The Iran war, which began with US-Israeli airstrikes in late February, has grounded tens of thousands of flights and pushed jet fuel to its highest price in years. Europe's jet fuel inventories have fallen by 50 per cent, and Goldman Sachs warned this week that stocks could drop below the International Energy Agency's critical 23-day shortage threshold in June, with the UK identified as most at risk.
Financial Crunch for Airlines
Many airlines are facing a financial crunch as jet fuel averages $181 a barrel globally, roughly double its pre-war level. Lufthansa has axed 20,000 flights through October. Spirit Airlines collapsed after a government bailout fell through. American Airlines faces $4bn more in fuel costs this year, and Delta is looking at a $2bn spike in the second quarter alone.
The crisis has brought renewed attention to the hunt for other fuel sources, particularly sustainable aviation fuel (SAF), typically made from used cooking oil, agricultural waste, and captured carbon. But how close are we to actually flying planes with it?
SAF Production and Limitations
SAF currently makes up just 0.7 per cent of global kerosene consumption, according to the International Air Transport Association. Around two million tonnes were produced last year. The IEA’s net zero scenario requires at least 250 million tonnes of SAF annually by 2050, while some think-tanks say we should be targeting closer to 500 million tonnes.
The most accessible feedstock – used cooking oil – is finite. Frédérique Rigal, co-author of a study on aviation decarbonisation, notes that global supply of waste cooking oil is around 20 million tonnes maximum, a small fraction of what is required by 2050.
The next generation of SAF – made from woody waste, agricultural residues and fermented alcohol – is more scalable but not yet commercially deployed at meaningful volumes. Rigal says the biggest problem is that airlines themselves are not committing to buy 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 Alternatives
Instead of looking to new alternatives, the short-term response from airlines has come from conventional sources. US refiners have stepped up production, with exports of jet fuel to Europe surging more than 400 per cent to 94,000 barrels per day in April compared to February. The European Commission has launched AccelerateEU, which includes measures to optimise jet fuel distribution between EU member states.
Another alternative fuel is electro-SAF (e-SAF), which uses green electricity to combine captured carbon with hydrogen produced from water electrolysis, creating a synthetic kerosene. There is no hard upper limit on how much e-SAF can be produced, but Rigal says it is constrained by investment and industrial capacity.
The EU and UK have set mandates requiring airlines to blend increasing proportions of SAF into their fuel, with e-SAF submandates starting at 1.2 per cent in 2030. But airlines have been calling for those targets to be pushed back, citing a lack of available supply. Producers disagree; in a collective letter to the European Commission, e-SAF developers said they "firmly disagreed" with airlines' assessment, stating that "a significant number of eSAF projects are currently under development across Europe."
Energy Security and Investment
Mahesh Roy, programme director for SAF at the Green Finance Institute, says the crisis has reframed SAF from a climate issue to one of energy security and sovereignty. "The energy trilemma was what they used to talk about – energy security, energy sustainability, and energy affordability," Roy says. "Now you can see that security and price are really driving what people are thinking about."
Airlines that had already secured SAF supply agreements before the crisis are now quietly benefiting, because SAF supply chains do not run through the Middle East. Global airline compliance costs under environmental policies are set to nearly quadruple to $48 billion by 2035, up 256 per cent from 2026, according to BloombergNEF research.
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. For context, total global oil and gas capital expenditure over 2014-2021 was also $4.2 trillion.
Can any of this respond to the current crisis? No, experts say. However, the direction of travel is clear. "It's probably something more like four or five years" before the projects currently in development begin producing meaningful volumes, Roy says. "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."
