As the conflict in Iran escalates, jet fuel prices have skyrocketed, reaching unprecedented levels and prompting urgent discussions about alternative energy sources for the aviation industry. With fuel costs now averaging around $181 a barrel—twice what they were before the war—airlines are grappling with severe financial implications, leading to flight cancellations and operational turmoil. Experts are advocating for a shift towards sustainable aviation fuel (SAF), primarily derived from used cooking oil, yet the transition remains fraught with challenges.
The Financial Fallout of the Iran Conflict
Since the onset of hostilities marked by US-Israeli airstrikes in late February, the aviation sector has felt the brunt of rising fuel costs. Recent reports indicate that Europe’s jet fuel reserves have plummeted by 50%, with projections suggesting that supplies could breach the International Energy Agency’s critical shortage threshold of 23 days by June. The UK, in particular, has been singled out as especially vulnerable.
Airlines are now facing a financial crunch, with major carriers like Lufthansa cutting 20,000 flights through October and American Airlines anticipating an additional $4 billion in fuel expenses this year. The situation has compelled stakeholders to reconsider the viability of sustainable alternatives to jet fuel, particularly SAF, which has been discussed for years but not yet implemented on a large scale.
The Promise of Sustainable Aviation Fuel
Currently, sustainable aviation fuel accounts for a mere 0.7% of the global kerosene market, according to the International Air Transport Association. Last year, only about two million tonnes of SAF were produced, whereas experts argue that to meet net-zero targets by 2050, production must increase to at least 250 million tonnes annually. Some analysts even suggest aiming for 500 million tonnes.
The most commonly used feedstock for SAF is waste cooking oil, which, while a promising option, is limited in supply. “The figures suggest that the maximum availability might be around 20 million tonnes,” notes Frédérique Rigal, co-author of a recent study on aviation decarbonisation. This volume is a mere fraction of what is needed to meet future demands.
Next-generation SAF, manufactured from woody biomass and fermented alcohol, presents a more scalable solution, but it has yet to be rolled out commercially in substantial quantities. Rigal acknowledges that the growth of SAF production faces several obstacles, including land requirements and a current focus on producing fuel for automobiles rather than aviation. Furthermore, a significant barrier remains the lack of commitment from airlines to purchase SAF in advance, stalling progress in developing these necessary projects.
Short-Term Responses and Long-Term Solutions
In the face of immediate fuel shortages, airlines have turned to conventional solutions, ramping up imports from US refiners who have increased jet fuel exports to Europe by over 400% since February. The European Commission has also initiated a programme called AccelerateEU aimed at optimising jet fuel distribution among member states.
However, analysts caution that supply chain disruptions will likely persist even if a ceasefire is achieved. For instance, South Korea—a major supplier of jet fuel to the US West Coast—faces shortages due to a decline in crude imports from the Middle East.
Another potential alternative, known as electro-SAF or e-SAF, employs green electricity to synthesise jet fuel from captured carbon and hydrogen. Although this method has no upper production limit, its development is hindered by high costs and the need for further investment.
Mandates from the EU and UK are pushing airlines to incorporate increasing quantities of SAF into their fuel mix, with targets set to commence at 1.2% by 2030. Nevertheless, airlines have requested postponements, citing insufficient supply. In response, e-SAF developers assert that many projects are progressing and could deliver the necessary volumes within the mandated timeframe.
A Shift in Perspective
Mahesh Roy, programme director for SAF at the Green Finance Institute, observes that the ongoing crisis has fundamentally altered the discourse surrounding sustainable fuels. Traditionally framed within the context of climate change, the conversation has now shifted to encompass energy security and sovereignty.
“The energy trilemma—energy security, sustainability, and affordability—has evolved,” Roy explains. As jet fuel prices soar, the urgency to seek alternatives intensifies. Airlines that have secured SAF supply agreements prior to this crisis are now in a favourable position as their supply chains remain unaffected by Middle Eastern volatility.
The pressure to accelerate the transition to SAF is mounting. Compliance costs for airlines under environmental regulations are projected to rise dramatically, with estimates suggesting they will reach £48 billion by 2035, a staggering increase of 256% from 2026. Roy indicates that the current fuel price surge has already begun to reshape the conversation about SAF, pushing it beyond the realms of mere environmental responsibility to encompass economic viability and security.
Why it Matters
The urgency to find sustainable alternatives to fossil fuels in the aviation industry has never been clearer. Rising jet fuel prices, exacerbated by geopolitical conflicts, not only threaten the operational stability of airlines but also underscore the critical need for innovation in fuel technology. As the world confronts a climate crisis, the aviation sector must pivot towards sustainable solutions, not only to ensure its own economic viability but also to contribute to a more resilient and environmentally responsible future. The choices made today will determine the trajectory of the industry for years to come, and the time for action is now.
