 2020-2050 ranges from $4.2 trillion to $8.1 trillion—comparable to global oil and gas capital expenditure from 2014 to 2021. Experts say SAF cannot respond to the current crisis, but the direction is clear. Roy estimates it will take “four or five years” before projects currently in development begin producing meaningful volumes. “If you think that the Russian invasion of Ukraine was four years ago, and then if there was another similar shock in about four years' time, those projects that are being planned now—if they can get off the ground and be properly supported—then yeah, that would shift,” he says.
