The ongoing conflict in Iran has sparked a dramatic surge in jet fuel prices, now at their highest levels in years, prompting airlines to consider alternative fuel sources. With financial pressures mounting, experts highlight the potential of sustainable aviation fuel (SAF), primarily derived from used cooking oil, but warn that significant investment is crucial for large-scale deployment.
The Fuel Crisis Deepens
Since the onset of the US-Israeli airstrikes in late February, the aviation industry has faced unprecedented challenges. Jet fuel prices have doubled, currently averaging $181 per barrel globally, sending shockwaves through airline operations. The situation is particularly dire in Europe, where jet fuel inventories have plummeted by 50 per cent, raising concerns that stocks could fall below critical levels by June. Goldman Sachs has identified the UK as particularly vulnerable, with many airlines now grappling with financial instability.
Airlines have begun to make drastic cuts in response. Lufthansa has announced the cancellation of 20,000 flights through October, while Spirit Airlines has collapsed after a failed government bailout. American Airlines is bracing for an additional $4 billion in fuel costs this year, while Delta anticipates a $2 billion increase in the second quarter alone.
The Quest for Sustainable Aviation Fuel
In light of the crisis, the conversation around sustainable aviation fuel has intensified. While SAF is made from various feedstocks, including agricultural waste and captured carbon, used cooking oil remains the most accessible option. However, the current production of SAF is a mere 0.7 per cent of global kerosene consumption, with only two million tonnes produced last year. Experts estimate that to meet net zero targets, annual SAF production must reach between 250 and 500 million tonnes by 2050.
Frédérique Rigal, a co-author of a recent study on aviation decarbonisation, highlights the limitations of used cooking oil, noting that its supply is finite. Current estimates suggest a maximum availability of around 20 million tonnes globally. The next generation of SAF, derived from woody waste and fermented alcohol, presents a more scalable solution but has yet to be commercially implemented in significant quantities.
Airlines’ Short-Term Responses
In the short term, airlines have turned to conventional sources to mitigate the crisis. US refiners have increased production, with exports of jet fuel to Europe soaring 400 per cent in April compared to February. Meanwhile, the European Commission has initiated the AccelerateEU programme to optimise fuel distribution among member states. However, analysts warn that supply chain bottlenecks will continue even if peace is restored.
Alternative fuels like electro-SAF, which utilises green electricity and captured carbon, also show promise. While the potential production of e-SAF is theoretically limitless, investment and industrial capacity remain significant hurdles. The EU and UK have set mandates requiring airlines to incorporate SAF into their fuel mix, but many airlines are advocating for delays, citing supply shortages.
A Shift in Perspective
Mahesh Roy, programme director for SAF at the Green Finance Institute, notes that the current crisis has shifted the narrative surrounding SAF. Previously framed as a climate issue, airlines are now considering energy security and cost-effectiveness. “The energy trilemma has evolved,” Roy explains, emphasising that security and pricing are now paramount concerns.
Airlines with existing SAF agreements are quietly reaping benefits, as their supply chains remain unaffected by Middle Eastern disruptions. The urgent financial pressure to adopt SAF is mounting, with compliance costs under environmental policies projected to nearly quadruple by 2035. This shift in focus underscores that the transition to sustainable fuels is not merely a matter of environmental responsibility; it is a pressing economic necessity.
Why it Matters
The escalating jet fuel prices and the ongoing conflict in Iran highlight the vulnerability of the aviation sector to geopolitical disruptions. As airlines grapple with soaring costs, the urgency for sustainable fuel alternatives grows. The transition to SAF is not only about mitigating climate change; it is becoming a critical component of energy security and economic stability for an industry that serves as a global lifeline. Without swift and substantial investment in sustainable fuels, the aviation sector risks being caught in a cycle of crises that could have far-reaching implications for both the economy and the environment.