The ongoing conflict in Iran has significantly impacted the aviation industry, with jet fuel prices soaring to unprecedented levels. Since the onset of hostilities in late February, air travel has been severely disrupted, prompting a critical examination of alternative fuel sources. With jet fuel now averaging around $181 a barrel—twice its price prior to the outbreak of conflict—airlines are feeling the financial strain and are being pushed to consider sustainable aviation fuel (SAF) as a viable solution.
Crisis Unfolds as Fuel Costs Surge
The war, ignited by US-Israeli airstrikes, has resulted in a staggering 50% decrease in Europe’s jet fuel inventories. Goldman Sachs has raised alarms, predicting that stock levels may dip below the International Energy Agency’s (IEA) critical threshold of 23 days’ supply by June, with the UK being particularly vulnerable.
As airlines grapple with these escalating costs, major companies are forced to make drastic changes. Lufthansa has announced the cancellation of 20,000 flights through October, while Spirit Airlines has ceased operations entirely after a government bailout failed to materialise. American Airlines is bracing for an additional $4 billion in fuel expenses this year, and Delta is facing a $2 billion increase in costs for the second quarter alone.
The Push for Sustainable Aviation Fuel
The crisis has rekindled interest in sustainable aviation fuel, which is typically derived from used cooking oil, agricultural waste, and captured carbon. Despite its promise, SAF currently accounts for a mere 0.7% of global kerosene consumption, according to the International Air Transport Association. Last year, only two million tonnes of SAF were produced, but projections suggest that the industry must ramp up production to at least 250 million tonnes annually by 2050 to meet net-zero targets.
Frédérique Rigal, co-author of a recent study on aviation decarbonisation, highlights a significant challenge: “While it’s difficult to assess exactly how much could be available, the figures indicate that around 20 million tonnes is the maximum supply of used cooking oil.” This figure is a small fraction of what the industry will require to meet future demands.
Airlines’ Short-Term Fixes and Challenges Ahead
In response to the immediate jet fuel shortage, airlines have turned back to traditional sources. US refiners have increased production, with exports of jet fuel to Europe soaring over 400% to 94,000 barrels per day in April compared to February. Meanwhile, the European Commission has initiated the AccelerateEU programme to optimise fuel distribution across member states.
However, analysts caution that supply chain issues will likely persist for months, regardless of any potential peace agreements. Countries such as South Korea, which supplies over 80% of the US West Coast’s jet fuel imports, face significant challenges due to lost crude shipments from the Middle East.
Alternative fuels like electro-SAF, which use renewable energy to create synthetic kerosene, offer further possibilities. However, Rigal points out that while production capacity is not limited by feedstock, it remains hampered by investment and the maturity of the technology.
The Path Forward: Investment and Commitment
The EU and UK are pressing airlines to blend increasing amounts of SAF into their fuel, with mandates commencing at 1.2% in 2030. Nevertheless, many airlines are advocating for a delay in these targets, citing supply shortages. In a collective response, SAF producers have countered that numerous projects across Europe are nearing final investment decisions and are expected to deliver significant volumes within the established timeline.
Mahesh Roy, programme director for SAF at the Green Finance Institute, notes that the current crisis has altered the discourse around these fuels. “The energy trilemma—security, sustainability, and affordability—has shifted focus,” he explains. The conflict has highlighted the urgency of energy security, prompting airlines to reassess their fuel sourcing strategies.
Airlines that had already secured SAF agreements prior to the crisis are now at an advantage, as their supply chains remain unaffected by Middle Eastern instability. The financial pressures associated with the rising cost of jet fuel are pushing the industry to explore alternative solutions more aggressively.
Why it Matters
The surge in jet fuel prices amid the Iran conflict underscores the vulnerability of global supply chains and the urgent need for the aviation industry to diversify its fuel sources. As airlines face escalating costs and operational challenges, the push for sustainable aviation fuel has transformed from a climate-focused initiative into a critical matter of energy security. The outcome of this situation may reshape the aviation landscape for years to come, potentially establishing a more resilient and environmentally friendly industry in the face of geopolitical uncertainties.