As global oil prices rocket due to the closure of the Strait of Hormuz, traditional jet fuel has become hard to come by and has nearly doubled in price, leading airlines across much of the world to raise ticket prices or cancel flights.
While greener fuels produced from plants or green hydrogen remain more expensive, the cost gap has narrowed and experts told Climate Home News that this could boost demand in the struggling sustainable aviation fuel (SAF) industry.
Matt Ridley, sustainability and innovation director at the OneWorld airline alliance told Climate Home News that “higher jet fuel prices narrow the green premium, reinforcing the role of SAF in cutting lifecycle emissions while reducing exposure to volatile fossil fuel markets.”
Marie Owens Thomsen, chief economist and sustainability lead at the International Air Transport Association (IATA), a trade group for airlines, said the world is currently seeing “the highest jet fuel prices that we’ve ever had in the history of jet travel”.
The problem predates the war but has been worsened by it, she said, adding that as demand for oil-based products like diesel has declined because of the electrification of road transport, many of the oil refineries that produce jet fuel were struggling to make a profit.
The crisis could “wake people up” to the problem of depending on “oil monopolies in the Middle East”, she said, adding that ramping up SAF production is critical for energy security.
“Khaki is the new green”
Some in the military sector seem to be taking note. Rheinmetall, a long-term supplier of the German air force, has partnered with a company called Ineratec which is developing technology to produce e-SAF based on hydrogen. And during the Biden administration, the US Department of Defense invested $65 million in an American e-SAF startup called Air Company.
Summing up the changing reasons for interest in SAF, Marcella Franchi from SAF producer Haffner Energy told the SAF Investor Summit in February that “khaki is the new green”. Speaking before the US bombed Iran, she gave the example of Canada, which she said is pursuing SAF production to avoid reliance on oil-based jet fuel from its “very unsettling neighbours”.
Since conflict has flared in the Middle East, Susan van Dyk, a former academic turned SAF consultant, told Climate Home News that a temporary narrowing of the cost gap is not, by itself, enough to make SAF take off. But the energy crisis may push governments to support SAF, she said.
The European Union and the UK have both mandated that, from January 2025, fuel suppliers at their airports must blend at least 2% SAF with oil-based kerosene. The blending requirement will gradually increase to reach 32% in the EU and 22% in the UK by 2040.
But, at least before the latest oil crisis, the EU and UK faced pressure from some airline and fossil fuel executives to water down these rules. The uncertainty these calls have created is damaging investment in production, SAF producers have said.
Book and claim
Speaking at the SAF Investor Conference in February, African airline executives and SAF producers said the design of the EU and UK mandates hinders non-European producers from contributing.
Under current rules, the SAF has to be physically delivered to planes at EU and UK airports to count towards the mandate, which favours SAF produced in or close to European airports – even though the raw materials to make it, such as waste oil, are often imported from regions like Southeast Asia.
Wakina Mutembei, Kenya Airways’ sustainability and innovations lead, told the conference that the EU and UK should adopt what is known as a book-and-claim system, where SAF supplied to planes outside of Europe can count towards a fuel supplier’s compliance with the EU and UK’s mandates.
This would be a “business opportunity”, she told the London audience, to use abundant Kenyan crops and used cooking oil and lower production costs “to produce SAF that is cheaper for the European market and the UK market”.
“If we are all complaining that the cost of SAF is higher, why not go to a market where it’s cheaper to produce it?” she asked, noting that this would create jobs in Africa and earn foreign currency.
Francis Mwangi, senior engineer at Kenya’s Civil Aviation Authority, told Climate Home News in an interview that if SAF is produced in Africa “you might find that, even relatively, the price might not be as far from the normal Jet A1 [oil-based jet fuel]”.
IATA’s Thomsen also called for a book-and-claim system, saying it “is definitely a way of making this teeny-tiny, bespoke, private-deal kind of market grow into a global market” by removing geographical constraints.
Shipping SAF long distances to be pumped into planes is inefficient, she said, adding that “without book and claim, this market will not scale”.
