The ongoing conflict in Iran has dramatically escalated jet fuel prices, placing significant financial strain on airlines and sparking renewed interest in sustainable aviation fuels (SAF). As costs soar to levels not seen in years, the aviation industry is under increasing pressure to explore alternative fuel sources, particularly those derived from waste materials. Experts advocate for investment in these technologies, suggesting they could offer a pathway to a more sustainable future for air travel.
Rising Costs and Supply Shortages
Since the onset of hostilities in late February, the Iranian conflict has severely disrupted air travel, leading to the cancellation of tens of thousands of flights. The impact on jet fuel prices has been substantial, with global averages climbing to approximately $181 per barrel—nearly double the pre-war figures. Compounding the issue, Europe’s jet fuel inventories have plummeted by 50%, raising alarms as analysts warn that supplies could fall below the International Energy Agency’s (IEA) critical threshold of 23 days by June, with the UK being particularly vulnerable.
Airlines are grappling with the financial repercussions of these surging costs. Major carriers are making drastic operational changes: Lufthansa has scrapped 20,000 flights through October, while American Airlines anticipates an additional $4 billion in fuel expenses this year. Delta Air Lines is also bracing for a $2 billion increase in fuel costs within the next quarter alone. This financial turmoil has reignited discussions around the feasibility of alternative fuels, specifically sustainable aviation fuels, which have been on the industry’s radar for some time.
The Promise of Sustainable Aviation Fuels
Sustainable aviation fuel, primarily produced from used cooking oil, agricultural waste, and captured carbon, currently accounts for merely 0.7% of global kerosene consumption. Last year, around two million tonnes of SAF were produced; however, the IEA’s net zero scenario envisions a staggering requirement of at least 250 million tonnes annually by 2050. Some experts argue that the target should be even higher, at approximately 500 million tonnes.
Frédérique Rigal, a researcher focused on aviation decarbonisation, notes that while waste cooking oil remains the primary feedstock for SAF, its availability is limited. “The literature suggests a maximum of around 20 million tonnes of waste cooking oil could be available globally,” she explains. This is a small fraction of what will be needed to meet future demands.
Emerging next-generation SAF, which can be made from woody biomass and fermented alcohol, shows promise for scalability but is yet to be rolled out at significant volumes. Rigal highlights the hurdles in accelerating SAF production, including land requirements and the current alignment of fuel production facilities, which are predominantly designed for road transport fuels rather than aviation. A critical factor in the slow adoption has been the lack of commitment from airlines to pre-purchase SAF, which hampers the viability of new projects.
Short-Term Solutions and Future Prospects
In the short term, airlines have turned to traditional sources to mitigate the fuel shortage. US refiners have ramped up output, with jet fuel exports to Europe increasing by over 400% in April compared to February levels, according to Kpler data. Additionally, the European Commission has initiated the AccelerateEU programme to optimise jet fuel distribution among member states. However, analysts caution that supply chain disruptions will likely persist for several months, irrespective of any potential resolution to the conflict.
Another alternative gaining traction is electro-SAF (e-SAF), produced by combining captured carbon with hydrogen derived from water electrolysis using renewable electricity. Unlike conventional SAF, there are no hard limits on the production of e-SAF, but its development is currently constrained by investment levels and industrial capacity, alongside the need for technological advancements.
The regulatory landscape is evolving, with the EU and UK implementing mandates for airlines to incorporate escalating proportions of SAF into their fuel mix. Despite these initiatives, many airlines have called for the delays of these targets, citing insufficient supply. However, SAF developers contend that numerous projects are in the pipeline and nearing final investment decisions, poised to deliver significant volumes within the stipulated timelines.
Mahesh Roy, programme director for SAF at the Green Finance Institute, asserts that the current crisis has shifted the dialogue surrounding SAF from purely environmental considerations to encompass energy security and sovereignty. “The conversation has evolved; it’s not just about sustainability anymore but also about affordability and security,” he states.
The Financial Imperative for Change
The economic pressures on airlines to accelerate their transition to SAF are intensifying. Compliance costs associated with environmental regulations, including SAF blending mandates and emissions trading schemes, are projected to surge to $48 billion by 2035—an increase of 256% from 2026 levels. With jet fuel prices on a significant upward trajectory, the industry is being compelled to reconsider its long-term fuel strategies.
European airlines are facing the brunt of these challenges, with Ryanair projecting a 38% increase in unit operating costs due to environmental policies by 2035. Consequently, airlines may resort to passing these costs onto consumers, reducing capacity, or altering long-haul flight routes to mitigate compliance expenses, potentially leading to longer flight durations and increased emissions.
The investment required to bridge the supply gap for sustainable fuels is monumental. Estimates from the ATAG Waypoint 2050 report suggest total capital expenditure for new renewable fuel plants could range from $4.2 trillion to $8.1 trillion between 2020 and 2050. For comparison, the entire capital expenditure for global oil and gas projects from 2014 to 2021 was also around $4.2 trillion.
While experts agree that immediate solutions are unlikely to materialise in response to the current crisis, the trajectory for SAF development is becoming clearer. Roy estimates it could take four to five years before currently planned projects yield significant output, urging the need for sustained support and investment to ensure the aviation sector can navigate future disruptions.
Why it Matters
The soaring prices of jet fuel stemming from geopolitical tensions underscore the urgent need for the aviation industry to pivot towards more sustainable fuel options. The transition to sustainable aviation fuels not only presents an opportunity to mitigate the environmental impact of air travel but also addresses critical issues of energy security and economic resilience. As airlines face mounting pressures from rising costs and regulatory requirements, the push for alternative fuels has never been more essential. The choices made in the coming years will fundamentally shape the future of air travel, influencing both the industry’s carbon footprint and its financial viability in an increasingly volatile global landscape.
