The ongoing conflict in Iran has sent jet fuel prices spiralling to unprecedented levels, with airlines grappling with financial turmoil as costs have surged to an average of $181 per barrel—approximately double what they were before the outbreak of hostilities. As the aviation industry confronts this crisis, experts are urging a shift towards cleaner fuel alternatives, primarily Sustainable Aviation Fuel (SAF), which could significantly reduce the environmental impact of air travel. However, the road to widespread adoption remains fraught with challenges.
The Current Crisis: A Catalyst for Change
Since the onset of the Iran war in late February, which began with US-Israeli airstrikes, the aviation sector has seen a dramatic reduction in flight operations and a steep decline in jet fuel inventories across Europe. Recent reports indicate that European jet fuel supplies have plummeted by 50%, with Goldman Sachs raising alarms that stocks may fall below critical thresholds set by the International Energy Agency (IEA) as soon as June—particularly jeopardising the UK’s aviation sector.
The financial ramifications for airlines have been severe. Lufthansa has already announced the cancellation of 20,000 flights through October, while Spirit Airlines has collapsed after a government bailout failed to materialise. American Airlines is projected to face an additional $4 billion in fuel expenses this year, while Delta Air Lines anticipates a $2 billion increase in their second-quarter costs alone. This sudden pressure on fuel prices has reignited discussions about the viability of SAF, which is primarily produced from waste cooking oil and agricultural residues.
Sustainable Aviation Fuel: The Potential and the Pitfalls
Currently, SAF accounts for a mere 0.7% of global kerosene use, with around two million tonnes produced last year. To meet the IEA’s net-zero scenario by 2050, production needs to skyrocket to a staggering 250 million tonnes annually, with some experts advocating for even higher targets of up to 500 million tonnes. The most common source for SAF—used cooking oil—holds limited potential; estimates suggest a maximum of 20 million tonnes could be available globally.
The next generation of SAF, derived from woody waste, agricultural leftovers, and fermented alcohol, offers greater scalability but remains largely undeployed at commercial levels. Frédérique Rigal, co-author of a recent study on aviation decarbonisation, highlights significant obstacles to scaling production, including the need for substantial land and the current focus of producers on fuels for cars rather than planes. Most critically, airlines have yet to commit to purchasing SAF in advance, which hampers the development of production projects.
Short-Term Reactions and Long-Term Solutions
In the short term, airlines have turned to traditional fuel sources to mitigate the crisis. US refiners have ramped up production, resulting in a staggering 400% increase in jet fuel exports to Europe compared to earlier this year. Meanwhile, the European Commission has initiated the AccelerateEU programme to optimise jet fuel distribution among member states. However, analysts caution that supply chain bottlenecks will persist, even with a potential peace agreement.
A promising alternative is electro-SAF (e-SAF), which combines captured carbon with hydrogen derived from water electrolysis, yielding a synthetic kerosene that can be produced in virtually limitless quantities. While e-SAF holds significant promise, it faces its own set of challenges, including high costs and the need for technological advancements.
The EU and UK have enacted mandates requiring airlines to incorporate increasing percentages of SAF into their fuel mix, starting with a sub-mandate for e-SAF set at 1.2% by 2030. Yet, airlines are pushing for these targets to be delayed, citing supply shortages. In response, e-SAF developers assert that numerous projects are advancing throughout Europe and are on track to meet the proposed timelines.
Changing Perspectives on Energy Security
Mahesh Roy, programme director for SAF at the Green Finance Institute, notes that the current crisis has shifted the narrative surrounding SAF from a focus solely on climate change to a broader conversation about energy security and sovereignty. The industry’s historical concerns about balancing energy security, sustainability, and affordability are now being reframed through the lens of rising prices and supply uncertainties.
Airlines that secured SAF agreements prior to the crisis are now finding themselves in a more advantageous position, as their supply chains remain unaffected by Middle Eastern turmoil. The urgency to transition to alternative fuels is intensifying, not only due to the escalating costs of conventional jet fuel but also because compliance with environmental regulations is projected to inflate global airline costs substantially.
Why it Matters
The aviation industry stands at a crucial crossroads. As the effects of geopolitical conflicts ripple through fuel markets, the pressing need for sustainable alternatives has never been clearer. The global push for SAF could serve not only as a means of mitigating climate impact but also as a vital strategy for enhancing energy security. With financial pressures mounting, the industry must accelerate its commitment to cleaner fuels, ensuring that it not only adapts to current crises but also paves the way for a sustainable future in air travel. The choices made today will shape the landscape of aviation for generations to come.